Unit 4 - Agency and Contract Law Flashcards
In terms of agency relations. Who is the principal? Who is the customer?
The principal is the individual who authorizes the agent to represent them on their behalf.
A customer is just a third party and does not have an agency relationship. So the customer is not represented, but limited duty of care is still owed to them.
What two things is the principal owing the brokerage in return for carrying out duties to represent them in real estate transactions?
Principal (client) owes brokerage:
- Remuneration
Obligation to pay an agreed upon amount - Indemnification
Compensate the brokerage for liabilities to acts undertaken such as providing services when selling a home
Does a brokerage orr agent represent a customer?
NO, THE BROKERAGE OR AGENT DOES NOT REPRESENT A CUSTOMER, they only represent clients (principals)
Are salespersons agents?
Nope, the brokerage is actually the agent. And the salesperson is a representative of the agent. So don’t call them real estate agents and instead call them realtors.
What would be an example of a common customer of a brokerage (not a client!)?
So say the broker’s client was selling a house with the brokerage. They are the client. The buyer of that house (say with a different brokerage/salesperson) would be a customer and not represented by brokerage.
What is the difference between single (sole) agency and dual agency?
Sole agency is a relationship in which the agent (brokerage) is exclusive to either the buyer or seller client.
Dual is when you have a buyer and seller on the same transaction. Dual agency is NO longer practiced in NS and has been replaced with transaction brokerage and facilitation processes.
What are the 5 ways an agency relationship can be created?
- Express Agreement
Clear verbal or written understanding - Ratification
A buyer or seller’s confirmation of the relationship after services have been performed - Estoppel or Conduct
Buyer or seller gives impression to 3rd party that brokerage is acting on their behalf - Operation of Law
An emergency requires action to be taken to protect client interests (this is rare in RE) - Implied Authority
Further authority can be implied for such things as when the seller expressly agrees to list house, then it could be implied that further authority is granted to get the job done
What are the 7 ways an agency relationship can be terminated?
- Mutual consent
all parties agree to termination - Revocation
A client can terminate an agency relationship but still may be on the hook for some obligations - Expiry
Terminated when reaching a specific agreed date - Completion / performance
Brokerage performs duties as agreed (sold!) - Impossibility
Property being sold is destroyed or for whatever reason can’t be sold - Death, mental incapacity, or bankruptcy
One or both parties fall into a above category - License registration/cancellation
Brokerage no longer authorized to trade in real estate
What are the 6 primary fiduciary responsibilities the agent owes to the client?
- Disclosure
Disclose all pertinent facts - Competency
Be skillful - Obedience
Obey lawful instructions of client - Accountability
Account for all monies and properties entrusted with brokerage by client - Confidentiality
Not disclose confidential info about the client that’d adversely impact them - Loyalty
Remain loyal to the client and protect and promote their interests
How must you disclose your representative capacity before establishing an agency relationship with client?
You show the client the “Working with the Real Estate Industry” form and have them sign it to acknowledge. If they don’t sign, still file it in their files with a notation that they didn’t sign but saw it.
Say you are representing a seller selling a house and a buyer is about to start saying stuff that they shouldn’t about their ability to pay and whatnot. Must you disclose your conflict of interest?
YES!
Ideally written. If somebody is about to start saying stuff that they shouldn’t you need to disclose in writing the nature f services that you’re providing, whether trade is on behalf of someone else, any conflict of interest, and any other facts that could influence their decision.
What is the 4 step disclosure process throughout a typical real estate relationship?
- Initial disclosure with the “Working wit the Real Estate Industry Form”
- Complete Seller/Buyer brokerage agreement
- Complete Transaction Brokerage Agreement
- Complete Agreement of Purchase and Sale
Under common law agency, what kind of relationship do ALL salespersons in brokerage have with seller/buyer clients?
So what is the option if there are two clients (one buying one selling) represented by the same agency on the same transaction?
Common law agency dictates that all salespersons in a brokerage have an agency relationship with all seller and buy clients of the brokerage.
So, because there is conflict of interest when representing two clients of same transaction (dual agency), the only resolution is to have the clients agree to a transaction brokerage relationship. Or, you can go with the designated agency model in which the salesperson is designated as sole agent for the buyer or seller.
If you have your clients sign the Seller/Buyer Designated Brokerage Agreement under the designated agency model, can you avoid dual agency of having buyer and seller client in same transaction?
NOPE!
It only avoids having two salespersons from the same brokerage conflicting. So even still, if it’s just one salesperson and two clients in same transaction a Transaction brokerage is needed to move the negotiations forward.
What is the designation process for a salesperson in a brokerage seeking to represent a client?
The broker must be impartial and remain neutral in all negotiations involving designated agents in the brokerage. Because the agency relationship is with the designated agent and NOT the brokerage, they need information barriers erected to protect confidential information.
