presents

Agency Relationships and Duties

California Department of Real Estate Disclaimer Statement:

This course is approved for Continuing Education credit by the California Department of Real Estate. However, this approval does not constitute an endorsement of the views or opinions which are expressed by the course sponsor, instructor, authors or lecturers.

Introduction

The issue of agency has been the subject of intensive study in the real estate industry. Many questions arise concerning agency, and the answers tend to be complex and confusing at times. In this unit, you will study the issues involved in the complex topic of agency. You will learn how and when real estate licensees create agency relationships with buyers and sellers; how and when licensees must make disclosures to principals to clarify agency relationships under the agency law; and what an agent's responsibilities are to his or her principals.

Course Objectives

After completing this course, you will be able to:

• recognize the various types of agency relationships • define "agent" • list the ways an agency relationship can be created • describe how agents receive their authority, and explain how that authority

can be expanded, restricted, or terminated • list the duties and obligations of agents to their principals • compare and contrast the different forms of listing agreements • recognize the importance of disclosing dual agency • comply with the agency law's three-step requirement of disclosure, election,

and confirmation

Key Terms and Concepts

Following are key terms and concepts addressed in this course:

• Agent • Principal • Express contract • C.A.R. listing/agency contracts • Implied agency • Gratuitous agency • Actual authority • Ostensible authority • Fiduciary • Power of attorney • Net listing • Open listing • Exclusive agency listing • Exclusive right to sell listing • Dual agency • Listing agent • Selling agent • Agency disclosure • Election of agency • Agency confirmation

Agency Scenarios

Scenario A

You are the cooperating broker in a transaction in which the property was listed through the Multiple Listing Service. The seller owns the property free and clear and agrees to carry back a $250,000 first mortgage at 10% for five years. Your buyer mentions that she would like to limit her liability on the note as much as possible. She also mentions that she does not want you to tell the seller that she has also purchased the adjacent parcel for development. You hear rumors that this buyer is in financial difficulty and has experienced foreclosures in other investment properties. Questions:

1. As the cooperating broker, do you disclose that the buyer has bought surrounding property for development?

2. Do you advise the seller to include a due-on-sale clause in the note?

3. Do you tell the seller about the rumors of past foreclosures?

Scenario B

In this case, Larry, the listing broker, takes a listing from Tom Jones, the seller. Larry then places advertisements in the local newspapers and posts a For Sale sign on Mr. Jones's property. A prospective buyer, Bill Meyers, sees the For Sale sign on the property and calls Larry to inquire about the property. Larry makes an appointment with Bill and shows him the property that same day.

Following the showing, Bill goes to Larry's office to discuss the possibility of making an offer, the terms of that offer, financing arrangements, and whether the seller will carry paper. Bill then solicits advice from broker Larry as to what price he should offer for the property.

Questions:

1. Who does broker Larry represent? 2. Is Larry a dual agent? 3. What are Larry's duties and responsibilities to each party?

Scenario C

The seller, Tom Jones, lists his property with Acme Real Estate Brokerage Company. Broker Larry and broker Betty are licensed to Acme. Larry is the broker with whom Mr. Jones placed the listing at Acme Real Estate. Acme Real Estate advertises the property for sale and posts For Sale signs on the property.

The prospective buyer, Bill Meyers, contacts broker Betty and discusses the possibility of purchasing the property. Betty shows Bill the property and then they discuss terms of financing. Bill then solicits from Betty information concerning the best price to offer for the property.

Betty presents the offer to broker Larry who is "representing" the seller, Mr. Jones. Remember that both broker Larry and broker Betty work for and are licensed to the Acme Real Estate Brokerage Company, which is doing business as a real estate brokerage company with a corporate broker of record.

Questions:

1. Who does broker Larry represent? 2. Who does broker Betty represent? 3. Who does Acme Real Estate represent? 4. Are any or all of the above dual agents? 5. What are the duties and responsibilities of the brokers and the real estate

company to Mr. Jones, the seller, and to Bill Meyers, the prospective buyer?

Scenario D

Larry, the real estate licensee, had been showing properties to his client, Bill Smith, when he happened to run across a for-sale-by-owner property advertised by seller Sally Jeffers. Larry approached Sally to see if she would cooperate with him (Larry) by paying him a full commission.

Sally indicated that she would pay Larry 3% of the sales price. She agreed to sign C.A.R. (California Association of REALTORS®) Form SP (Single Party Compensation Agreement).

Questions:

1. Who does listing broker Larry represent? 2. What are the responsibilities and duties of Larry to Bill? 3. What are the responsibilities and duties of Larry to Sally?

The Agency Relationship

As you read, think about:

• the definition of an agent • how agency relationships are created

Basic Definitions

Under the statutory law, California Civil Code §2295 states: "An agent is one who represents another, called the principal, in dealings with third persons. Such representation is called agency." Case law indicates that an agent is anyone who undertakes to transact some business, or manage some affair, for another, by authority of and on account of the latter, and to render an account of such transactions. Case law also notes that the agency relationship is defined as the relationship resulting from the act of one person, called the principal, who authorizes another, called the agent, to conduct one or more transactions with one or more third persons and to exercise a degree of discretion in effecting the purpose of the principal.

How Is an Agency Relationship Created?

An agency relationship may be created by an express contract or may be implied by the actions of the parties. Factors that may create an agency relationship include: express contracts, express statements, compensation, and conduct. While payment of a commission is one factor that may indicate agency, compensation is not necessary to create agency.

Express Contracts

An express contract is either a written or an oral agreement. An express contract may create an agency relationship depending on the language in the contract. For example, it is possible to have an express commission contract with a seller (e.g., in a for-sale-by-owner “FSBO” transaction) that clearly indicates that the real estate agent will be acting as agent for the buyer only but not for the seller. On the other hand, the express contract may include language indicating that the real estate agent will be acting as agent for the seller.

Written Agreements

In the real estate context, the most common written agreement creating an agency relationship is the listing contract. C.A.R. offers many different types of listing contracts depending on the type of transaction involved. Each of these forms can be accessed through the Appendix at the end of this course.

1. Residential Listing Agreement (Exclusive Authorization and Right to Sell) (C.A.R. Form RLA). This is an express written contract for residential real property sales transactions that creates an agency relationship between the seller and the listing broker.

2. Residential Listing Agreement - "Open" (Non-Exclusive Authorization and Right to Sell) (C.A.R. Form RLAN). This is an express written contract for residential real property sales transactions that creates an agency relationship between the seller and the listing broker only if the broker procures the buyer. This form allows the seller to sell the property on seller’s own, or through another broker, with no obligation to pay the listing broker. The party that sells the property collects the commission.

3. Residential Listing Agreement - Agency (Agency Authorization and Right to Sell) (C.A.R. Form RLAA). This is an express written contract for residential real property sales transactions that creates an agency relationship between the seller and the listing broker unless the seller procures the buyer. This form allows the seller to sell the property on seller’s own without paying a commission to the broker.

4. Manufactured Housing Listing Agreement (For Real and Personal Property) (C.A.R. Form MHL). This is an express written contract for the sale of all types of manufactured housing, both personal and real property. It creates an agency relationship between the seller and the listing broker.

5. Probate Listing Agreement (C.A.R. Form PL). This is an express written contract used for listing probate property whether or not a court confirmation is required. It creates an agency relationship between the seller and the listing broker.

6. Lease Listing Agreement (Exclusive Authorization to Lease or Rent) (C.A.R. Form LL). This is an express written contract used for listing a residential property when the owner is seeking a tenant. It creates an agency relationship between the owner and the listing broker.

7. Single Party Compensation Agreement (C.A.R. Form SP). This is an express written contract used in “For Sale By Owner” (FSBO) transactions when the seller is reluctant to sign one of the other listing contracts. It is used to document the agreement that the seller agrees to pay compensation if the property sells to a particular buyer. It may or may not create an agency relationship between the seller and the broker depending on the agency confirmation (see below) and, possibly, other actions by the broker. See the section below on Implied Agency.

8. Non-Residential, Residential Income and Vacant Land Listing Agreement (C.A.R. Form NRL). This is an express written contract for the

listing of non-owner occupied properties or non-residential properties. It creates an agency relationship between the seller and the listing broker.

9. Buyer Representation Agreement (Non-Exclusive/Not for Compensation) (C.A.R. Form BRNN). This is a revocable express written contract that spells out the duties of the prospective buyer and the broker. Not only does it create an agency relationship between the prospective buyer and the selling broker, but it contains a provision whereby the buyer gives his or her written permission for the broker to also represent the seller or another buyer for the same property.

10. Buyer Representation Agreement - Exclusive (C.A.R. Form BRE). This is an express written contract that establishes an agency relationship between a prospective buyer and a selling broker. The compensation paragraph indicates that a commission is owed to the selling broker from the buyer directly unless the commission is paid by the listing agent or seller.

11. Buyer Representation Agreement - Non-Exlusive (C.A.R. Form BRNE). This is an express written contract that establishes an agency relationship between a prospective buyer and a selling broker (and provides for commission to the broker from the buyer as with the Exclusive Authorization to Acquire Property Contract) only if the broker presents the property to the buyer or acts on the buyer’s behalf in the purchase of the property.

Verbal Agreements

Although not as common as the written listing agreement, a verbal agreement is a verbal undertaking by a broker to act on behalf of a seller in marketing that seller's property. This oral agreement to act on behalf of the seller as the seller's agent creates an agency relationship. Bear in mind, however, that although this agreement is binding on the broker in that it creates agency responsibilities and duties toward the seller, it is generally not binding on the seller in terms of obligating that seller to pay a commission to the agent. The Statute of Frauds (California Civil Code §1624) requires the broker to have a written employment agreement (e.g., listing contract or other written agreement specifying the commission owed) in order to enforce the compensation or commission provision. In other words, although an oral agreement between the broker and the seller can impose all agency responsibilities on the broker, at the same time it will not, in many cases, automatically provide the broker with any recourse for commission should a seller refuse to pay.

Implied Agency

An agency relationship may be implied from the circumstances and conduct of the parties. In the real estate context, this often occurs when a real estate licensee is approached by a prospective buyer. Consider the following example:

A property is listed through your office. A sign is placed on the property that results in a call from a prospective buyer. The buyer soon discovers that the property, for some reason, perhaps price, is not suitable for him or her. At that point, you ask the buyer what type of property he or she is interested in

and how much he or she can afford. Your conversation with the buyer gets around to a discussion of the buyer's likes and dislikes with respect to certain properties and before you know it you are assuring the buyer that you will be able to help him or her find a suitable property.

Now consider this next example:

You are on floor time when a buyer walks in off the street and mentions that he or she is interested in purchasing property in your area. You ask the buyer what type of property he or she is interested in, how much he or she can afford, what his or her likes and dislikes are and you assure him or her that you will be able to assist in finding something compatible with his or her needs.

In both of these examples, the circumstances and conduct of the parties may lead the buyer to conclude that the real estate licensee was acting on his or her behalf with the buyer’s best interest at heart. In effect, the buyer would expect, based on the conduct of the real estate licensee, that the licensee was acting as his or her agent.

Gratuitous Agency

In a gratuitous agency relationship, one may gratuitously undertake to act as an agent and will be held to certain obligations of an ordinary agent despite the fact that no consideration of any form is offered or paid to the agent for such agency services. In the real estate context, this may occur when a real estate licensee undertakes to market a property for a friend. When the real estate licensee has only a salesperson’s license, then the licensee’s broker may actually become the agent of the principal. Despite the fact that the real estate licensee is not compensated for such efforts, the real estate licensee’s broker may be considered an agent of the seller with all responsibilities, duties, and obligations that accompany that agency status.

Self-Check Questions

1. An agent is one who represents another, called the principal, in dealings with

third parties.

a. True

b. False

2. An agency relationship may be created by an express contract or implied by the

actions of the parties.

a. True

b. False

3. Compensation is always required for an agency relationship to exist.

a. True

b. False

4. In an express contract, either a written or an oral contract may create an agency

relationship.

a. True

b. False

5. In a gratuitous agency relationship, the broker does not have the same

responsibilities and duties that "normally" accompany agency status.

a. True

b. False

The Effect of Agency Relationships

As you read, think about:

• the extent of the agent's authority • the situations that affect an agent's authority • the ways in which an agency relationship can be terminated

An Agent's Authority

The Civil Code provides that every agent has authority:

• to do everything necessary, or proper and usual in the ordinary course of business, for affecting the purpose of the agency; and

• to make representations as to facts involved in the transaction in which the agent is engaged.

The authority of an agent may be actual or ostensible. Actual authority is that authority a principal intentionally confers upon the agent, or by want of ordinary care, allows the agent to believe that he or she possesses. Ostensible authority is that authority a principal intentionally, or by want of ordinary care, causes or allows third persons to believe that the agent possesses. The principal is liable to persons who have sustained injury through a reasonable and prudent reliance upon the ostensible authority of an agent. The act or declaration of the agent can never alone establish ostensible authority, but silence upon the part of

the principal who knows that an agent is holding himself or herself out as vested with certain authority may give rise to liability of the principal. And, when the principal executes and entrusts to the agent a negotiable or non-negotiable instrument containing blanks and the agent fills them in, the principal will be bound to third persons who rely upon the instruments even though the agent was not so authorized.

Situations That Affect the Agent's Authority

• An agent has expanded authority in an emergency, including the power to disobey instructions where it is clearly for the interests of the principal, and where there is no time to obtain instructions from the principal.

• An agent who is given the power to sell and convey real property for a principal also possesses the power to give the usual covenants of warranty, unless there are express restrictions in regard to the agent's agreement with the principal.

• An agent can never have authority, either actual or ostensible, to do an act which is known or suspected by the person with whom the agent deals to be a fraud upon the principal.

• Unless specifically authorized, an agent has no authority to act in the agent's own name unless it is in the usual course of business for the agent to do so.

• An agency to sell does not carry with it the authority to modify or cancel the contract of sale after it has been made. A mere agency to sell property ordinarily empowers the agent to find a purchaser but does not authorize the agent to enter into a contract to convey on behalf of the principal. Unless otherwise specified, the authority to sell only permits a sale for cash and the agent is not entitled to accept goods in payment.

• An agent who has authority to collect money may endorse a negotiable instrument received in payment only where the exercise of this power is necessary for the performance of the agent's duty. Where an agent is expressly authorized to collect money, the agent may accept a valid check, and the agent's receipt of the check will be considered payment to the principal.

• An agent who negotiates a loan on behalf of a lender-principal ordinarily has no authority to collect from the borrower except in those instances where the agent has possession of the security and the borrower has knowledge of this fact.

The Agent's Scope of Authority

Occasionally a person may act as agent without any authority to do so, or the true agent may act beyond the scope of the agent's authority. The alleged principal is not bound by such acts. However, a principal may, under certain circumstances, ratify the acts of the agent and thus become bound. Not only must the principal intend to ratify, but the following five conditions must be true:

1. The agent must have professed to act as a representative of the principal.

2. The principal must have been capable of authorizing the act, both at the time of the act and at the time of ratification. (For example, sometimes the promoters of a proposed corporation make contracts on its behalf, but the corporation cannot ratify them even though it may achieve the same result by other means).

3. The principal must have knowledge of all the material facts (unless ratification is given with the principal's intention to ratify, whatever the facts may be).

4. The principal must ratify the entire act, with the agent accepting the burdens with benefits.

5. The principal must ratify before the third party withdraws. Once ratified, the legal consequences are the same as though the act had been originally authorized. Generally, an act may be ratified by any words or conduct showing an intention upon the part of the principal to adopt the agent's act as the principal's own. Acquiescence or acceptance of benefits by the principal must be with full knowledge of the facts unless made with the intention to ratify, whatever the facts may be. Where the principal's ignorance of the fact arises from the principal's own failure to investigate, and the circumstances are such as to put a reasonable person on inquiry, the principal may be held to have ratified the act in spite of lack of knowledge.

Termination of an Agency Relationship

The agency relationship is usually set up for a specific time period, with a designated termination. Ordinarily, an agency may be terminated by the acts of one or both of the parties or by operation of law. An agency is also terminated by the expiration of its terms, extinction of its subject matter, or the death or incapacity of either principal or agent.

When May a Principal Revoke Agency?

Because the relationship between a principal and an agent is a personal one, founded on the trust and confidence which a principal places in his or her own agent, the principal has an absolute power under the law to revoke the agency relationship at any time, unless the agency is coupled with an interest. Nevertheless, while the principal has an absolute power to revoke the agency relationship, the principal does not necessarily have the right to unilaterally cancel the listing contract and, thus, may be liable for breach of contract by revoking the agency without good cause. According to Civil Code §2355, notice of termination of an agency relationship must be given to third persons if the agency is terminated as a result of expiration of the term, extinction of the subject matter, or the death, incapacity or renunciation by the agent. If the agency is, in fact, terminated in any of the ways enumerated in Section 2355, the former agent is still an ostensible agent as to those third persons who have not received notice of the termination.

If the agency is terminated through the death or incapacity of the principal or by the principal's express act of revocation, it is not effective as to third persons when they have no notice of this event. A contract entered into with an agent by a third person who does not have actual knowledge of the death or incapacity by the principal is binding upon the principal, the principal's heirs, and other successors in interest. As a rule, unless a real estate agent's authority is coupled with an interest in the property, an agent's authorization may be revoked at any time by the principal. A real estate licensee's right to earn a commission under a listing agreement is not considered to be an interest in the contract and, thus, precludes termination by death, incapacity or revocation on the part of the principal. This is true even if the agent is given a particular time within which to perform under the terms of the listing agreement. On the other hand, the courts have recognized circumstances where the contract of agency is irrevocable because the licensee has an interest in the property which is the subject matter of the agency, or the express agreement provides for breach of contract remedies for commission. This remedy should not be confused with the principal's ultimate authority to "fire" the agent. The principal's termination of the agency relationship by revocation may give a real estate agent a right to damages for breach of contract. Withdrawal of the property from the market by the owner prior to expiration of the listing is an example of a de facto revocation which gives the broker a cause of action for the agreed compensation under the listing contract. The California Supreme Court has held that a clause in an exclusive listing contract providing for payment of the commission to the real estate agent upon unilateral withdrawal of the property from sale by the principal does not constitute an unenforceable penalty under California law. If the listing is an open one, a sale negotiated by the owner or by a broker terminates the listing, and notice of termination need not be given to brokers other than the broker who has presented the offer which has been accepted. In the event an open listing specifies no fixed term of employment, the listing normally may be revoked by the owner at any time without liability prior to production of a ready, willing and able buyer by the broker. If a fixed term is specified, it is possible that, despite revocation by the owner, the commission will be earned if the broker produces such a buyer within the specified time. An exclusive listing contract must contain a definite, specified date of final and complete termination. If the listing does not contain a definite termination date, the listing is unenforceable by the agent, and the claim, demand or receipt of any fee under the agreement by the agent is a basis for disciplinary action against that agent's license.

Self-Check Questions

1. In an emergency, an agent has expanded authority, including the power to

disobey the principal's instructions where it is clearly in the best interest of the principal.

a. True

b. False

2. A principal does not have the power to revoke an agency.

a. True

b. False

3. A seller can be held liable to the buyer for misrepresentations made solely by the

listing agent and not by the seller.

a. True

b. False

4. An agency to sell carries with it the authority to modify or cancel the purchase

agreement after it has been signed.

a. True

b. False

5. The California Supreme Court has held that if the broker has not produced a

buyer, a seller may unilaterally cancel the listing contract without payment of commission.

a. True

b. False

Duties of an Agent

As you read, think about:

• the duties an agent owes to his or her principals • the liability of an agent to his or her principals

Fiduciary and Statutory Duties

An agent is a fiduciary, and, as such, has an obligation of undivided service and loyalty to the principal, very similar to that of a trustee to the beneficiary. As a fiduciary, the real estate agent must act in the principal’s best interests. In certain residential real estate transactions, the real estate agent has both statutory duties (California Civil Code Sections 2079 et seq.) and common law duties—fiduciary duties as determined by the courts.

Duty of Disclosure

An agent is required to disclose to the principal all information he or she has relevant to the subject matter of the agency. In the real estate context, the real estate broker or agent may be liable to his or her principal for concealing or failing to disclose to his or her principal any fact concerning the value or desirability of the property involved. For example, a real estate broker or agent representing a buyer, purchasing vacant land with the intent to build a home, may be liable to the buyer for failing to disclose a known material fact such as the existence of a county dump nearby.

In a fiduciary relationship, it is the duty of the agent, in whom such trust and confidence are reposed by the agent's principal, to make full disclosure of all material facts relating to the subject matter of the agency. For example, the courts have held that negotiating a sale to the agent's wife without making a full disclosure of such fact to the principal is a violation of the duty that the agent owes to disclose all material facts. In one case the court stated that the rule prohibiting an agent from becoming the purchaser is aimed at any indirect, as well as direct, sale or transfer, and extends to the agent or some other relative of the agent. Other cases have said the seller's broker must disclose when the buyer is the broker's mother, son-in-law, or brother-in-law.

An agent's duty includes full disclosure, and possibly explanation, of facts necessary for the principal to make an intelligent decision. In some circumstances, that duty may include a duty to investigate. In George Ball Pacific, Inc. v. Coldwell Banker & Company, the court found that when a broker arranged a lease without knowing whether the lessor had sufficient ownership interest in the property being leased to be able to do so, there may have been a violation of fiduciary duties and customary practice in the area. In Field v. Century 21 Klowden-Forness, the court clearly imposed a greater fiduciary duty of disclosure upon the buyer's agent. In fact, according to Field, the buyer's agent's fiduciary duty to the buyer, whether or not a buyer's broker agreement has been signed, may encompass a duty to research, investigate or counsel concerning the ramifications of decisions of the principal. On the other hand, according to Padgett v. Phariss, a buyer's agent has no duty to inquire of the homeowners' association whether there are any construction defects in the common areas of the property or whether there is any pending or proposed litigation concerning disclosed defects in the common areas.

Duty of Care

An agent is under a duty to use reasonable care, diligence, and skill in performing the tasks of his or her agency. In the real estate context, a real estate agent may be held to a high degree of skill and diligence in procuring the best terms possible for the seller.

Recently in Coldwell Banker Residential Brokerage Company, Inc. v. The Superior Court of San Diego County, the court ruled that a listing agent's statutory inspection and disclosure duties did not impose on the agent a duty of care toward the buyer's minor child.

Duty of Loyalty and Duty Against Self-Dealing

An agent is under a duty not to compete with his or her principal on matters connected with the agency, unless the principal and the agent otherwise agree. Permission to compete with the principal on matters of agency must be documented in writing. However, an agent cannot act for one whose interests conflict with those of the principal.

In the real estate context, an agent cannot act on confidential information made available to him or her by virtue of his or her agency relationship with the principal and obtain any unfair advantage over that principal. An agent could not, for example, inform a prospective purchaser that the agent owned property that was the same or similar to that of the agent's principal and, in fact, could be purchased for less than what the principal was asking for the principal's property.

Even after the termination of the agency relationship, the agent remains under a duty not to take advantage of a still-existing confidential relationship created during the prior agency relationship.

An agent may not obtain an interest adverse to that of his or her principal. This concerns three situations:

1. Secret Profits

Any secret profits made by an agent as a result of his or her agency are recoverable by the principal.

2. Personal Purchase by Purchasing Agent

The general rule against self-dealing by a fiduciary would prohibit an agent, who is authorized to purchase certain property for his or her principal, to purchase it for himself or herself instead. For example, an agent retained by a buyer to locate a piece of property suitable to that buyer's needs could not purchase the property for himself or herself, hoping at some point to then sell the same property to the buyer. In such a situation, we would have an example of self-dealing as well as "secret" profit if, in fact, the sale to the buyer was at a higher price than that paid by the agent.

3. Personal Purchase by Listing Agent

In a situation in which an agent with the authority to sell property buys it himself or herself, the burden is upon that agent to show that the transaction was proper in all respects. The principal may avoid the transaction if there is any unfairness, even though the price is adequate.

This applies also to any indirect or collusive contract transaction in which the agent, although not technically the purchaser, actually profits by the purchase. An example would be where a real estate broker who has a listing on a certain property "joins up" with a prospective purchaser to purchase the property in question. Once again, remember that if the agent who has the authority to sell the property buys it himself or herself, the burden is upon him or her to show that the transaction was proper in

all respects and that the seller/principal may avoid it if there is any unfairness, even though the price is adequate.

Duty of Loyalty and Dual Representation

A real estate agent has a duty to refrain from dual representation in a transaction without full disclosure to both principals and the knowledge and consent of the principals. Typically, an agent provides this necessary disclosure in the listing contract for the sale of a property and obtains the consent of the principal when the listing contract is signed by the principal. All of the C.A.R. listing contracts mentioned above contain provisions whereby the principal is agreeing to dual representation under various circumstances (e.g., the agent representing a seller and a buyer, the agent representing two or more buyers).

The situation that may be problematic for a real estate agent is when he or she shows a particular property to a prospective buyer without any written agreement. The buyer may be undecided about this property. The agent also shows this property to another buyer--again without any written agreement. Now both buyers decide they want to make an offer on the property. Clearly we have a conflict of interest. Unfortunately, the agent owes both buyers a fiduciary duty and one of them is going to end up very unhappy. One way to avoid this problematic situation is for the agent to have the buyers sign a form giving permission for dual agency before showing any properties to either buyer. C.A.R. Form DA, Disclosure and Consent for Representation of More Than One Buyer or Seller (see Appendix), satisfies this requirement if one of the above buyer-broker listing agreements is not used.

Keep in mind that the office (broker) is deemed the agent of the principals and not the real estate salesperson. Two salespersons in the same office may show the same property to two different buyers. The office (broker) owes a fiduciary duty to both buyers. Similarly, if one salesperson represents the seller and another salesperson in the same office represents the buyer, the office (broker) is a dual agent owing a fiduciary duty to both buyer and seller.

Duty of Fair and Honest Dealing

A real estate licensee who is the agent of a seller owes a duty of fair and honest dealing to the buyer. This is a duty that the courts have held to exist by reason of the agent's status as a real estate licensee. The duty may also be found to exist by way of the agent's fiduciary obligation to the seller since any misrepresentation or material concealment on the part of the agent may afford the buyer grounds upon which to seek rescission or damages from the seller.

An agent must not withhold from a prospective buyer material facts regarding the property which are known to the agent and unknown to the buyer and unascertainable by the buyer through diligent attention or observation.

Duty of Reasonable Care and Skill

An agent is under a duty to use reasonable care and skill, to obey directions of the employer and to render an account on demand. Earlier we defined a gratuitous agent as one who is not paid for the agent's services. Although a gratuitous agent cannot

be compelled to perform the undertaking, if such an agent actually decides to assist in the transaction, he or she must also obey instructions and be bound to exercise the utmost good faith in dealings with the principal.

Duty Owed Other Parties

An agent is not personally liable on a contract signed by the agent in the name of the principal as long as the third party is aware of the agency relationship and knows the identity of the principal. The agent may be personally liable to the third party if the agent's name appears either without the name of the principal or without any indication that he or she is acting as an agent. Therefore, a real estate agent should sign any papers or agreements in the form "by John Doe as listing agent for Mary Smith" or "by John Doe as property manager for Mary Smith" or "by John Doe as agent for Mary Smith."

If the agent acts without authority or in excess of his or her authority, then the agent may be liable to the third party. It is important to remember that although the agent may sign certain papers or agreements (e.g., pest control inspection for the seller), some contracts or amendments must be signed by the principals (e.g., the purchase agreement, grant deed) unless the agent has been given a power of attorney by the principal.

An agent is liable to all contracting parties for injuries resulting from the agent's negligence or misconduct. For example, a broker was held liable when a prospective tenant fell and injured herself because the woman was not warned about the condition of the stairs in the property, and the injury was considered a foreseeable result of the broker's negligence. In another case, a real estate company was held liable to third parties when a real estate salesperson caused an automobile accident while driving on real estate related business.

In general, a real estate agent owes a duty of honesty and fairness to all parties in a transaction. However, if the agent is acting under instructions from the principal, there is joint and several liability for the agent's torts (any civil wrong by act or omission for which a suit can be brought, exclusive of a breach of contract). For example, even if a seller is unaware of the misrepresentations made by his or her listing agent, the seller can be held jointly and severally liable for the agent's negligence or fraud--that means the injured party may sue the seller or the agent or both. Certain actions by real estate licensees--such as fraud--may lead to suspension or other disciplinary action by the Commissioner of the Department of Real Estate.

Liability of an Agent to a Principal

An agent is liable to his principal for any breach of duties and for obligations owed to that principal under the agency relationship. Namely, an agent is responsible for any breach of fiduciary duty, duty of due care, breach of contract and any tort that he may commit against his principal. For example, a broker is the agent of a seller in a transaction. If the broker fails to disclose that the buyer wants to buy the seller's property due to some newly discovered oil finds, the broker has breached his duty and is liable to the seller for damages. A gratuitous agent, in a like manner, is liable to the principal once that agent undertakes to act for such principal. The following are aspects of agency liability:

Breach of Contract or Fiduciary Duties

An agent is liable to his or her principal for any breach of duties and/or obligations owed to that principal under the agency relationship.

Misrepresentation

An agent is liable to his or her principal and other parties for damages resulting from the agent's misrepresentations.

Negligence

An agent may be liable to his or her principal and other third parties for failing to act or for negligently performing the duties of licensee.

Consequences of Professional Liability

The consequences that may result from professional liability are as follows:

1. The injured party may collect damages. 2. The principals may be able to rescind contracts. 3. The principals may be able to avoid paying commissions. 4. In some instances, the agent may suffer the loss of his or her license.

Self-Check Questions

1. An agent is under a duty to use reasonable care, diligence, and skill in performing

the tasks of his or her agency.

a. True

b. False

2. An agent must disclose to his principal any material facts he knows concerning

the value or desirability of a property.

a. True

b. False

3. An exclusive listing agent's duty of honesty to all parties means that the agent

must reveal the seller's confidential information to the buyer.

a. True

b. False

4. The listing broker has no liability to the principal for acts of his salesperson--only

the salesperson is liable to the principal.

a. True

b. False

5. Secret profits made by an agent as a result of his agency are not recoverable by

the principals.

a. True

b. False

6. If an agent acts in the name of the agent's principal with authority given by the

principal, the principal is not bound by the agent's act.

a. True

b. False

Agency Contracts

As you read, think about:

• the agreements that authorize agency • the key provisions in a listing agreement

Power of Attorney

A power of attorney is a written instrument giving special authority to an agent to act on behalf of the principal. The agent acting under such a grant of authority is generally called "attorney in fact." A special power of attorney authorizes the attorney in fact to perform certain prescribed acts on behalf of the principal. Under a general power of attorney, the agent may transact all of the business of the principal including signing contracts and even the grant deed. However, if the attorney in fact is authorized to sign documents that need to be recorded, the power of attorney must also be notarized and recorded.

The Civil Code provides that if the agency was created by a recorded instrument containing a power to convey or execute instruments affecting a real property, the revocation of the agency is not effective unless the revocation is in writing and is acknowledged and recorded in the same place as the instrument creating the agency.

Powers of attorney are strictly construed and, ordinarily, where an authority is given partly in general and partly in specific terms, the general authority is limited to acts necessary to accomplish the specific purposes set forth.

Listing Contracts

Agency may also be authorized by listing contracts. A listing is defined as a written contract by which a principal employs an agent to do certain things with the owner's property. Therefore, an agent holding a listing is always bound by the law of agency and has certain obligations to the principal that do not exist between two principals.

The most common forms of listing agreements are as follows:

Net Listing

In a net listing, the compensation is not definitely determined, but a clause in the contract usually permits the agent to retain as compensation all the money received in excess of the listing price set by the seller. The agent is required by the Real Estate Law to reveal to both the buyer and seller, in writing, within one month of the closing of the transaction, the selling price involved. The law permits this information to be disclosed by the closing statement of the escrow holder, and this is the usual practice.

A net listing is perfectly legitimate, but it may give rise to a charge of fraud, misrepresentation and other abuses which the Real Estate Law is designed to protect the public against. Accordingly, if a net listing is used, the meaning should be thoroughly explained to the principal. The principal should be fully informed that all money received over and above the listing price will be kept by the broker as commission on the transaction. Under the Real Estate Law, failure of an agent to disclose the amount of the agent's compensation in connection with a net listing is cause for revocation or suspension of license. This disclosure must be made prior to or at the time the principal binds himself to the transaction.

Open Listing

An open listing (C.A.R. Form RLAN) (see Appendix) is a written contract signed by the party to be charged, usually the seller of the property, which authorizes the broker to act as agent for the sale of certain described property. The property is identified by a suitable description, and generally the terms and conditions of sale are set forth.

Open listings are the simplest form of written authorization. They may be given concurrently to more than one agent, and usually the seller is not required to notify the other agents in case of a sale by one of them, in order to prevent liability of paying more than one commission. The sale of the property under such an agreement is considered to cancel all outstanding listings.

Thus, where several open listings are given, the commission is considered to be earned by the broker who first finds a buyer who meets the terms of the listing, or whose offer is accepted by the seller. If the owner personally sells the property, the owner is not obligated to pay a commission to any of the brokers holding open listings.

Exclusive Agency Listing

An exclusive agency listing (C.A.R. Form RLAA) is a written contract containing the words "exclusive agency" (see Appendix). The commission is payable to the broker named in the contract, and if the broker or any other broker finds the buyer and effects the sale, the broker holding the exclusive listing is entitled to a commission. It should be noted that this listing allows the owner to personally effect the sale without incurring liability for commission to the broker holding the exclusive agency listing.

Exclusive Right to Sell Listing

Under an exclusive right to sell listing (C.A.R. Form RLA), a commission is due the broker named in the contract if the property is sold within the time limit by the said broker, or any other broker, or by the owner (see Appendix). Frequently, such contracts also provide that the owner shall be liable to pay a commission if a sale is made within a specified time after the listing expires to a buyer introduced to the owner by the listing broker during the term of the listing. The real estate broker is usually obligated, under the terms of the listing contract, to furnish a list of the names of persons with whom the broker has negotiated during the listing period, before or upon the expiration of the listing.

The exclusive right, the exclusive agency, and all other listings should be for a definite term, with a specified time of termination. If a licensed broker does not provide these specifics, the broker is subject to disciplinary action against the broker's license, under the California Real Estate Law.

Key Provisions in Listing Agreements

The key provisions in all listing agreements are listed below.

• agency relationship • start and stop dates • multiple listing service authorization • terms and conditions of sale • authority to accept deposits • compensation to broker • methods for resolving disputes

Self-Check Questions

1. An exclusive listing agent owes fiduciary duties to both buyer and seller.

a. True

b. False

2. Net listings are illegal in the state of California.

a. True

b. False

3. With an open listing, if the owner personally sells his property, he is still obligated

to pay a commission to the brokers holding open listings.

a. True

b. False

Agency Relationships in the Modern Brokerage Practice

As you read, think about the following:

• the complexity of dual agency • the three steps of agency disclosure, election, and confirmation • the various types of agency relationships

Dual Agency

There has been a great deal of concern over the issue of dual agency. Under single agency, a sales associate can act solely as agent for the seller or as agent for the buyer. Remember, all sales associates with the same company are considered under one "agent" (the broker) for purposes of agency duties. Dual agency is a more complex issue. In a real estate transaction, a licensed real estate broker may act for both buyer and seller, provided full disclosure has been made to both parties involved and their consent has been obtained prior to the agent acting as a dual agent. Dual agency contains potential liabilities. If the real estate agent has not given full disclosure and obtained consent of the principals involved to act as a dual agent, serious liability and risks may occur, such as:

• Professional sanctions: The broker involved is subject to disciplinary action.

• Rescission: The principals involved may rescind the purchase and sales agreement without a showing of actual fraud or injury.

• Avoidance: The principals involved may legally avoid the obligation to pay commission.

• Damages: The principals may have recourse for any damages suffered as a result of the undisclosed dual agency.

• Double exposure: A dual agent runs a greater risk of breaching fiduciary duties due to the conflicting nature of the duties involved in a dual agency relationship.

The dual agent has the same agency responsibilities concerning each principal as would an individual agent with respect to his or her principal.

Two questions which are often asked regarding dual agency are: As a dual agent, am I obligated to tell a buyer that the seller will sell for less than the listing price? Or, conversely, am I obligated to tell the seller that a buyer will buy for more than the offering price?

Civil Code Section 2079.21 states that:

A dual agent shall not disclose to the buyer that the seller is willing to sell the property at a price less than the listing price, without the express written consent of the seller. A dual agent shall not disclose to the seller that the buyer is willing to pay a price greater than the offering price, without the express written consent of the buyer.

This section does not alter in any way the duty or responsibility of a dual agent to any principal with respect to confidential information other than price.

The Three Steps of Disclosure, Election, and Confirmation

When Required

The California Agency Law--involving the three-step process of disclosure of agency, election of agency and confirmation of agency--found in Civil Code Sections 2079.12 through 2079.24, applies only when a real estate licensee is dealing with residential property of one-to-four dwelling units or any leasehold where the lease exceeds one year duration.

What Required

In general, the agency law requires a real estate licensee acting as an agent to do three things: 1) the licensee must provide written disclosures to both the buyer and seller concerning the agency relationship options which are available; 2) the licensee must make an oral or written election (i.e., make a choice) concerning the form of agency selected for the particular transaction; and 3) the licensee must confirm in writing the particular agency relationship selected.

Basically, this breaks down into a three step process: disclosure, election, and confirmation. The agency disclosure and confirmation forms are used at various times, depending on whether the agent is the listing agent, the selling agent or a dual agent.

Listing Agent: The listing agent is a person who has obtained a listing of real property to act as an agent, usually for compensation, to sell the property or to find and obtain a buyer.

Selling Agent: Basically, the selling agent is the person who works with the buyer. The selling agent can be one of three things:

1. A listing agent who acts alone; in other words, a listing agent selling his or her own listing

2. An agent who acts in cooperation with a listing agent and who sells or finds and obtains a buyer for the real property

3. An agent who locates property for a buyer, or locates a buyer for property, for which no listing exists, and presents an offer to purchase to the seller.

Agency Disclosure

The real estate licensee must give the agency disclosure form, as mandated by law, to every buyer and seller in applicable transactions. This form basically describes the agency relationship alternatives available and the agent's duties to the respective parties under each alternative. The licensee must obtain a signed acknowledgment from the buyer and seller that they have received a copy of this disclosure.

The law requires that the entire text of specific sections of the residential agency statute be printed on the backside of the disclosure form. The California Association of REALTORS® Form AD complies with this "Step One" requirement. If the seller or buyer refuses to sign an acknowledgment of receipt of the form, the agent, or an associate licensee acting for the agent, must write, sign, and date a declaration of the facts of the refusal.

Timing of the Agency Disclosure

The appropriate time to provide the disclosure form usually depends on whether the licensee is a listing or selling agent and whether it is being given to the buyer or to the seller.

Disclosure Forms Given to the Seller

The listing agent must provide the disclosure to the seller before entering into a listing agreement.

The selling agent, on the other hand, must give the disclosure form to the seller as soon as practicable prior to presenting the seller with an offer.

In other words, both the listing agent and the selling agent must provide the seller with separate disclosure forms.

If the selling agent is also the listing agent, as is the case in an "in-house" sale, then only one disclosure form for the seller is necessary, even though more than one associate licensee from the same office is involved. An in-house sale means selling one's own listing without the use of any outside independent brokerage firms.

It is not uncommon in a real property transaction for the agent, or even more than one agent in the transaction, to represent only one party to the transaction, most commonly the seller. The law does not compel any particular agency relationship.

Depending on the given circumstances, there are several methods for the selling agent to provide the seller with the disclosure form:

1. If the selling agent is able to deal on a face-to-face basis with the seller, then the selling agent should hand the disclosure form to the seller and obtain the

acknowledgment of receipt prior to presenting the seller with an offer to purchase.

2. If the selling agent is not able to deal on a face-to-face basis with the seller, the disclosure form prepared by the selling agent may be furnished to the seller through one of these means: a) the listing agent, who is then required to deliver it to the seller and obtain the acknowledgment of receipt for the selling agent from the seller; or, b) by certified mail addressed to the seller at his or her last known address, in which case no signed acknowledgment of receipt is required.

It is quite important that the seller be given the agency disclosure form prior to the execution of the listing agreement. In Huijers v. DeMarrais, the court held that the broker's failure to provide the sellers with the statutory agency disclosure statement prior to execution of the listing agreement makes the listing agreement voidable at the option of the sellers--meaning the sellers do not have to pay the commission to the broker. In addition, the sellers may be entitled to rescission of the sale of the property as a remedy. In the Huijers case, the agent was working with the buyers trying to find a property for the buyers when the agent approached the sellers, asking if they were interested in selling their property.

Disclosure Form Given to the Buyer

According to Civil Code §2079.14, the selling agent must provide the disclosure form to the buyer as soon as practicable prior to execution of the buyer's offer to purchase. But what happens if the selling agent doesn't write the buyer's offer, such as when the buyer or the buyer's attorney prepares the offer? If the offer to purchase is not prepared by the selling agent, the selling agent shall present the disclosure form to the buyer not later than the next business day after the selling agent receives the offer to purchase from the buyer.

A listing agent is not required to furnish a disclosure form to a buyer unless the listing agent is also the selling agent in an "in-house" sale situation. In that event, the combined listing agent/selling agent is required to provide the buyer with the disclosure form.

Although the statute specifically states the latest time at which the "Step One" disclosure form must be provided, it does not specifically state how soon it must be provided to a "possible" buyer. The statute gives some general guidance in its definition of a "buyer" as one "...who seeks the services of an agent in more than a casual, transitory, or preliminary manner, with the object of entering into a real property transaction...." as stated in Civil Code §2079.13(c). Therefore, it would appear that casual visitors to an open house, for example, would not be "buyers" within the meaning of the statute. Selling agents are encouraged to provide the "Step One" disclosure form at the time the selling agent determines he or she is working with a serious buyer.

Agency Election

Agency "election" means deciding who represents whom. Real estate licensees need to discuss with their clients what the agency relationship will be. Election is Step Two in the three-step process. In other words, buyers and sellers need to know which licensees are the seller's agents, which are the buyer's agents

and which are acting as dual agents for both parties. For example, in a FSBO transaction, will the agent be representing the buyer only, or will the agent act as a dual agent for both seller and buyer?

The timing of the election of an agency relationship depends on whether a licensee is a listing or selling agent and whether he is dealing with a seller or a buyer. It is advisable that all clients be made aware of the agency election as soon as possible.

Agency Confirmation

The selling agent must "confirm"--that is disclose--the election of agency representation as soon as practicable. The election may be oral, but the parties must confirm it in writing in either the purchase agreement or a separate writing signed by the seller, buyer and the agents prior to or at the time the purchase contract is signed by the buyer and seller. The earlier the election is made the better. This will help avoid allegations by the buyer or seller that the selling agent acted one way but later disclosed, and attempted to confirm, an inconsistent agency status. All of the C.A.R. purchase agreements contain a confirmation paragraph. However, if the purchase agreement being used does not, then C.A.R. Form AC-6, Agency Confirmation, may be used.

The selling agent may elect to act exclusively as the buyer's agent, exclusively as the seller's agent, or as a dual agent representing both the buyer and the seller. If the selling agent and the listing agent are the same, again as in an "in-house" sale, the licensee and the buying and selling parties may elect that the licensee represent the seller only, instead of acting as a dual agent, which is the only other available option. In these situations, the buyer, who is not a principal of the selling agent, receives various services from the selling agent which are offered on behalf of, and for the benefit of, the seller, who is the principal of the selling agent.

The listing agent should disclose the agency election to the seller as soon as practicable, and this election must be confirmed in the purchase agreement or in a separate writing executed or acknowledged by the seller and the listing agent prior to or coincident with execution of the contract by the seller.

It is recommended that as soon as possible after the listing agent provides the "Step One" mandatory disclosure form to the seller (which must be provided prior to entering into the listing agreement) that the listing agent then proceed to disclose the election of agency representation to the seller. Employing brokers are advised to adopt an office policy of agency representation for the office's listings that can only be varied with the employing broker's approval and documentation.

Unlike the selling agent who has three options, the listing agent only has two options. The listing agent may act either exclusively as the seller's agent or as a dual agent representing both the buyer and the seller. Since the definition of a listing agent is one who already has an agency relationship with the seller, it is impossible for the listing broker to act exclusively as the buyer's agent. In addition, the law specifically prohibits a listing agent from acting exclusively as a buyer's agent.

Format of Agency Confirmation

The law sets forth a mandatory check box format that must be used to confirm in writing the agency relationship selected. This mandatory agency confirmation language may be in the purchase agreement or in a separate writing. The California Association of REALTORS® Standard Form AC-6 complies with this requirement (see Appendix), as do all the C.A.R. purchase agreements.

The law specifically allows a licensee to sell his or her own listing. However, the agency relationship selected must be disclosed and confirmed in writing. In other words, the licensee must disclose that he/she is exclusively representing the seller or is a dual agent of both the buyer and the seller.

The licensee does not have to be a dual agent if he/she sells his/her own listing. An agent selling his or her own listing may represent the seller only. In this case, it is very important to disclose this election to the buyer as early as possible since the buyer may assume the licensee is his agent as well. When agents sell their own listing exclusively as the seller's agent, the buyer is unrepresented. However, the seller's agent still has affirmative obligations to the buyer to diligently exercise reasonable skill and care, provide full disclosure of material facts and deal honestly, fairly and in good faith.

The licensee cannot change agency relationships by assigning a different salesperson in the same office or a branch office to assist the buyer. The primary "agent" in a transaction is the broker under whose license the salespeople are operating. If an office has a listing, the broker will always be at least the seller's agent. If different associate licensees of the same office work with the seller and buyer, both associate licensees still will be at least the agent of the seller. However, if the broker also elects to be the agent of the buyer by becoming a dual agent, then the different associate licensees also will be dual agents of both the buyer and the seller. In either case, it is important to discuss the agency representation arrangement selected with both the buyer and the seller as soon as possible.

Various Agency Relationships and the Agency Disclosure/Election/Confirmation Process

The following discussion illustrates the agency disclosure/election/confirmation process:

Example One:

Two separate offices are involved in a transaction: one listing office and a different office working with the buyer. Listing agent Sarah takes a listing from property owner Rick Smith.

Sarah gives Rick an agency disclosure form and has him sign it at the same time that he signs the listing agreement.

Seller Rick and listing agent Sarah decide that Sarah will represent Rick exclusively. So in this example, listing agent Sarah makes sure that the confirmation paragraph in the purchase agreement presented by the buyer's agent is filled out with the listing agent checked off as acting as the seller's agent exclusively.

Add selling agent, Carmen Garcia, to the scene. Carmen is not in the same office or company as listing agent Sarah. Carmen is from Garcia Realty and she has been working with buyer, Loretta Larson.

When selling agent Carmen first sits down with buyer Loretta, she gives her the agency disclosure form. Loretta expresses her preference that Carmen represent her exclusively as a buyer's agent.

Carmen shows Loretta several MLS properties, and Loretta decides to make an offer on the one owned by seller Rick Smith.

Carmen gives an agency disclosure form to listing broker Sarah, who will obtain seller Rick's signature prior to presenting the offer. Note that Seller Rick will have received two agency disclosure forms, one from his agent Sarah and one from the buyer's agent, Carmen.

In this example, Carmen has filled out the confirmation paragraph in the purchase agreement by checking herself off as the agent of the buyer exclusively. Seller Rick acknowledges the disclosure and accepts the offer.

Example Two:

Notice how the situation is affected by an in-house transaction. Jack Johnson of Lots of Land Realty takes a listing from seller Bernie Brown. Jack wants to make sure he can sell the listing in-house if that possibility exists. Listing agent Jack gives the disclosure form to Bernie, and Jack gets the signed receipt prior to the signing of the listing agreement. However, at that time Bernie says that he never wants Jack to act as a dual agent.

An interested buyer is working with associate licensee Lisa Ross in Jack's Lots of Land Realty Office. The buyer thinks that associate Lisa is working for him and is a dual agent. Lisa gives the buyer the agency disclosure form before the offer is prepared and signed by the buyer.

Lisa is permitted to be present at the presentation of the offer to the seller Bernie. Lisa gives the seller Bernie an agency disclosure form to be signed before presenting the offer to Bernie. The offer comes in with the confirmation paragraph completed as follows: Lots of Land Realty is the agent of both the buyer and seller. At this time, before Bernie can accept the offer, Jack needs to explain to Bernie that the office is legally Bernie's agent and even if another individual licensee in the same office represents the buyer, the office is considered a dual agent. If Bernie agrees to the dual agency under these circumstances, then everything is fine.

If Bernie does not agree to the dual agency relationship, then a counter-offer situation is in operation. The buyer may then elect to proceed without any agent representation, or he may seek another outside real estate broker for representation. Regardless, the agents must clarify the final agency relationship election and confirm in writing. The agents must also decide how the outside office as the buyer's agent is to be compensated since the in-house agent Lisa has procured the buyer.

Self-Check Questions

1. All sales associates with the same company are considered under one "agent"

(the broker) for purposes of agency duties.

a. True

b. False

2. The dual agent owes the same duties and obligations to both principals.

a. True

b. False

3. If the listing agent and the selling agent are different salespersons in the same

brokerage office, then both agents must provide the seller with separate disclosure forms.

a. True

b. False

4. The three steps required under current agency legislation are disclosure, election,

and confirmation.

a. True

b. False

5. The mandatory agency confirmation language may be in the purchase agreement

or in a separate writing.

a. True

b. False

Summary

In this course, we have covered the various types of agency relationships that may exist and how such relationships are created (e.g., express agency, implied agency, gratuitous agency). We described how agents receive their authority and explained under what circumstances that authority can be expanded, restricted, or terminated. We also explained the duties and obligations of agents to their principals (e.g., loyalty, care, etc.). We discussed the different forms of listing agreements, which are the contracts that authorize agency. One of the most important components of this course is an

understanding of how to comply with the agency law's three-step requirement of agency disclosure (in writing), election, and confirmation (in writing). Although the agency law is complex and can be confusing, it is vital that every real estate licensee understand the intent of the law. The law requires real estate licensees to explain agency relationships to their clients. In order to comply with the law, it is vital that you have a clear understanding of what "agency" is all about.

Appendix

Downloadable Files

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Course Content Agency Relationships and Duties (file size: 203k)

Forms

C.A.R. Form RLA (4.06) (191K) C.A.R. Form RLAN (4.05) (191K) C.A.R. Form RLAA (4.05) (191K) C.A.R. Form MHL (4.06) (191K) C.A.R. Form PL (4.06) (191K) C.A.R. Form LL (4.06) (191K) C.A.R. Form SP (10.00) (191K) C.A.R. Form NRL (10.01) (191K) C.A.R. Form BRNN (4.07) (191K) C.A.R. Form BRE (4.07)) (191K) C.A.R. Form BRNE (4.07) (191K) C.A.R. Form AC-6 (1987) (191K) C.A.R. Form AD (4.06) (191K) C.A.R. Form DA (11.06) (191K)

Final Exam

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