L4: Authorized Relationships, Duties & Disclosures

Question 1

Relationship: Agent/Customer

Answer 1

Agent is an individual with authority to act on behalf of another.

Agents acting as agents have customers.

Question 2

Relationship: Fiduciary/Client

Answer 2

Fiduciary is an individual upon whom is placed the highest level of trust and confidence when acting on behalf of another.

Agents acting as fiduciaries have clients (principals).

Question 3

Agency relationship

Answer 3

A relationship where one party authorizes another to represent their interests and the second party accepts the given responsibility

Question 4

3 Types of Agency Relationship based on Scope of Authority Granted

Answer 4

1) Special Agency, a.k.a. limited agency - restricted
2) General Agency - for specified area
3) Universal Agency - all business matters (power of attorney)

Question 5

(Types of agency scope of authority 1/3)

Special Agency

Answer 5

AKA, limited agency
Scope of authority of agent is restricted to specific acts, no binding authority.
It normally ends one goal is reached
Ex. Relationship between broker and customer the represent.

Question 6

(Types of agency scope of authority 2/3)

General Agency

Answer 6

Scope of authority: Agent is authorized to manage all party’s affairs within specified areas
It is usually ongoing within the business needs
It has binding authority (ex. sales agent binds broker to customer)
Example of agency: relationship between broker and sales associate

Question 7

(Types of agency scope of authority 3/3)

Universal Agency

Answer 7

Scope of authority: agents have the power to act on behalf of the party and make decisions on behalf of the party in all business matters of concern
It is the most broad type of agency and the most rare in RE
It is normally granted via power of attorney

Question 8

Essential components of creation of agency

Answer 8

1) Consent —> creation of agency requires mutual consent

2) Control —> agent must have authority to act on behalf of customer/client

Question 9

(Way in which and agency can be created 1/6)

Express agency

Answer 9

When A party explicitly appoints an agent to act on their behalf (written or oral form)

Question 10

(Way in which and agency can be created 2/6)

Implied Agency

Answer 10

When agency is entered without explicitly been stated

Question 11

(Way in which and agency can be created 3/6)

Gratuitous Agency

Answer 11

Agency in which there is no compensation

Question 12

(Way in which and agency can be created 4/6)

Agency by ratification

Answer 12

When an agent takes an unauthorized action on behalf of a party which is accepted after the fact by the party

Question 13

(Way in which and agency can be created 5/6)

Ostensible agency

Answer 13

Agency created when actions of an individual lead a third-party to believe agency exists when it actually doesn’t, and parties fail to take action to correct such impression

Question 14

(Way in which and agency can be created 6/6)

Agency by estoppel

Answer 14

Agency imposed by law and used to give legal accountability for agent or individual responsible for creating the impression of agency

Agent or individual can be held liable for financial injury

Question 15

3 Types of Authorized Brokerage Relationship (FL)

Answer 15

1) Transaction broker relationship
2) Single agent relationship
3) No brokerage relationship

Question 16

(Types of authorized brokerage relationship 1/3)

No Brokerage Relationship and its duties

Answer 16

Working relationship: agent/customer
AKA, non representation
It provides no representation to customer
Cannot negotiate for a customer
Requires written disclosure pre-representation (no brokerage relationship notice)
Agent can “represent” to parties

Duties:

• deal honestly and fairly
• disclose all known facts
• account for all funds and trusted to licensee

Question 17

(Types of authorized brokerage relationship 2/3)

Transaction broker relationship and its duties

Answer 17

Working relationship: Agent/Customer
Provides limited degree of representation
Is the presumed relationship in Florida and doesn’t require disclosure
Allows for in-house transaction as long as a different agent represents the seller and the buyer

Duties (7)

• deal honestly and fairly
• disclose all known facts
• account for all funds and trusted to licensee
• employ skill, care and diligence
• present all offers and counters
• exercise limited confidentiality
• fulfill any additional duties agreed-upon

Question 18

(Types of authorized brokerage relationship 3/3)

Single agent relationship and its duties

Answer 18

Working relationship: Fiduciary/Client or Principal
Provides exclusive, fiduciary level representation to ONE party
Requires written disclosure pre-representation (Single agent notice)

Duties (9)

• deal honestly and fairly
• disclose all known facts
• account for all funds and trusted to licensee
• employ skill, care and diligence
• present all offers and counters
• confidentiality forever
• obedience except when illegal or unethical
• loyalty
• disclosure beyond basic material

Question 19

Components of a relationship

Answer 19

1) Two parties
2) An agreement
3) A duty

Question 20

Consent to transition to Transition Broker

Answer 20

Form that allows switching the type of relationship from single agent to transaction broker

It is frequently signed in conjunction with the Single Agent Notice in case of an in-house transaction

Question 21

What is a residential transaction sale in Florida

Answer 21

It is the sale of residential property (improved or not) of 4 or less units (real or intended)

AND

Sale of agricultural property of 10 acres or fewer

Question 22

Allowed in house transaction relationship combinations (residential property)

Answer 22

A) Single agent + no brokerage
B) Transaction broker + transaction broker
C) No brokerage + any type of relationship

Question 23

Non-residential transaction relationships

Answer 23

1) No Brokerage
2) Transaction Brokerage
3) Single Agent Brokerage
4) Designated Sales Associate

Question 24

Designated Sales Associate

Non-residential only

Answer 24

4th type of Brokerage Relationship only allowed in non-residential transactions
Allows for fiduciary representation of both sides in house, but broker must remain neutral with no contact with client (can only facilitate a transaction)

Requirements:

• both parties have $1 million in assets
• both parties consent to two different sales associate that act like single agents
• both parties sign Designated Sales Associate Notice Disclosure
• each sales associate signs Single Agent Notice Disclosure

Question 25

2 Primary umbrellas for contract termination

Answer 25

1) Operation of law
2) Acts of the parties

NB: Agent must immediately comply with agency termination if customer expresses the desire to do so, regardless of valid reason or not

Question 26

(umbrella for contract termination)

Operation of Law

Answer 26

Circumstances or changes affect in the contract or property
It is an automatic termination
Ex. Performance, expiration, destruction, death, bankruptcy

Question 27

(umbrella for contract termination)

Act of the Parties

Answer 27

Action from one or more parties that cause contract termination
Ex. Mutual agreement, revocation, renunciation, breach

Question 28

Subagency

Answer 28

Form of agency that arises when an employing broker puts a sales agent or associate broker to work with the client to accomplish their goal