Laws of Agency

Protected classes

Race, color, religion, national origin, gender, familial status, handicapped.

Fiduciary duties

A duty imposed on a fiduciary by the common laws of agency.

Federal fair housing law

Intended to promote equal and fair opportunities to obtain housing for certain protects classes of persons. The Dept. of Housing and Urban Development (HUD) administers them. They and Dept. of Justice enforce them.

Uninformed misrepresentation

A licensee wrongly states a fact that he should know (or holds himself out as knowing).

Independent contractors

A person hired to perform a specific task, who uses independent discretion and judgment to select a method of completion.

Fiduciary

A portion of trust and confidence, such as that between an agent and a principal.

Ratification

A principal may create an agency relationship where an agent performs for the principal without the principal's consent, but the principal subsequently approves the agent's conduct.

Implied dual agency

Accidentally acting as a dual agent without disclosing as so.

Loyalty

According to traditional common law agency duties; fiduciary duty imposed on an agent during client representation. Requires that the agent promote the client's interest above all interests, including his own.

Confidentiality

According to traditional common law agency duties; fiduciary duty that prohibits an agent from disclosing info given to him by a client if such disclosure would be harmful to the client or client's interests.

Reasonable care and due diligence

According to traditional common law agency duties; fiduciary duty that requires an agent to act as a competent professional and to make reasonable efforts to keep the client informed.

Disclosure

According to traditional common law agency duties; fiduciary duty that requires an agent to disclose all material facts, rumors, and other info that might implicate the transaction to her client.

Obedience

According to traditional common law agency duties; fiduciary duty that requires an agent to follow all lawful client instructions.

Accounting

According to traditional common law agency duties; fiduciary duty that requires an agent to protect and account for all money and property held on behalf of the client. Commingling and conversion violate this.

Price discrimination

Act of charging different amounts to different buyers for identical goods or services, which may violate antitrust, fair housing, and credit laws.

Tying arrangement

Act of restricting the purchase of a good or service (real estate) strictly to buyers who have agreed to also purchase another good or service from the same seller.

Kickbacks

Act of returning a portion of a payment pursuant to a secret or coercive agreement. May violate antitrust laws and RESPA.

CAN-SPAM act (controlling the assault of non-solicited pornography and marketing)

Act was passed in 2003, and the rules went into effect in 2008. Sets requirements for any e-mail that advertises a commercial product or service (such as real estate), and includes website content.

Implied agreement

Agency relationship created by actions or statements that are short of an excess agreement.

Single agency

Agency representation where a broker represents only one part in a transaction--either the buyer or the seller, but not both.

General agent

Agent authorized to perform any and all acts associated with a specific service (property manager). Have authority to legally obligate clients (may contract on client's behalf).

Designated agency

Agent's state law disclosure and request for consent, where the agent (broker) proposes to represent both parties (buyer, seller) in the same transaction.

Disclosure of agency

Agent's state law informing of customers regarding who the agent represents (often on mandatory forms)

Earning commissions

Agents earn compensation if they are "the procuring cause of the sale" or if they produce "a ready, willing, and able buyer."

Subagent

Agents may appoint salespersons where the client expressly authorizes or the law otherwise permits. They may then perform tasks for the primary agent's clients. Must represent the client in the same manner as the primary agent.

Express agreement

An agency relationship clearly stated orally or in writing by the parties.

Trust account (escrow account)

Bank accounts which state licensing laws require brokers to maintain in order to deposit and hold certain monies of third parties until specified terms and conditions have been satisfied.

Federal fair housing act of 1968

Bans all preference, limitation, or discrimination based on race, color, religion, sex, or national origin in connection with the sale or rental of most residential dwellings and vacant land intended for residential construction. Sex was add in 1974.

Religious organizations

Churches may restrict dwellings to members of the same religion. However, the religious organization must be non-profit and cannot discriminate on any other grounds.

Protection clause

Exclusive right-to-sell listing agreements usually contain a clause that entitles the broker to a commission after the listing expires or is otherwise terminated if the buyer (who was introduced to the property during the listing) purchases the property after the listing expiration/termination. It "protects" the broker's commission in the event that the buyer attempts to wait for the listing to expire and then deal directly with the seller.

Penalties of violation of fair housing laws

Compensatory damages to victims for actual damages suffered as a result of the violation, inductive relief (order to correct violations), attorney fees and costs.

Fair housing amendments act of 1988

Congress amended the fair housing act to increase penalties for violators, provide an administrative enforcement mechanism, and expand protections to persons that are handicapped or have familial status.

Effect of dual agency on agent's duties

Dual representation is permissible is properly disclosed and agreed to in writing.

National "do not call" registry

Est. 2003. No sales/solicitation calls to consumers who register. Registration is valid until the consumer removes the number from the list or disconnects service. Sellers must access the registry before making the consumer call and must update their call lists at least every 31 days. Does not apply to business to business calls or calls to consumers from political/charitable organizations.

Puffing

Exaggerating a selling feature of a property.

Civil rights act of 1866

Federal law and subsequent Constitutional Amendment, which prohibits any form of discrimination based on race that restricts a person's right to inherit, purchase, lease, sell, hold, or convey real and personal property. Incorporated into the 14th amendment.

Truth in lending act (TILA) (regulation z) 1968

Federal law with the primary purpose to promote the meaningful disclosure of consumer credit and lease terms in order to facilitate choice. Applies to advertisements that promote "consumer credit" or a "consumer lease" as defined within.

Fair Housing enforcement

Fewer fair housing laws are administered by the office of fair housing and equal opportunity (FHEO) under the direction of the HUD.

Public enforcement

HUD may prosecute violations in its administrative forum, before an administrative law judge. DoJ may prosecute complains in federal court. Both HUD and the DoJ may prosecute violations on their own motion, without receiving any formal complaint.

Reasonable modifications

Handicapped persons may make reasonably necessary changes to individual units (pre and post 1991 construction).

Elderly housing

Hoping for the elderly is exempt from the familial status protection if it falls into either one of thee following two categories: (i) housing that requires all of its residents (excluding employees) to be 62 years of age or older and (ii) housing that requires at least one person per unit to be 55 years of age or older, and 80% of all units are so occupied.

Source of information

Info is guarded by the duty of confidentiality regardless of its source.

Redlining

Illegal act under the Fair Housing Act where a mortgage loan or insurance policy is unfairly denied based on where the property is located rather than the economic qualifications of the person seeking the loan or policy.

Blockbusting

Illegal act under the Fair Housing Act where a person induces the sale of property by overtly creating the impression that a neighborhood is about to undergo an undesirable change.

Steering

Illegal act under the Fair Housing Act where an agent discourages protected classes of people form purchasing property in certain neighborhoods or directs them to certain properties or neighborhoods. (often related to ethnicity)

Procuring cause

In event of dispute over who produced a ready, willing, and able buyer, it is important to determine which broker was the ______ cause of the sale.

Referral fees

Incentives paid to another solely for referring a potential client, which are restricted by state and federal law in certain circumstances.

Private enforcement

Individuals may litigate privately in federal court.

Duration of duty

Info is geared by the duty of confidentiality both during and after the agency concludes (or terminates).

Termination of agency via operation of law

Mental incompetence of either party (no breach); death of either party (no breach; however, the death of the salesperson will not terminate the agency agreement because it is with her broker); destruction or disposition of the subject of employment (no breach); bankruptcy of either party (may result in a breach); or expiration of time (no breach).

Material facts

Most state license laws require brokers and other agents to disclose ____ ____ that they know or should know to clients and customers.

New construction

New multi-family dwellings must be designed and built to meet certain adaptability and accessibility requirements for persons with a handicap.

Occupancy restrictions

Nothing in the fair housing act prevents states from reasonably restricting the max number of people permitted to occupy a dwelling.

Principal

One who has conferred authority on an agent to act on his behalf (may include authority to execute legal decisions).

Universal agent

One who is authorized to perform a variety of acts necessary to effectuate a variety of transactions on behalf of another.

Employee

One who works under the direct supervision of another, with limited discretion.

Agent

One with authority to act on behalf oh, and to obligate, another.

Compensation

Only the employing broker may pay the salesperson.

Owner occupants

Owners who occupy their homes, but sell or rent rooms or units, are exempt from the non-racial aspects of the fair housing act provided their home contains 4 or fewer units. One must be legal residence.

Price fixing

People or firms that collusively establish uniform prices for products or services, regardless of which company or person actually provides the product or service.

Special agent

Person authorized to perform a particular act or transaction pursuant to an agency agreement.

Independent contractor

Person hired to perform a specific task, who uses independent discretion and judgment to select a method of completion. Not an agent, and is therefore not subject to the default fiduciary duties.

Customer

Person who is not in a brokerage relationship with respect to a particular broker, but for whom a real estate agent may perform ministerial acts in a real estate transaction.

Estoppel

Prevents one from asserting that there was no agency relationship.

Client

Principal who has an agency relationship with an agent.

Private clubs

Private membership clubs that are not open to the public may restrict lodging in their own facilities as members only, provided they are non-profit clubs.

Equal opportunity posters

Real estate brokers must display HUD posters in all places of business, model home sites, and other related locations. Must contain slogan, statement, and logo.

Ministerial acts

Routine acts that do not involve discretion or the exercise of significant independent judgment.

Salesperson compensation

Salespersons and associate brokers must receive compensation from principal brokers only, who receive compensation from the client (client pays broker, broker pays salesperson). The amount received is negotiated with the principal broker.

Americans with disabilities act (ADA)

Signed into law in 1990, gives civil rights protections to individuals with disabilities that are like those provided to individuals on the basis of race, sex, national origin, and religion. Guarantees equal opportunity for those with disabilities in employment, public accommodations, transportation, state and local government services, and telecommunications.

Entity specific rules

Since 1995, federal rules have prohibited calls to any consumer who has asked not to be called. Sellers and telemarketers are responsible for maintaining individual lists of consumers who have asked not to receive calls placed by, or on behalf of, a particular seller.

Dual agency

Situation where the same agent (broker or firm) represents multiple parties (buyer and seller) with competing interests in the same transaction.

Conflicts with customer duties

Some state laws and the common law may trump the agent's duty of confidentiality to his or her client

Antitrust laws

State and federal laws designed to protect consumers by preserving and maintaining competition among businesses.

Truth in advertising

State licensing laws and licensee codes of ethics require that licensees use advertising that is truthful, not misleading. Applies to both the advertising of property and the promotion of real estate services. Requires certain financing disclosures when specified trigger terms, thus distorting the true cost of the credit or lease.

Commingling

The act of mixing entrusted client or customer funds with personal or business funds (deposit into the same account).

Conversion

The act of stealing (using, misappropriating) entrusted client or customer funds.

Agency

The legal relationship between two or more persons where person 1 (principal) provides person 2 (agent) with the authority to act on person 1's behalf and in a emmer that promotes person 1's best interests (fiduciary duties).

Fraud

The licensee knows a statement tone until but states it regardless, with the intent that the questioning party will rely on that fact.

Duration

The duty of accounting applies both during and after the agency concludes (terminates).

Threats to health and safety

The fair housing act does not require that a dwelling be made available to an otherwise protected individual whose occupancy of the dwelling would constitute a direct threat to the health or safety of others, or whose occupancy of the dwelling would result in substantial physical damage to the property of others.

Do not fax/text laws

The telephone consumer protection act (TCPA), and the revised rules under the junk fax prevention act, passed by congress in 2005, prohibit the sending of unsolicited advertisements to any fax machine. Also prohibits sending unsolicited text message advertisements to mobile phones or devices through use of an automated telephone dialing system.

Boycott

Two or more companies that conspire to exclude a competitor from the market place. Is a conspiracy, which has the effect of reducing competition.

"Do not call" laws

Two principal federal rules: entity-specific and national registry.

Liability

Under common law agency, employers (brokers) may be liable for the wrongful conduct of their employees and independent contractors when they act within the scope of their employees and independent contractors when they act within the scope of their authority or employment.

Gifts

Under most state laws, salespersons may not accept payment for services directly from clients. Such payment should be turned over to the employing (principal) broker.

Fiduciary duties following agency representation

Unless otherwise agreed in writing, the agent owes no further duties to a client after termination, expiration, or full performance of the brokerage relationship, with some exceptions.

Private individual owners

private individual owners of single-family housing are exempt from the non-racial protections of the fair housing act provided they: 1) do not own more than three single-family houses at any one time; 2) do not sell more than one single family house in any two year period; 3) do not employ a real estate agent; and 4) do not use discriminatory advertising.