Ch 01: Agency and License Law
New York Real Property Law §443 1p
"Advance consent to dual agency" means written informed consent signed by the seller/landlord
Categories of licensure
1) Broker 2) Associate Broker 3) Salesperson
§462 - Property condition disclosure statement
1. Except as is provided in section 463 of this article, every seller of residential real property pursuant to a real estate purchase contract shall complete and sign a property condition disclosure statement.
"Warm Body" Exceptions
8/18/1995: DOS ruled that a seller's agent doesn't have to present agency disclosure forms to every single person who walks through the open house
Common Issues that can take an agency that ends up in court (10)
A BODILY INJURY claim by a prospect or client against an agent who is showing them a property for sale or lease can be quite expensive for the agent and employing broker. (10)
Common Issues that can take a agency that ends up in court (6)
A breach of contract claim where a client alleges negligence, fraud, or breach of duty, and that the agent did not follow the terms of the mutually agreed upon written or implied contract. (6)
Duty of Care
A duty to use due care toward others in order to protect them from unnecessary risk or harm.
Intermediary
A licensee who assist one or more parties throughout a contemplated real estate transaction with communication, contract terms, forms, or the closing of the real estate transaction without being an agent or I have a kit for any party to the transaction.
Principal
A participant in an action or transaction especially having control or authority as; • One who engages another to ask for him or her subject to his or her general control or instruction, or • One from home and agent derives Authority to act.
Customer
A person or business that purchases a commodity or service
Fiduciary relationship
A relationship in which one party places special trust, confidence, and reliance in and is influenced by another who has a fiduciary duty to act for the benefit of the party.
New York RPL§443(3)(f)
A seller/landlord or buyer/tenant may provide advance informed consent to dual agency and dual agency with designated sales agents by indicating the same on the form set forth In subdivision four of this section
New York RPL§443(1)(p)
Advance consent to dual agency
New York RPL§443(1)(q)
Advance consent to dual agency with designated Sales agents
Agency by Estoppel
An agency that is not created as
Disclosure
An agent must be sure to provide the proper material information to the principal in any situation where it is necessary. Failure to provide proper, even unintentionally, could be considered fraudulent and action could be taken against the agent.
Disclosure laws
An agent must make a full disclosure, in a timely fashion, of all known facts that are "material" to the transaction
Common Issues that can take a agency that ends up in court (2)
Breach of duty, or not always acting in the clients best interest. (2)
Errors and Omissions Insurance
Broker business liability insurance policy; liability insurance purchased by a broker to cover alleged claims for transactional acts, errors, mistakes and omissions that arise in the practice of real estate
Per the terms of the New York codes like section Real Property Law §443
Buyers cannot sue brokers who fail to disclose the excluded matters like murders or owners with certain types of diseases, and nor can brokers face any disciplinary actions over such acts by any New York Real Estate Agency.
Fiduciary relationship may be created
By express agreement of the parties, or it May be imposed by law where established by the conduct of the parties. Typical fiduciary relationships exist between agents and principles, attorneys and clients, executors or administrators and legatees or heirs, Trustees and beneficiaries, corporate directors or officers and stockholders, receivers or trustees in bankruptcy and creditors, guardians awards, and confidential advisors and those advised.
Mediation
Can be handled by a court-appointed or a private third-party mediator. The primary goal of the mediator is to help both sides find some sort of middle ground agreement. it is NOT up to the mediator to find solutions in a situation as the final decisions are agreed to by the disputing parties before the agreement is finalized.
acronym COALD
Care, Obedience, Accounting, Loyalty, and Disclosure
Ordinary Care
Conformity to the reasonable business standards that prevail in a particular area for a particular business.
DOS
Department of State
New York RPL§443
Disclosure regarding real estate agency relationship
E&O Insurance
Errors and Omissions Insurance
Common Issues that can take a agency that ends up in court (1)
Failing to disclose known or unknown property defects (1)
Article 12-A of the New York Real Property Law
Gives authority to the DOS to regulate real estate brokers in salespersons
qui facit per alium facit per se
He, who acts through another, is deemed in law to do it himself.
Common Issues that can take a agency that ends up in court (5)
Intentional misleading or exaggerating benefits, or minimizing real flaws with the property or deal when interacting with the client. (5)
"caveat emptor" philosophy
It was up to the buyer more so than any other party to inspect and find hidden or not so hidden defects in the residential or commercial real estate property befoe completing the purchase agreement.
Vicarious Liability
Liability that is imposed for another's acts because of imputed or constructive fault (as negligence).
Under Article 12-A of RPL§440-§443-a
Licensed New York Brokers and Agents who are later found guilty of engaging in some type of fraudulent behaviors such as false advertising or knowingly providing dishonest disclosure forms may be serious risk for fines, the suspension or revocation of their real estate license, civil lawsuits, and even criminal actions.
Implied Agency
May occur unwittingly or unknowingly. It arises from actions, not words. The undisclosed relationship would be considered to be misrepresentation.
Accounting
Monies or contracts received on behalf of a client or principal is part of the agent's fiduciary responsibilities. Monies received by an agent as earnest money for a deposit according to the purchase contract or to be held in trust for the principal and delivered in a reasonable time. Brokers who retain trust funds must do so in a trust account that is separate from their own accounts.
NYCRR
New York Code Rules and Regulations
PCDA
Property Condition Disclosure Act
RPL§443(3)(b)
Provide the disclosure form set forth in subdivision four of this section to a buyer, buyer's agent, tenant or tenant's agent at the time of the first substantive contact with the buyer or tenant and shall obtain a signed acknowledgement from the buyer or tenant, except as provided in paragraph e of this subdivision
Common Issues that can take an agency that ends up in court (8)
Providing clients with bad or no recommendations for third party inspectors such as home inspectors. (8)
RPL
Real Property Law
Fiduciary comes from
The Latin word "fides" which means " trust"
Commingling
The act of mixing client funds with the broker's personal or business funds in trust, business, or personal checking accounts.
Reasonable care and diligence
The agent is considered to be qualified to exercise judgement and be knowledgeable about the title and physical considerations of the property.
Obedience
The agent is under the control of their principal and must obey their principal's instructions (as long as they are within the law). If asked to illegally discriminate against the customer, withhold information about a property defect, or to engage in any other illegal endeavor, the agent must refuse
Loyalty
The agent must put the principal's interest above all others, even their own self-interests, in a transaction. All clients comes with confidentiality. Any information that the client shares with their agent must remain confidential, unless otherwise specified by the client.
Care
The agent must show "reasonable care and skill."
Confidentiality
The agent owes a bond of confidentiality to the principal or client. And agent may not discuss or reveal facts or information that may harm the interests of a client without the permission of the client.
Dual Agency
The agent represents both the buyer and the seller in the same transaction and owes fiduciary duties to both.
Single Agency
The agent represents one party only; either the buyer or the seller.
Buyer Agency
The agent represents only the buyer in a transaction.
Contract Liability
The listing agreement between a real estate broker and a seller typically requires the broker to exercise his or her "best efforts" to find a buyer for the seller. If the seller believes that a busy broker has not actually exercised his or her "best efforts" to locate a suitable buyer, The real estate broker may be looking at a lawsuit seeking damages for the delay in selling the real estate attributable to the broker or agent's failure to exercise his or her best efforts. Even if the broker wins, he or she may still have to pay legal fees, and the time and worry spent time the lawsuit could keep him or her from other clients who need attention.
Advance Consent to Dual Agency
The seller or buyer agrees to dual agency before it occurs by indicating the same on the agency disclosure form.
New York RPL§443(2)
This section shall apply only two transactions involving residential real property.
Arbitration
Usually held outside of a formal courtroom and setting in locations like a conference room. has an arbitrator makes the final decision for a dispute, regardless of whether one or both sides like the outcome. It can be much cheaper and quicker than a courtroom setting, but at least one side in the legal dispute may not be very pleased with the decisions.
Common Law
forms the basis of each state's legal system. The only exception is Louisiana, which is based on the French legal system.
"caveat emptor"
let the buyer beware
Agency
1) The person or thing through which power is exerted or an end is achieved. 2) A consensual fiduciary relationship in which one party acts on behalf of and under the control of another in dealing with third parties; the power of one in such a relationship to act on behalf of another. 3) A principal is bound by and liable for acts of his or her agent that are within the scope of the agency.
What is the threefold mission of the Division of Licensing Services?
1) To protect the health, safety and welfare of consumers. 2) to provide you finish it processing and examination Services to License applicants. 3) To provide accurate information and qualified licensees to the business community.
Agent
A person or entity (as an employee or independent contractor) authorized to act in behalf of and under the control of another in dealing with third parties. Someone or something that acts or exerts power; a moving force in achieving some result. A person guided or instigated by another in some action.
Express Agency
An actual agency created by the written or spoken words of the principal authorizing the agent to act.
Common Issues that can take an agency that ends up in court (7)
Failure by an agent to keep his or her client's personal and financial information safe from other parties, especially computer hackers. (7)
New York RPL§443(3)(e)
If the seller, buyer, landlord or tenant refuses to sign and a knowledge meant of receipt pursuant to this subdivision, the agent shall set forth under oath Or affirmation a written declaration of the fax of the refusal and shall maintain a copy of the Declaration for not less than three years
Property condition disclosure act (PCDA)
Listing agents or brokers are required to advise their sellers in regard to the disclosure requirements included With the PCDA at a time before The buyer signs the real estate purchase contract.
19NYCRR §175.7
Make it clear for which party he is acting and he shall not receive compensation from more than one party except with the full knowledge and consent of all parties
RPL§443-(3)(a)-(c)
Must be presented in a knowledge by a consumer pursuant to RPL§443(3)(a)-(c).
OLDCAR
Obedience, Loyalty, Disclosure, Confidentially, Accounting, Reasonable Care
Common Issues that can take a agency that ends up in court (4)
Offering legal advice to clients and/or acting as an unlicensed attorney in real estate transactions. (4)
Real Property Law §443
Real property used or occupied, or intended to be use Or occupied, holy or partly, as the home or residence of one or more persons improved by (I) a one-to-four family dwelling or (II) a condominium or cooperative apartments, But shall not refer to unimproved real property upon which such dwellings are to be constructed.
General Agency
The agent represents the principal in a variety of matters related to a particular business.
Seller Agency
The agent represents the seller only; the buyer is a customer.
New York RPL§443(3)(d)
The agent shall provide to the buyer, seller, tenant or landlord a copy of the signed acknowledgment and shall maintain a copy of the signed acknowledgment form not less than three years
Due Care
The care that an ordinarily reasonable and prudent person would use under the same or similar circumstances.
Common Issues that can take an agency that ends up in court (9)
The claim of NEGLIGENCE is a cause of action in a legal matter where one party is alleging that another party did not properly exercise the utmost duty of care that another party or real estate professional would have in the same situation, and/or when clients make claims that the agent SHOULD HAVE KNOWN SOMETHING AND DISCLOSED IT instead of not mentioning it at all. (9)
Sellers, landlords, or lessors are required under section RPL§443(3)(b)
To provide the disclosure form set forth in subdivision four of this section to a buyer, buyer's agent, tenant or tenant's agent at the time of the first substantive contact with the buyer or tenant and shall obtain a signed acknowledgement from the buyer or tenant, except as provided in paragraph e of this subdivision.
Care
Watchable or protective attention, caution, concern, prudence, or regard usually towards an action or situation.
Common Law
developed in England centuries ago and were based on judicial decisions for the long term benefit of society.
New York RPL§443(3)(c)
A buyers agent or tenants agent shall provide the disclosure form to the buyer or tenant prior to entering into an agreement to act as the buyers agent or tenants agent and shall obtain a sign acknowledgment from the buyer or tenant, except as provided in paragraph (e) of this subdivision. A buyers agent or tenants agent shall provide the form to the seller, sellers agent, landlord or landlords agent at the time of the first substantive contact With the seller or landlord and shall obtain a signed acknowledgment from the seller, landlord or the listing agent, except as provided in paragraph (e) of this subdivision
Respondent Superior
A doctrine in tort law that makes a master liable for the wrong of a servant. The doctrine making an employer or principal liable for the wrong of an employee or agent if it was committed within the scope of employment or agency.
Fiduciary Duty
A duty obligating (as an agent or trustee) to act with loyalty and honesty and in a manner consistent with the best interest of the beneficiary of the relationship (as a principal or trust beneficiary)
Sub-agency
A license he joins the agency relationship already established between another licensee and his/her principal. This has typically been the case when the seller expresses Lee authorizes the contracted listing agent Two employs other agents to help market the property. The most common example is when a property is listed with the MLS. However, it can also occur when a buyers agent employsThe assistance of another licensee in locating and negotiating the purchase of a property.
New York RPL§443(3)(a)
A listing agent shall provide the disclosure form set forth in subdivision for of this section to a seller or landlord prior to entering into a listing agreement with the seller or landlord and shall obtain a sign acknowledgment from the seller or landlord, except as provided in Paragraph E of this subdivision.
RPL§443(3)(a)
A listing agent shall provide the disclosure form set forth in subdivision four of this section to a seller or landlord prior to entering into a listing agreement with the seller or landlord and shall obtain a signed acknowledgment from the seller or landlord, except as provided in paragraph e of this subdivision.
RPL§443(4)
Agency disclosure must be established by an agent as quickly as possible to the agent's client or prospect at "first substantive contact" between the parties.
How agents are subagents to listing agents:
Agents who show properties listed for sale on the MLS are acting as some agents for the sellers agent, or the listing agent, since they are in charge of the transaction, per the terms of MLS and NYS licensing laws.
RPL§441-c
Allows the DOS to revoke, suspend, fine or reprimand a Real estate broker or sales person if that licensee is found to have: 1) Violated any provision of article 12-A of the Real Property Law 2) engaged in Fraud or Fraudulent practices 3) Demonstrated untrustworthiness or incompetence
Buyer's and Tenant's (or Lessee's) Agents: RPL§443(3)(c)
An agent acting on behalf of a buyer, tenant, or lessee Must provide the disclosure form to the buyer or tenant prior to entering into and agreement to act as the buyers agent or tenants agent and shall obtain a sign acknowledgment from the buyer or tenant, except as provided in paragraph e of this subdivision. A buyer's agent or tenant's agent shall provide the form to the seller, seller's agent, landlord or landlord's agent at that time of the first substantive contact with the seller or landlord and shall obtain a sign of knowledge meant from the seller, landlord or listing agent, except as provided in paragraph e of this subdivision.
Agent's Responsibilities to Third Parties
An agent works with third parties on behalf of the principal. When dealing with third parties, agents are required by law to act with honesty,integrity, and fairness in business dealings.
Client
An individual, Corporation, trust, or a state that employs a professional to advise or assist in the professional's line of work.
Constructive Notice
Giving notice without giving notice. Instead of delivering written or oral notice of some fact to a person, the person giving notice could post it on a public bulletin board or put the notice in a periodical with a large circulation in the area. In most cases, this notice is perfectly acceptable. If this notice is given, the actual notice does not need to be personally delivered. However, most states have specific requirements about the type and location of the public notice, such as in a publication with a minimum circulation, Or the notice must be recorded in the county recorder's office.
Implied Knowledge
In the law of agency, notice of facts brought to the attention of an agent (A person authorized by another, known as a principal, to act for him or her), Within the scope of the agent's Authority or employment, is usually imputed to him or her principal. This notice of facts brought to the attention of the agent results in known by the principal
Advance consent to dual agency with designated Sales agents
Informed consent signed by the seller/landlord or buyer/tenant that in indicates The name of the agent appointed to represent the seller/landlord or buyer/tenant as a designated sales agent for residential real property which is the subject of the listing agreement.
Fiduciary
One often in a position of authority who obligates himself or herself to act on behalf of another (as in managing money or property) and assumes a duty to act in good faith and with care, candor, and loyalty in For filling the obligation. One (as an agent) Having a fiduciary duty to another.
441-c. Revocation and suspension of licenses
Powers of Department (a) The department of state may revoke the license of a real estate broker or salesman or suspend the same, for such period as the department may deem proper, or in lieu thereof may impose a fine not exceeding one thousand dollars payable to the DOS, or a reprimand upon conviction of the licensee of a violation of any provision of this article, or for a material misstatement in the application for such license, or if the licensee has been guilty of fraud or fraudulent practices, or for dishonest or misleading advertising, or has demonstrated untrustworthiness or incompetency to act as a real estate broker or salesman...
Common Issues that can take a agency that ends up in court (3)
Representing clients in unfamiliar territory, literally and figuratively, such as showing clients properties in a new city 50 miles away from the agents main office or attempting to act as a mortgage broker by providing a private money loan to the client in spite of having no financial background. (3)
Obedience
The agent's duty to obey the principal's instructions. The agent is obligated to work in the best interest of his or her client in a lawful manner.
Accounting
The custodial care and record keeping of all money handled on behalf of the principal. All funds must be deposited into special escrow or trust accounts and can never be mixed with the agent's personal funds or the brokerage company funds.
Standard of Care
The degree of care or competence that one is expected to exercise in a particular circumstance or role
Tort Liability: Negligence and Fraud
Tort law is a group of laws that address and provide remedies for civil wrongs not arising out of contractual obligations. A person who suffers damages may be able to use tort law to receive compensation from someone who is legally responsible for those injuries under civil law. In criminal law, the state is the plaintiff. Tort covers accidents and acts that are intentional.
Conversion
When a broker then spends those same mixed-up client funds on his or her personal or business expenses. This is fraud, and can subject to the supervising broker to both civil and criminal penalties.