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By Jeffrey L. Marcus*
January 2004
Introduction:
In
its most simplistic form, dual agency occurs when a real
estate agent represents both the buyer and seller in the
same transaction or a landlord and a tenant in the same
transaction. California
law permits dual agency representation provided
appropriate disclosures and consents are satisfied.
(Business and Professions Code section
10176(d)). Absent
disclosure and consent, dual agency is a conflict of
interest. In
today’s brisk real estate market, dual agency situations
are bound to arise. If
handled correctly by the real estate agent, the principal
(buyer/seller or landlord/tenant) in the real estate
transaction will not be disadvantaged.
Real
Estate Professional’s Obligations:
In
a dual agency situation, the agent owes a fiduciary duty
to both principals. An agent’s statutory fiduciary obligations include the duty
of utmost care, integrity, honesty and loyalty in dealing
with either or both principals. However,
dual agents are confronted with difficulties when
negotiating certain terms and price in connection with a
real estate transaction. For example, the seller
wants the purchase price to be higher and the buyer wants
it lower.
The
California Legislature recognized the dual agency dilemma
when enacting Civil Code section 2079.21, which
reads in part, “[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.” The
following discussion provides protocol the agent and
principal should follow in order to comply with California
dual agency laws and to complete the transaction.
Suggested Approach:
When
taking a listing to either sell or lease real property,
the agent should explain the concept of dual agency to the
principal and explain that it is permitted with proper
disclosure and consent.
The agent shall emphasize that if a dual agency
occurs, prompt notice and disclosure will be given and any
confidential information received from one principal will
not be disclosed to the other principal without the
expressed written consent of that principal.
After disclosure of dual agency, all principals
must consent in writing.
A principal does not have to consent.
If
the principal refuses to consent to the dual agency
setting, the agent may recommend an alternative whereby
the supervising broker of the agent’s office act as the
other principal’s agent.
Dual agency is still present, however, this
alternative may satisfy the non-consenting principal’s
concern. If
the principal continues to reject the dual agency
relationship, the agent will need to recommend another
agent from a different real estate company to represent
one of the principals.
This approach extinguishes the dual agency setting
resulting in the consummation of the transaction.
When
entering the real estate market and employing an agent,
the principal should hire the appropriate agent.
The principal needs to perform some investigation.
The agent should be referred to the principal, the agent
should be familiar with the principal’s real estate
requirements, and the agent should be professional and
experienced. If the proper agent is employed and the appropriate
disclosures and consents have been satisfied, the dual
agency experience will be advantageous to all.
This
quarterly newsletter is published for the interest of
friends, clients and prospective clients of the Law
Offices of Jeffrey L. Marcus and should not be relied upon
or considered as legal advice.
*Jeffrey
L. Marcus, Esq. provides litigation services and
transactional advice to the firm’s clients.
He has more than 14 years’ experience in private
and corporate practices involving business transactions
and real estate. Mr.
Marcus can be contacted at jeff@marcuslawgroup.com
or at the above address/telephone number.
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