BROKER RISK MANAGEMENT
WEEKLY PRACTICE TIP
- Remain Neutral at All Times
When there is no dual agency, you can be an advocate for your client. However, once there is a dual agency, you, and the other agent (and all agents and managers in your brokerage) cannot advocate for one client or their position over the other.
NOTE: See Rules 3 – 6 for what you can and cannot do when there is a dual agency.
- You Have the Same Fiduciary Duty to the Other Party as You Do to the Party that You “Represent”
Remember, under California law, all clients and all transactions belong to the broker – not the agent. Therefore, in a strict legal sense, you do not represent one party to a transaction any more than you represent the other party in a dual agency.
You have complete fiduciary duties to both. This is especially difficult if you have a strong or prior relationship with the party with whom you are working, and the other party is difficult at best to work with.
NOTE: See Part 2 “Fiduciary Duties” for a summary of what those duties entail.
- You Cannot Take Any Steps to Favor or Promote One Client Over the Other
Because your brokerage owes equal fiduciary duties to both clients, when there is a dispute, you cannot favor or promote “your” client’s interests to the detriment of the other party. Even though you strongly believe that the other party is wrong, you and your broker must be neutral on that issue.
You may not confidentially provide information to one of your clients and not the other. For example, you may not send information to a wife, but not a husband in a divorce situation and they have a conflict. You must have full transparency with both.
- Do Not Accuse the Other Party of Wrongdoing
For example, the buyer’s agent should not state or write something like: “The seller is acting in bad faith in not allowing the buyer to cancel and get their deposit back. I think they are wrong to take that position.” Nor should the seller’s agent state: “The buyer has no right to cancel the contract. If they do, they are in breach of the contract will be liable to the seller for damages.”
Both statements can be alleged to be a breach of fiduciary duty to the client. Such statements in emails or texts are discoverable in the litigation. These statements will be damaging to you and your broker; demonstrating that you did not understand your fiduciary duties, and are evidence of violation of those duties.
- Do Not Own Your Client’s Position or Statement; Attribute it to the Client
If buyer with whom you are working believes that the seller is being unreasonable in not allowing a contract cancellation with the deposit returned to the buyer, rather than YOU accusing the seller, ask the client to instruct you IN WRITING what to write to the other party, then email the listing agent language such as: “The buyer have requested that I convey to the seller that they believe that the seller does not have grounds to keep the deposit and requests that the seller sign cancellation papers with buyers’ deposit returned to them.” That way you do not own that position, you are not the one accusing the seller, and you have added nothing to the buyers’ position – thereby, remaining neutral.
- During Escrow, If There Is a Client Dispute, You Cannot Attempt to Informally Mediate or Negotiate a Resolution
If a dispute arises between dual agent clients, immediately consult with your manager. If your manager cannot resolve it, then the parties should consult with a qualified California real estate attorney.
- Be Especially Careful With Claims After the Close of Escrow
Typically, a buyer may find defects or conditions after close of escrow and may feel that the seller knew or should have known of the defect and should have disclosed it. Often, the buyer will ask their agent to write a demand letter to the seller setting forth the allegation and demanding compensation.
Please be reminded that your fiduciary duties to clients end upon the close of escrow. Therefore,
it is recommended that you advise the buyer in writing to consult with their own qualified California real estate attorney to write the claim letter.
Agents should never write demand letters on behalf of their clients irrespective of fiduciary duty, as it may constitute the illegal practice of law.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is an attorney-client privileged communication for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.