2. Law of Agency 1 : Agency Relationships Flashcards
Relationships with Sellers/Buyers/Tenants/Landlords between Brokers/Agents/Third Parties
Agency
= one person (agent) agrees and is authorized to act on behalf of another person (principal)
- consensual relationship of trust
- compensation does not create agency
Client/Principal
= party whose the agent contractually represents
Customer
= third party to the transaction
- agent works with but not for
Fiduciary Relationship
= relationship between agent and principal
- agent owes fiduciary duties: OLD CAR
- agent owes third party or customer good faith, honesty (= disclose material facts) and fair dealing Article 1 NAR code of ethics
OLD CAR
= judiciary duties
1.Obedience: obey all lawful instructions of principal
2. Loyalty: put principal’s interest above all (including their own)
3. Disclosure: disclose all material facts about property, true property value, all offers to purchase, any financial condition of the prospective buyer if known, any compensation from a third party (secret profit)
4. Confidentiality: never reveal confidential information without written authorization, confidentiality last forever (can only be broken when court orders)
5. Accountability: obligated to account for all of principals money
6. Reasonable Care and Skill: knowledge about property value, making best effort to sell, explaining simple terms etc.)
Types of agents/Agent Authority
- Special/limited Agent: limited authority, hired to perform one duty, once done client-agent relationship ends (most Real estate agents)
- General Agent: authority to conduct business for client for ongoing period of time (property manager)
- Universal Agent: full authority to represent principal, often have power of attorney to sign documents, buy and sell on behalf of client (not often real estate licensees)
Misrepresentation
= false or misleading information
4 COMPONENTS:
1.False statement or representation of a material fact
2.Person was aware (misrepresentation) of or should have been aware of (negligence) falsity of material fact
3.Another person relies on false information
4.Person who relied on it is harmed
3 TYPES:
1.Fraudulent Misrepresentation
2.Innocent Misrepresentation
3.Negligent Misrepresentation
OTHER TYPES:
1.Self dealing
2.Commingling
3.Conversion
4.Puffing/Exaggeration
Brokerage
= company formed by broker
- can be owned by single broker = sole proprietorship
- or more than one = partnership/corporation
Creation of Agency
- Expressed agency
- Agency by Estoppel
- Agency by ratification
- Agency coupled with interest
- Apparent/ostensible agency
- Intentional implied agency
- unintentional implied agency
Vicarious Liability
= action 442 of Real property law
- broker is legally liable for licensees’ acts (but only if broker had knowledge of offense)
Compensation
- commission (negotiated, in writing: amount, timing)
- alternative forms of compensation:
1. net listing (illegal in NY)
2. referral fees (legal in NY but may only be paid to a broker AND if the individual being referred was provided with informed consent),
3. offers of cooperation via MLS (agreement to pay percentage of earned commission to agent procuring the sale)
4. Franchise Fees (if broker works under umbrella of franchise) - commission paid to cooperating broker: offer of cooperation
Agency Termination
1.Completion
2.Expiration: if contract expires, no commission paid
3.Mutual Agreement
4.Revocation/Renunciation: relationship is ended by one party
a.Revocation: principal ends relationship
b.Renunciation: agent ends relationship
5.Matters/Operation of Law: party dies, goes bankrupt, property is destroyed or condemned, broker’s license revoked
6. Destruction of property: natural or other disasters
Types of agency relationships
1.Single Agency: will only represent seller or buyer not both
a.Sellers Agent
b.Buyers agent
2.Dual Agent
3.Dual Agency with Designated Sales Agents
4.Subagency
5. Brokers agent
Subagent
= agents agent, agent has granted licensee authority to act on behalf of principal
- salesperson is subagent to broker and seller/buyer
- owes fiduciary duties to principal, broker, broker’s principal
Special/limited Agent
= limited authority, hired to perform one duty, once done client-agent relationship ends (most Real estate agents)
General Agent
= authority to conduct business for client for ongoing period of time (property manager)
Universal Agent
= full authority to represent principal, often have power of attorney to sign documents, buy and sell on behalf of client (not often real estate licensees)
Fraudulent Misrepresentation
= (actual fraud), intentional misrepresentation concealing of material fact
Negligent Misrepresentation
= (constructive fraud), broker makes false claim but is not aware of falsehood, should have put more effort to understand better
Innocent Misrepresentation
= careless mistake, broker believes he is telling truth but should have known better
Self dealing
= when personal interest in transaction is not disclosed
Commingling
= client money is mixed with agents business account
Conversion
= client money is used for brokers personal bills
Expressed agency
= Most common, written or oral contract between broker and principal
Puffing/Exaggeration
= claim reasonable buyer would know is exaggerated “Best view in town” (NOT FRAUD)
Agency by Estoppel
= principal doesn’t stop agent from acting on their behalf, third party thinks real estate licensee has been given authority, based on the third party’s belief due to the principal’s actions
Agency by ratification
= principal accepts/approves real estate agents unauthorized actions after the fact, based on the principal’s later approval of unauthorized actions
Agency coupled with interest
= agent has material interest in property
Apparent/ostensible agency
= formed when agent or principal leads third party to believe agency agreement is in place (creates Estoppel)
Intentional implied agency
= verbal agreement is made to represent principal
Unintentional implied agency
= kind gesture is misinterpreted as a willingness to provide fiduciary duties
Sellers Agent
= represents sellers interest only, owes fiduciary duties to seller: OLD CAR (listing agreement)
Buyers agent
= represents buyers interest only, owes fiduciary duties to buyer: OLD CAR (buyer-broker agreement)
Dual Agent
= agent represents seller and buyer, must be neutral, obligated to disclose material facts, buyer and seller must forfeit right to undivided loyalty, only legal in NY if buyer and seller give advanced, informed consent in writing,
Dual Agency with Designated Sales Agents
= designated agency, broker represents seller and buyer but designates two different sales agents to each, buyer and seller must consent in writing, broker and agents can not provide undivided loyalty
Subagency
= anyone given authority by an agent so that subagent can assist with principals orders. Broker offers subagency through MLS . Anyone who accepts becomes agent to listing broker and subagent of seller
+client gets fiduciary benefits from broker and subagent +property gets more exposure – seller has vicarious liability (compared to Brokers agent)
Brokers agent
= cooperates with listing or buyers agent but does not work at same firm, owes fiduciary duties to listing broker, clients do not have vicarious liability
Revocation
= principal ends relationship
Renunciation
= agent ends relationship
Matters/Operation of Law
= party dies, goes bankrupt, property is destroyed or condemned, broker’s license revoked
