commercial agency

MREC Agency- Commercial

Westfield North Building, 2730 University Blvd, Ste. 200, Wheaton, Maryland 20902

301-949-1771 (Phone)301-949-5441 (Fax) www.pditraining.net

Presents:

ByD. Scott Smith, CCIM

443.691.8153 [email protected]

Class Room, DLLR, and MREC Rules!!!

•You must sign in and out to get CE (show ID)

•No eating, sleeping, or using electronics

•You must be on time

•Raise your hand to ask questions

•Be polite


•Part 1 Intro- Common Law, Creation & Compensation

•Part 2 Duties- COLAD

•Part 3 Subagent, Disclosed Dual, Undisclosed Dual

•Break

Today We Will:


•Part 4 Remedies of Breach.

•Part 5 Obligations

•Part 6 Termination of Agency

•Q&A

Today We Will:


DISCLOSURE:

I am not an attorney. This class was written by attorneys, directors, and agents for and by the Maryland Real Estate Commission and in conjunction with Maryland DLLR. Should you have questions outside the scope of this class, please seek your own professional legal council.


PART 1.

Intro, Common Law, Creation & Compensation


PART 1. Intro, Common Law, Creation & Compensation

A. Common Law Agency• History of Common Law ( http://en.wikipedia.org/wiki/Common_law )

• Agency is a result of a fiduciary relationship of consent from one to another to act on their behalf and subject to control and consent from the other

• The one for whom action is taken (principal)

• The agent is the one who acts on behalf of the other

The Agency relationship gives authority and

scope to perform actions granted by principal

http://en.wikipedia.org/wiki/Common_law

http://en.wikipedia.org/wiki/Common_law



B. Agency Creation• Express Agency can be oral or written

Written is not required by common law but IS for License law

• Intentional Implied Agency

Created by words and actions and is enforceable

• Accidental or Unintentional

Created by conduct and words of parties



B. Agency Creation, Cont.• General Agency is express or implied authority as in guardianship,

POS, etc.

• Special Agency is express or implied for a specific purpose only

Bottom line test for agency is to answer this:

“Did the parties have reasonable basis to believe and did they In fact, believe that an agencyrelationship existed?”



C. Compensation• Gratuitous Agent represents a principal for no compensation but is still

held by the same Agency standards and is still an agent

• Payment alone is not controlling as to an agency relationship

• Compensation is to be considered for agency but the payment of compensation is not by itself conclusive evidence of an agency


PART 2.

Duties to Principal


PART 2. Duties to Principal

A. Fiduciary• Depends on who the agent represents or who the client is, regardless

duties are the same. In disclosed dual agency, duties should be spelled out and in writing for each party.



B. Types of Duties owed by an agent to a principal• Loyalty

• Obedience

• Disclosure

• Confidentiality

• Promote and Protect clients interest

• Accounting

FAILURE TO FOLLOW THESE CONSTITUTES A

BREACH OF FIDUCIARY DUTIES TO A CLIENT



B. Types of Duties owed by an agent to a principal

• Loyalty- Most fundamental owed by agent. Obligates broker to act at all times solely in the best interest of the principal. Duty of loyalty prohibits and conflicts of interest that might compromise or dilute brokers loyalty to principals interests. Including, employment from any person whose interests compete with the principals interests.

• Example: Agent purchasing a property listed with agents firm and then reselling the property for a higher price. Fiduciary will be deemed to have acted against principal




• Obedience- Obligated to reasonably, promptly, and efficiently, follow all legal instructions by principal.

• Duty does not obligate to perform unlawful actions like, discrimination and misrepresentation.




• Disclosure- Agent must disclose all relevant and material information that agent knows and pertains to agency scope.

• Examples of obligated disclosures are ALL offers (even bad ones) at ALL times. Identity of all potential purchasers, facts affecting the value (NOI or Juiced statements), ability to close, brokers relationship to interested parties in transaction, buyers or sellers intentions as known, ANY other pertinent information on the property, or location that may affect value, days on the market, any option or factorsof potential transfer price.




• Confidentiality- Anything that is learned that may be against the clients best interest forever. Broker must keep secret any information that may weaken the bargaining position of principal. Does not include any disclosure of material facts that would constitute misrepresentation if not disclosed.

• Accounting- Agent must account for all financial matters, including deeds, money, or other entrusted documents in a

secured fashion.




• Care and Diligence-Brokers are deemed to have skill and competence in the matters of their trade superior to that of an average person and are expected to use their expertise while pursuing the affairs of the principal. Includes duty of discovery and honesty at all times and to promote and protect the clients interest at all times.


PART 3.

Sub-Agent, Disclosed Dual,Undisclosed Dual


PART 3. Sub-Agent

A.Definition- An Agent of an Agent1. Creation of a Subagent?

By expressed or implied consent.

B. Duties Owed1. to primary agent and principal are identical to duties owed by

primary agent to principal.


PART 3. Sub-Agent

C. Duties of Sub-agent owed to whom?1. The primary agent- who is also the broker of the sub-agent.

2. The principal (client-seller, purchaser, or both- if disclosed dual.

D. Types of sub-agents1. Associates in brokers office.

a) Usually two clients, the broker and owner or property

listed or, in purchaser, a prospective buyer or lessee of

property.


PART 3. Sub-Agent

D. Types of sub-agents –cont.2. Sellers Agent / Cooperating agent.

a) Usually have three clients: broker, listing broker and owner of property OR in buyer agency a prospective buyer or lessee of property.


PART 3. Disclosed Dual Agency

Refer. Part 3- 529 COMAR.

• Definition of Disclosed Dual Agency1. Acting for two parties in the same transaction @ one time.

2. Any contrast with single agency (agency for one party)


PART 3. Disclosed Dual Agency

Refer. Part 3- 529 COMAR.

B. Permitted Under Real Estate Law, IF:1. Disclosed to all parties AND

2. Consent to by all parties with informed consent.

3. Necessity for each broker to have a policy regarding

in-house sale and possible dual agency.


PART 3. Undisclosed Dual Agency

A. Definition of Undisclosed Dual Agency1. Acting for two parties in the same transaction @ one time, without knowledge and consent with both parties.

B. Not Permitted by law1. An undisclosed dual agency is one of the most serious

breaches of the law of agency. You will loose!


PART 3. Undisclosed Dual Agency

C. How undisclosed dual agencies are created. 1. Purchasing property listed by broker

2. Accepting future employment

3. Representing the buyer-while seeking compensation from the

seller without FIRST disclaiming any sub-agency.

4. Leading buyer to believe agent is representing buyer,

while legally acting as the agent for seller.


PART 3. Undisclosed Dual Agency-cont.

5. Working for buyer rather than with the buyer.

6. Implied from conduct and words spoken.

a) Examples:

“I’ll take care of everything”,

“Let’s offer a lower offer and see how it goes”,

“Trust me, the seller won’t counter”

“we” & “us” – Buyer / “them” & “they” –Seller and Listing Agent

Calling buyer “client” to 3rd person



CAVEAT:

A real estate broker working with a buyer doesn’t automatically become the buyers agent. Courts understand that brokers routinely provide buyers with other valuable services and information as a byproduct of brokers marketing function for seller.



You can without creating an agency relationship:

1. Show buyer listed property that fit buyers criteria2. Describe amenities and attributes and make 3. Factual representation about condition and status4. Transmit offers made by buyer to seller or listing broker on a timely basis.



Providing services like these to buyer does not in itself, create an agency relationship with buyer. When a broker does more than provide market information or facilitates the completion of a transaction, and instead becomes and advocate and negotiator for the buyer, then broker most likely has crated an implied agency with buyer. This can result in an undisclosed dual agency if broker is also the agent of the seller by reason of a listing agreement, or a sub-agency agreement, or a sub-agent based upon an offer of sub-agency from the listing broker that was NOT rejected.



When acting as the agent of the seller while working with the buyer, do not lead buyer or seller to believe you are acting as buyers advocate in negotiations with seller.


•BREAK TIME


Part 4 Remedies of Breach



A.Remedies1. Brokers principal has three main remedies available IF broker or subagent has committed a fiduciary duty breach.

a) rescission

b) forfeiture of commission

c) damages

NOT exclusive. Plaintiff can pursue one, two, or three in the

same lawsuit.



B. Rescission1. Only principal can rescind. Legal remedy through court attempts to restore parties to original status before transaction occurred.

Buyer deeds property back to seller. Seller refunds purchase price.

2. A tainted transaction by agents breach is presumed to be unfair and a principal is able to rescind transaction without showing transaction was in fact, unfair in price or terms and that agent acted in bad faith



B. Rescission 3. In undisclosed dual agency, if intentional or not, either the buyer or the seller need only to establish the existence of undisclosed dual agency to qualify for the rescission.

(OOUCH!!!)



C. Forfeiture of Commission 1. An agent who breaches their fiduciary duty while procuring a transaction for a principal is deemed to have breached the implied terms and conditions of their employment. Duties are imposed by implication upon agreement in addition to any express obligation set forth in an employment agreement. An agent who breaches their duties in not entitled to be paid and can be compelled to return any compensation received, including brokerage commission.



D. Damages 1. Agent can also be expected to pay any damages caused by breach.

Include:

a) Difference from sales price and price of higher offer broker failed to reveal.

b) Any profits made by broker who purchased property form seller-principal and resold it for a higher price.

c) Punitive & compensatory damages



E. Loss of License 1. Real estate license laws prohibit licensees from acting as undisclosed dual agents and many other forms of conduct that could constitute breach of licensee’s fiduciary duties to principal. Violators of said laws put their license in jeopardy.


Part 5 Obligations


Part 5 Obligations

To Non-Principals

A. Duty of Fairness

B. Duty of Disclosure of Material Facts

C. Duty of Honesty


Part 5 Obligations

D. Liability to NON-Principals

• Fraud- Defined as an act of omission or concealment involving a breach of a duty resulting in damage to another.

• Fraud must be shown by:

1. Representation made was false

2. Falsity was know by person making the presentation or representation was made with reckless disregard for the truth

3. Falsity was made to purposefully mislead


Part 5 Obligations

D. Liability to NON-Principals Cont.

4. Person to whom falsities were made not only relied upon the statements but did so in the full belief that statement made was true.

5. If falsities were not made the individual would not had acted in the same manor.

6. Person relied upon false statements suffered actual damages resulted from the making of false statement.


Part 5 Obligations


• Negligence is defined by absence or failure to exercise care as ordinarily or reasonably prudent and careful person would exercise under similar circumstances. Any conduct that falls below the standards established by law for the protection of others against unreasonable risk to them.


Part 5 Obligations


• In order for negligence to be actionable it must be shown to be:

a) A duty owed to another person

b) One or more duties owed were breached, violated, neglected or undischarged by the person owing such duty.

c) Breach of duty owned was proximate cause of injury or harm to the person to whom duty was owed.

d) Damages resulting from breach


Part 5 Obligations


• Misrepresentation is defined as the making of a statement which is false or which constitutes a mis-statement of fact containing only partial truths. This can be intentional (fraud) or unintentional (negligence).


Part 5 Obligations

E. Obligation of principal to agent

a) Availability

b) Accuracy of information

c) Reimbursement


Part 6 Termination


Part 6 Termination

1. Occurs when:

a) Purpose of agency has been fulfilled

b) Unilateral rescission by owner or broker by mutual consent

c) Expiration of term of agency employment

d) Death of owner of broker, if no assignment has been placed.

e) Loss of license by broker


The information provided in this course outline is intended to reflect a summary of the subject matter required to be taught, as of August 2011, in a course approved by the Maryland Real Estate Commission. While the Maryland Real Estate Commission has made every attempt to ensure the accuracy, completeness, and timeliness of this course outline, the Maryland Real Estate Commission makes no guarantee or warranty, either expressed or implied, concerning the accuracy, completeness, or timeliness of the content of this course outline. The Maryland Real Estate Commission assumes no responsibility for use of, or reliance on, this course outline by the public or licensees of the MREC, in no event, shall be liable for any direct, indirect, incidental, special, exemplary, or consequential damages arising in any way from the use of this course outline. Course requirements, as reflected in this course outline, may change from time to time to reflect changes in Maryland real estate law and regulations.

This course outline does not replace or amend any requirements

of Maryland Real estate law and regulation.


Conclusion

Case Law ~ Real Estate Law ~ Common Law

Q & A

Westfield North Building, 2730 University Blvd, Ste. 200, Wheaton, Maryland 20902

301-949-1771 (Phone)301-949-5441 (Fax) www.pditraining.net

We Thank You and hope to see you again!

By D. Scott Smith, CCIM 443.691.8153 [email protected]