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DUAL AGENCY IN THE REAL ESTATE TRANSACTION
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 todayís 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 Professionalís Obligations:

In a dual agency situation, the agent owes a fiduciary duty to both principals.  An agentís 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, ď[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.Ē 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 agentís office act as the other principalís agent.  Dual agency is still present, however, this alternative may satisfy the non-consenting principalís 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 principalís 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 firmís clients.  He has more than 14 yearsí 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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