Chapter 4 - Agency Representation
A written notice must be given when buying or selling real estate. What 3 things does this written notice need to include?
-Facts that could impact the property's value -Must state that the registrant is a broker, salesperson or brokerage -Any negotiations to resell the property
According to REBBA 2002 Code of Ethics:
-registrants must convey offers to the client at the earliest practicable opportunity -Must put in best effort in ensuring agreements are written and legible -A client must be informed of all significant steps taken in representing that person -Written consent is required for multiple representation
A brokerage representing a client has 3 duties towards 3rd parties (customers). What are they?
1. Be fair and ethical 2. Provide accurate information 3. Make no misrepresentation regarding the property
Fiduciary duties that an Agent owes the Principal:
1. Disclosure: any information affecting the value/desirability of the property as well as material facts..can include family relationships. 2. Competence: Must exercise a degree of competence as would be expected from an average person in that field. In all agency relationships, the law sees the agent as an extension of the principal. Thus, the principle is liable for the agents actions. 3. Obedience: Obey principles LAWFUL & REASONABLE instructions, even if he doesn't agree with them. 4. Accounting: Safeguard monies and property that belongs to the principle 5. Confidentiality: Must not use any information for any purpose that is likely to cause harm or interfere with the principles business, now or in the future. This duty should NOT be confused with the agents responsibility to disclose known facts, including defects about the property to non-principles because agent has a duty to treat all persons fairly and honestly. 6. Loyalty: The agent must place interests of the principle above all else *** Competence and Obedience = traditional
A salesperson must meet certain disclosure requirements BEFORE the seller representation agreement is signed. What are these dis-closure requirements?
1. Discuss the restrictive nature of services that are provided to a customer, if a brokerage is also representing another client 2. Service alternatives available to the seller 3. Explain that the brokerage could be involved in representing more than one client in the same trade 4. Explain that multiple representation (2 or more) could occur and discuss the services that would be provided to each client in this case (a brokerage cannot represent more than one client until certain disclosures are made)
***5 methods of creating an agency relationship (to represent the buyer or seller)
1. Express agreement: both parties agree and limits and responsibilities are clearly stated. This can be done orally or written. This is the most common way. 2. Ratification (retroactively): When the principle accepts the benefits of an agents previously unauthorized act. (popular when salesperson brings potential buyers to house, even though no agreement yet between broker and client) 3. Estoppel or Conduct: When a principal gives the IMPRESSION to a 3rd party that the agent has the authority to act on behalf of the principal. Agency may also be created if an agent gives the impression to the 3rd party that the agent is protecting the interests of the 3rd party. For example, buyer makes one agent believe he will buy from the property he showed, even though the buyer himself knows he won't and is dealing with another agent. The buyer would still owe commission to the first agent and an agency relationship was created. 4. Operation on Law (By Necessity): When an emergency situation exists where the agent has the authority to bind his/her principle. For example, an agent saving goods of a client when unable to reach them. NOT popular in real estate, but for master of a ship or carrier of perishable products. 5. Implied authority: For example, if smith gave ABC express authority for representation, the court would imply that smith has also given ABC to do the things to achieve express authority.
Forms of delegating duties:
1. Express authority delegation: most popular type of delegation. When the principle authorizes the listing brokerage to co-operate with other brokerages in marketing the property. 2. Implied consent delegation: If an agent is involved in a profession in which it is common knowledge that delegation of duties is a necessary and standard practice (e.g. listing of a property) 3.Statutory delegation: where the real estate brokerages are allowed to delegate duties to registered salespeople under REBBA 2002.
Termination of Agency Relationship
1. Mutual consent: by an agreement. 2. Revocation: The principle can revoke the agreement any time, but in most scenarios, they both agree to certain obligations until a specific date. If either breach that, they will be held responsible. 3. Expiry: the relationship will end at the date agreed to by the parties. 4. Completion/performance: when the agent completes what was agreed to (e.g. sale of property or acquisition by buyer) 5. Impossibility: If the agreement involves material that no longer exists (e.g. building caught on fire). An agency agreement concerning the sale of property may be disrupted if the property is expropriated or foreclosed (foreclosure) and neither commission nor damages may be payable, depending on the agency agreement. 6. Death, mental incapacity or bankruptcy of either party. Limited circumstances EXIST where the agency agreement can continue despite the principles death. NOT ALWAYS TERMINATED AT DEATH. 7. Registration Cancellation: if the agents registration is terminated by an official party or by the principal.
Duties that the principle owes the agent
1. Remuneration: pay the agreed upon amount 2. Indemnification: The assurance of one party to make financial compensation or repair and make good for any loss that may be incurred by another party. The right to claim damages. -Indemnity by a principle -Indemnity by an agent
Single agency
Agency relationship in which the agent represents only one party to a transaction. This term is used to refer to brokerages that only work with EITHER buyers or sellers. For example, a brokerage dealing only with buyers and not offering services to sellers is called a single buyer brokerage. Seller agency (representing only the seller) is a type of single agency.
An agency relationship can be between the agent and either the buyer or seller. This can happen out of agreement either expressed or IMPLIED, written or oral.
Agency will be implied when agents treat customers as principles (clients) even though no written agreement exists. ----> For example, promising the 3rd party that they would work to get them the best price on a property even though the brokerage has a customer relationship with them, and not a client one.
Option to Buy/Purchase
Allows the seller (owner) and buyer to enter into an option that gives the buyer the right to buy the seller property at an agreed price at some future date WITHOUT imposing any obligation to buy. While the option period is in existence, owner cannot sell the property to a 3rd party. If the option to buy is not exercised, contract ends. This option is NOT normally used in residential transactions It is also called an offer to purchase An option to buy is distinct from an agreement/contract in that the latter creates immediate mutual rights and obligations on both the seller and the buyer. The option to buy does not impose an obligation to purchase.
Sub-agency
An agent allowing another brokerage to represent the principle, with the permission of the principle. (allows co-operating brokerage to work on behalf of the principle) The principle must give consent and a written notice that he/she allows this. The principal is liable for the the actions of the agent and sub-agent. The use of sub-agency has gradually diminished given the growing popularity of buyer agency. In today's maketplace, it is assumed that the co-operating brokerage is working in the best interest of the buyer
Listing agreement
An oral or written agreement under which the owner appoints a brokerage for a designated period of time to sell, lease or exchange a property based on the owners terms in return for commission. This agreement performs several functions: 1. As a basis for the agency relationship between the seller and the brokerage 2. Defines limitations on the agents authority 3. Provides detailed information regarding the property used for answering prospective buyer inquiries 4. Foundation for negotiations and drafting of an offer 5. Mortgage application The listing agreement consists of 2 essential parts (The authority/ The data input)
Agent
Represents the principal (client - buyer or seller) and acts on their behalf and can bring the principal into legal relationships with third parties (customers). This is called an agency relationship. The law governing relations between these individuals and other persons is called the law of agency.
Holdover provision
Situations in which a person introduced to the property during the listing period, buys the property within a certain period of time after the listing has expired (AFTER the termination date.) This provision is normally found in both the buyer and seller representation agreement (listing agreement) -Time period is diverse and established based on agreement between agent and client -This provision is found in both seller and buyer representation agreements. -No standard wording -Typically ranges between 60-90 days, but can be longer depending on circumstances -used in both residential and commercial agreements
A real estate brokerage acting as an agent is best described as
Special class of agent ((One who has the authority to perform only a SPECIFIC task or function. Outside of this special task or function, he has no authority or power))
statutory delegation
The ability of a brokerage to delegate duties to employed salespersons is best described as
The brokerage/sales-person must use best effort to obtain a written acknowledgement that the information has been received by the buyer.
The buyer does not need to provide a written acknowledgement but salesperson must try their best to get one. He doesn't need to ensure he gets one (acknowledgement is not a requirement), just needs to put in effort in getting one.
If a buyer is interested in a property and would like to make an offer, the salesperson must ensure that a buyer representation agreement is written down and , signed by both himself and sent to the buyer.
The buyer is not obligated to sign the buyer representation agreement. The responsibility lies with the brokerage in that the agreement must be written, signed by himself and submit it to the buyer. This all needs to occur before any offer is made.
REBBA 2002 refers to
The real estate and business brokers act, 2002 and several regulations
Implied (unintended) dual agency
This arises when an agent inadvertently represents two parties (the seller and buyer at the same time). This is dangerous because no formal document exists.
Limited dual agency
This became popular given the inherent conflicts that arise with dual agency. Limited dual agency sets out procedures regarding: 1. Non-disclosure of the price either party is willing to pay 2. Non-disclosure of the motivation of either buyer or seller 3. Non-disclosure of the terms of competing offers 4. Not disclose personal or financial information 5. Not represent interest of the buyer over the seller (or vice versa)
When the agent does not carry out his/her duties, the principal has certain remedies. These are:
dismissal, damages for breach of contract indemnity for losses flowing from the breach.
REBBA 2002
does not define what is meant by the term represent. However, it is generally viewed as being a synonym with fiduciary duties. (REPRESENT = FIDUCIARY DUTIES) -The act DOES differentiate between a representation agreement and non-representation agreement -It identifies 3 different registration categories = broker, brokerage, salesperson -REBBA does not address the principles duties to indemnify the agent-duties owed by the principle is based on agency law -Registrants must convey offers to the clients at the earliest time possible
The term represent, when used in REBBA 2002, refers to situations where the agent owns ______ to the client
fiduciary
*** Estoppel p.g. 131
occurs when a representation of fact made by one person to another person is reasonably relied on by that person to such an extent that it would be inequitable to allow the first person to deny the truth of the representation. This occurs when: - When no actual authority was given to an agent - When only limited authority was given - Where the authority has been terminated but the circumstances lead others to believe the agent has full authority The basic concept of an estoppel is that where a person (A) has caused another (B) to act on the basis of a particular state of affairs, A is prevented from going back on the words or conduct which led B to act on that basis, if certain conditions are satisfied. In such cases A is estopped (ie 'stopped') from resiling from, or denying, the existence of that particular state of affairs.
