Florida Real Estate Principles,
Practices & Law 38th Edition
Linda L. Crawford
Copyright © 2015 Kaplan, Inc.
All rights reserved.
Chapter 4
Authorized Relationships and
Ethics
Law of Agency
• When people delegate authority to another to act
on their behalf, an agency relationship is created
• Three types of law
– Common law (unwritten law)
• Case law
– Statutory law
• F.S. 475 and F.S. 455
– Administrative law
• FREC rules
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Agency Relationships in General Business
Dealings
• Fiduciary relationship
Opposite of arm’s length relationship
• Principal
Person who delegates authority to another
• Agent
Person who is authorized to represent and act for
principal
– Universal agent
– General agent
– Special agent
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Brokerage Relationships in Florida
Three options in real
estate transactions
– Transaction broker for
buyer and/or seller
– Single agent for buyer
or seller (not both)
– No brokerage
relationship
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Dual Agency
• Dual Agent
Broker who represents as a
fiduciary both the buyer and
the seller in a real estate
transaction
• Florida law prohibits a broker
from creating a fiduciary
relationship with both the
buyer and the seller
• Fiduciary
Relationship of trust and
confidence between broker
as agent and the principal
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Written Disclosure Required in Residential
Sales
Residential Sales
• Sale of improved
residential property of
four or fewer units
• Unimproved residential
property intended for
four or fewer units
• Agricultural property of
10 acres or less
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Disclosure Does Not Apply To
• Nonresidential transactions
• Rental or leasing, unless there is an option to
purchase property with four or fewer residential
units
• Auctions
• Appraisals
• Business opportunities
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Transaction Broker Relationship Presumed
• Under Florida law
It is presumed licensees are operating as
transaction brokers unless a single agent or no
brokerage relationship is established
• A transaction broker disclosure is not
required
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Transaction Broker Relationship
• Provides limited
representation to
customer (buyer, seller
or both)
• Does not represent buyer
or seller as a fiduciary or
as a single agent
• Customer is not
responsible for actions of
transaction broker
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Limited
Representation
Duties of a Transaction Broker
•
•
•
•
Deal honestly and fairly
Account for all funds
Use skill, care, and diligence in the transaction
Disclose all known facts that materially affect the
value of real property not readily observable
• Timely present of all offers and counteroffers
• Exercise limited confidentiality, unless waived in
writing by a party
• Perform additional duties mutually agreed to
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Transaction Broker Relationship
• Parties give up rights to undivided loyalty
• Limited representation allows licensee to
assist both buyer and seller
• License cannot represent one party to
detriment of other party
• Not required to give customers a written
transaction broker notice but still have
duties of a transaction broker
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Single Agent Relationship
• Single agent A
broker who represents,
as a fiduciary, either
the buyer or seller but
not both in the same
transaction
• Principal The party
with whom a licensee
has entered into a
single agent
relationship
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Subagents
• Authorized to assist and represent the agent
• Duties are delegated by the original agent
– Broker’s sales associates are general agents of
the broker and subagents of the broker’s
principals
– The broker is an agent of the principal
– Sales associates owe same fiduciary obligations
to the principal as does broker
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Duties of a Single Agent
•
•
•
•
•
•
•
•
•
Deal honestly and fairly
Loyalty
Confidentiality
Obedience
Full disclosure
Account for all funds
Skill, care, and diligence in the transaction
Timely present all offers and counteroffers
Disclose all known facts that materially affect the value
of residential real property that are not readily
observable
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No Brokerage Relationship
• Seller or buyer can
choose not to be
represented
• Broker facilitates
sale/purchase
• Law does not
require buyers and
seller be
represented
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Duties in No Brokerage Relationship
• Deal honestly and fairly
• Disclose all known facts that materially
affect the value of residential property that
are not readily observable to the buyer
• Account for all funds entrusted to the
licensee
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Who’s Duty?
• Deal honestly and fairly
• Disclose all known facts that affect the
value of residential property
• Account for all funds
Transaction broker
Single agent
No brokerage relationship
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Who’s Duty?
• Use skill, care, and diligence
• Present all offers and counteroffers
Transaction broker
Single agent
•
•
Exercise limited confidentiality
Perform additional duties
Transaction broker
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Who’s Duty?
•
•
•
•
Confidentiality
Obedience
Loyalty
Disclosure (full)
Single agent
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Disclosure Requirements
• Duties must be described and disclosed in
writing (except transaction broker)
• Can be included in listing agreement
– Signature line inserted following disclosure
– Single agent disclosure before, or at time of
entering into a listing agreement, or before
showing property
– No brokerage notice before showing property
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Exceptions to Disclosure Requirements
• Licensee knows that a single agent or
transaction broker represents buyer or seller
• Bona fide open house or model showing
• Unanticipated casual encounters
• Responding to general questions of advertised
property
• Communications concern services offered
• When selling new residential units built by the
owner
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Practical Example #1
Sales Associate Amy works for XYZ Realty,
Inc. Amy lists a house and establishes a
single agent relationship with the seller. A
buyer contacts Amy and wants to view the
property. What relationship may Amy have
with this buyer?
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Example #1 Solution
• Because Amy and XYZ Realty, Inc. have a
single agent relationship with the seller,
Amy must give the buyer a No Brokerage
Relationship disclosure before showing the
property.
• Single agent for the seller  No brokerage
relationship with the buyer
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Practical Example #2
Broker Brown is working with buyer Jones as
a transaction broker. Broker Brown is also
listing 1234 Oak St., a property that buyer
Jones is considering for purchase. If buyer
Jones is going to buy this property, what
relationship can Broker Brown have with the
seller of 1234 Oak St.?
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Example #2 Solution
• Broker Brown can list 1234 Oak St. as a
Transaction Broker or with No Brokerage
Relationship. He cannot be a Transaction
Broker for the buyer and a Single Agent for
the seller.
• Transaction broker with buyer 
Transaction broker or no brokerage
relationship (nonrepresentation) with seller
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Transition to Another Relationship
• F.S. 475 permits a
licensee to change the
relationship
• To transition from a
single agent to a
transaction broker, the
principal must sign
– Consent to Transition to
Transaction Broker
Notice
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Practical Example #3
Sales Associates Yvette and Zach work for
Extra-Fine Realty. Yvette has just listed the
house at 3456 Main St. as a single agent for
the seller. Zach is a single agent for buyer
Black. If buyer Black wants to view the house
at 3456 Main St., how can this legally
happen?
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Example #3 Solution
• Because Extra-Fine Realty is acting as a
single agent for both the seller of 3456 Main
St. and for buyer Black, both the seller and
the buyer would have to sign a Consent to
Transition to Transaction Broker notice to
show this property to buyer Black.
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Designated Sales Associates
• Nonresidential transactions only
• At the request of the buyer and seller, the broker
may designate sales associates to act as single
agents for different customers in the same
transaction
• Buyer and seller each must have assets of at least
$1 million
• Written disclosures
– Single agent disclosure
– Designated sales associate disclosure
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Record Keeping and Retention
• Brokers must retain agreements that engage
their services for 5 years
• Brokers must retain brokerage relationship
disclosure documents for 5 years
– All residential transactions that result in a
written contract
– All nonresidential transactions that utilize
designated sales associates
– Includes files of properties that fail to close
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Terminating a Brokerage Relationship
–
–
–
–
–
–
–
–
Fulfillment of brokerage relationship purpose
Mutual agreement to terminate
Expiration of agreement
Broker renounces by giving notice
Principal revokes relationship by giving notice
Death of broker
Destruction of property or eminent domain
Bankruptcy of principal or customer
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Misrepresentation and Fraud
• Puffing Licensee boasting about property’s
benefits
• Misrepresentation The misstatement of fact or
the omission or concealment of a factual matter
• Fraud
–
–
–
–
Licensee misrepresented the facts
Licensee knew or should have known
Buyer relied on the misrepresentation
Buyer was damaged
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Professional Ethics
• Golden Rule
• Ethics is good
business
• Professional
standards
• NAR Code of Ethics
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