All agents and brokers know that we have “fiduciary duties” to our clients, but few know exactly what that means.
According to the law, a broker’s fiduciary duties to the client include the obligation of utmost loyalty, good faith, trust and confidence; putting the clients interests ahead of the broker’s.The duties of loyalty and good faith include duties of honesty and full disclosure.The broker must exercise reasonable skill and care for the benefit of their client, and avoid any conflicts of interest.
What does this mean on a daily basis?
1.CONFIDENTIALITY:The broker is required to treat the client’s information as confidential.It would be a violation of that duty to disclose confidential information learned from the client without their consent.For example, if a listing agent learns from their sellers that they are in financial trouble, it would be a violation of the fiduciary duty to disclose that information to other brokers, agents or buyers without the consent of the sellers.
This duty of Confidentiality continues after the agency relationship with the client ends.
2.PUTTING THE CLIENT’S INTERESTS FIRST: Many times agents are so focused on closing the transaction (and getting the commission) that they lose sight of the fact that it may not be in the client’s best interest to continue to pursue the sale.If an agent is pushing a client to close a sale or purchase when the best course may be to send the client to an attorney to discuss how to best cancel the transaction, there may be a breach of the fiduciary duty to the client.
Or a listing agent may push a seller to accept an offer when the seller clearly does not want to do so.Again, the agent may have lost sight of what is in the client’s best interests.
Putting client’s interests first also requires an agent to remember that they are the AGENT and the SELLER or BUYER is the Principal.The AGENT does not sell or buy the property.The AGENT does not make the decisions.SELLERS and BUYERS make the decisions.
How often have you heard an agent say “I won’t allow that.”Or, “I won’t let my client do that.”Or“We aren’t going to agree to that.”That agent has forgotten that he/she is the agent and is acting like a principal.
Agents must gather information, discuss the information with the client, give advice and then act on the instructions of the client – all the while keeping the client informed as to the progress of the transaction. (See the next section.)
3.HONESTY AND FULL DISCLOSURE:In all of the dealings with the client, the agent must be honest.This means, of course, giving a truthful response to a question; but it also means affirmatively giving information to the client that will, or might, affect their decisions or best interests.
This is true also of full disclosure.The agent must, at all points in the relationship with the client, take affirmative steps to keep them apprised of what is occurring.That means promptly passing along information that is or might be material to them; and keeping them involved in what is happening with the negotiations.Agents get into trouble when they think they know what the client wants, without giving the client the opportunity to weigh the information and give input.Remember, clients have the right to change their minds.
4.LOYALTY:Often an agent will get frustrated with a client whom they deem to be stubborn, unreasonable, or even downright nasty.It is easy for that agent to forget that this is a client to whom they still have a fiduciary duty of loyalty.While it may be easy to start complaining about your client to the other agent or third parties, or to do things without the client’s approval, remember that this could be deemed to be a breach of the duty of loyalty.
5.AVOIDING CONFLICT OF INTEREST:The most difficult situation is, of course, a dual agency.When agents from the same brokerage represent both seller and buyer, the potential for being in a conflict situation is high.This is particularly true when a dispute develops between seller and buyer.In that case, neither agent can take a position, or advocate for an advantage, in favor of their client and to the detriment of the other client.
When the dual agent encounters disputes between buyers and sellers, they must remain neutral.They may facilitate communication, and try to resolve issues, but may not appear to favor one side over the other.That agent is like “Switzerland” – neutral.Remind the clients of the dual agency and that the agent may not take an advocacy position in favor of one, or against the other.
When in a dual agency transaction, whether two agents are involved or, in particular, if it is a “single agent-dual agency,” all agents must be alert to providing equal service to both clients.If a client feels that either of the dual agents is favoring the other side, there is exposure to a potential breach of fiduciary duty claim.
See Weekly Practice Tips: “How to Stay Out of Trouble as a Dual Agent”
“Dual Agency Contract Cancellation”
“Divorce Dual Agency Duties”
“Dual Agency in Multiple Offer Situations”
“Confidentiality”
DO NOT FORWARD TO CLIENTS.This Weekly Practice Tip is 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.
Bill Jansen is a partner in Broker Risk Management, PC, a firm he founded in 2002 to provide risk management services to real estate brokers and agents in California. He was joined in 2017 by Vickie Naidorf as a law partner.
Previously, Mr. Jansen was a founder and principal of Soma Living Real Estate, serving as broker of record, chief legal officer, and member of the executive team. For 23 years, he was an executive and broker with Pacific Union, overseeing risk management and transaction integrity in the Bay Area.
Mr. Jansen served as the 1986 President of the San Francisco Association of REALTORS® and has been on its Board of Directors for 15 years. He has been a Director-for-Life with the California Association of REALTORS® (CAR)
, serving on numerous committees, including the Strategic Planning and Finance Committee and the Legal Affairs Forum. He has also earned the Certified Residential Broker (CRB) designation.
In 2010, he served on the California Department of Real Estate’s Broker Supervision Task Force, which made recommendations leading to legislative and policy changes.
Mr. Jansen has been a Continuing Education of the Bar (CEB) instructor and contributing author to CEB publications. He has spoken for CAR, bar associations, and JAMS.
He holds a Juris Doctor from the University of Minnesota School of Law and is a member of the Bar Association of San Francisco and California and American Bar Associations.
Bhumi Dahya
Bhumi Dahya has had the privilege of working alongside Ms. Jones for several years, during which Bhumi has gained invaluable experience and expertise. Our collaborative approach has fostered a strong team dynamic. Holding dual master’s degrees in Legal Studies and Dispute Resolution from Pepperdine University’s Straus Institute for Dispute Resolution, Bhumi brings a comprehensive understanding of legal principles and conflict resolution strategies to our team’s efforts.
Shannon Jones
Shannon B. Jones has been representing real estate agents and brokerages for 34 years. She currently represents close to 70,000 agents. She is a partner in Broker Risk Management, PC, which provides risk management services to real estate brokerages and agents.
Ms. Jones has been named a Super Lawyer for three years in a row in the area of real estate. She has vast experience in litigation, including handling thousands of depositions, mediations, arbitrations, numerous court trials, jury trials, and has argued matters before the appellate court. She has also successfully defensed Department of Real Estate hearings. Ms. Jones published the best-selling real estate book, “A Real Estate Agent’s Practical Guide to Avoiding Litigation.”
Ms. Jones has a Bachelor of Science in Public Administration and a Juris Doctor from the University of Southern California. She is a Department of Real Estate and Graduate Real Estate Institute approved instructor. She has written and published numerous articles in various publications. She regularly speaks before the California Association of Realtors and local associations.
Grant Jones
Grant Jones is a second-year law student at Santa Clara University, specializing in real estate law. He holds a degree in Business Administration and a Master’s in Social Entrepreneurship from the University of Southern California, where he also played football. Grant has significant experience in the real estate sector as a licensed California Real Estate Salesperson and has spent almost three years at the real estate law firm, Broker Risk Management in Danville, California. His goal is to become a real estate trial attorney, leveraging his comprehensive knowledge and industry connections to provide exceptional service to his clients.
Vickie Naidorf, Of Counsel
Vickie Naidorf is best known as the Vice President and Brokerage Counsel for Coldwell Banker NRT Northern California where she helped protect approximately 5000 Sales Associates in 65 Northern California branch offices from Tahoe to Carmel. However, after 31 years of being an employee Vickie recently decided to become an entrepreneur; she joined forces with her long-time friend and colleague, Bill Jansen. Bill and Vickie have formed a new partnership called Broker Risk Management, LLP where they will provide legal services for Brokers throughout California to help avoid claims, lawsuits and BRE investigations. Their current clients include Alain Pinel Realtors, Lyon, Pacific Union and some Better Homes, Keller Williams and REMAX offices.
Bill and Vickie have long worked together to create local Advisories and Contract documents for several Associations of Realtors including Alameda, Contra Costa and Marin. Vickie is the author of most of the in-house transaction forms and procedures that continue to be used by Coldwell Banker many of which have been adopted by CAR such as the Market Conditions Advisory.
Vickie has had the unique distinction of being the only person who is currently on the 3 Major Purchase Contract Forms Committees for CAR, the San Francisco Association of REALTORS® and PRDs. Vickie was the person who originated much of the language that is used every day in California residential transaction forms and she works with Santa Clara County Attorney David Hamerslough on many forms projects.
Bill, Dave and Vickie are frequent guest speakers at various Associations of REALTORS® and California State Bar presentations because of their vast real estate law expertise, their extensive knowledge of relevant real estate forms and the practical transaction advice that they can provide.
Vickie graduated from the prestigious University of Southern California Law School where she was on the team that won the USC Moot Court Championship and the California State Moot Court Championship in 1977. She began her career in Century City as an insurance defense counsel representing various licensed professionals including REALTORS®, architects and doctors. After moving to Northern California in 1983 she worked for Ticor Title Insurance Company until she was hired by Coldwell Banker to handle claims, litigation and help manage risk.
Vickie was a cited contributor to a law review article on California Real Estate Disclosure Laws and is a cited authority in House Selling for Dummies. She is proud to have successfully launched 2 adult children. In her spare time, Vickie writes mystery novels so that she can delight in killing off people who irritate her without fear of incarceration or reprisal but (so far) her fictional stories have yet to be published. Her first novel is entitled Death Takes a Listing and a REALTOR® is the heroine!
