Florida Real Estate Principles, Practices, and
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Chapter 4 SAM IRLANDER © 2009 by South-Western, Cengage Learning Florida Real Estate: Principles, Practices and License Law Chapter 4 The Law of Agency – Relationships and Disclosures © 2009 by South-Western, Cengage Learning Key Terms Agency Agency coupled with an interest Agent Caveat emptor Consent to transition Customer Designated sales associate Dual agency Fiduciary General agency Limited confidentiality Limited representation Nonrepresenation Principal Residential sale Single agent Special agency Transaction broker Universal agency © 2009 by South-Western, Cengage Learning Law of Agency October 1, 1997 Clarifies relationships between licensees and buyer and sellers Required disclosures © 2009 by South-Western, Cengage Learning Law of Agency Agent: transacts business activities on behalf of another Agency relationships from 2 types of law Statuary Law Common Law © 2009 by South-Western, Cengage Learning Law of Agency Enacted via state legislature Agent: State law of agency FREC rules Case law / court Judgments Statuary law supersedes Common law © 2009 by South-Western, Cengage Learning Agency Relationships Defined Agent Employed by another Legal authority to act and bind another Exercise some degree of discretion Examples: Real estate broker Attorney Investment manager © 2009 by South-Western, Cengage Learning Agency Relationships Defined Principal (Client): hires the agent Customer: third party Agency: relationship © 2009 by South-Western, Cengage Learning Agency Relationships Defined Figure 4.1 © 2009 by South-Western, Cengage Learning Agency Relationships Defined Appoints Seller To find Broker Buyer Figure 4.2 © 2009 by South-Western, Cengage Learning Agency Relationships Defined Principal / Client Hires the licensee Enters into an authorized brokerage relationship with licensee © 2009 by South-Western, Cengage Learning Agency Relationships Defined Fiduciary Loyalty Act in best interest of principal © 2009 by South-Western, Cengage Learning Agency Relationships Defined Loyalty Obedience Disclosure Accountability Care Confidentiality © 2009 by South-Western, Cengage Learning Agency Relationships Defined Interest of principal before all others Agent prohibited: Making a secret profit Violating confidence Failing to disclose identify Dual agency Undisclosed dual capacity Holding an offer © 2009 by South-Western, Cengage Learning Agency Relationships Defined Follow instructions: Legal Ethical Reasonable © 2009 by South-Western, Cengage Learning Agency Relationships Defined All material facts effecting value Submit all offers promptly © 2009 by South-Western, Cengage Learning Agency Relationships Defined All valuable consideration belonging to others Books and records Evidence of receipts or expenditures © 2009 by South-Western, Cengage Learning Agency Relationships Defined Cannot be negligent Due diligence in performance of duties © 2009 by South-Western, Cengage Learning Agency Relationships Defined Cannot divulge sensitive information Adversely affects the principal © 2009 by South-Western, Cengage Learning Agency Relationship Defined oyality bedience ritten offers ersonally act ccount nform ot negligent © 2009 by South-Western, Cengage Learning Agency Relationships Defined Potential buyer or seller May or may not be represented © 2009 by South-Western, Cengage Learning Agency Relationships Defined Honesty Fair dealing Accountability Full disclosure © 2009 by South-Western, Cengage Learning Agency Relationships Defined Dealing with buyer Honestly Fairly In good faith © 2009 by South-Western, Cengage Learning Agency Relationships Defined Account for funds Disclose material facts Value Desirability © 2009 by South-Western, Cengage Learning Agency Relationships Defined Johnson vs. Davis Disclose known property defects Florida Law requires licensee disclose Known or suspected defects affecting value “as is” Caveat emptor: “Let the buyer beware” © 2009 by South-Western, Cengage Learning Agency Relationships Defined Authorized agency relationship Agent hired to transact business on behalf of another Agent is governed by laws and rules Customer may or may not be represented Principals is always represented © 2009 by South-Western, Cengage Learning Agency Relationships Defined Fiduciary – highest trust Agents are fiduciary Arms length relationship with third parties Caveat emptor applies © 2009 by South-Western, Cengage Learning Types of Agencies Transacts all matters for the principal Sports agents Negotiates salary Manages investments Negotiates endorsement contracts Elderly family member Bank accounts Sale of property Other matters © 2009 by South-Western, Cengage Learning Types of Agency Specific business or trade Real estate sales associate Property manager Sales representative © 2009 by South-Western, Cengage Learning Types of Agency Specific act or transaction Broker authorized to sell a home Power of Attorney © 2009 by South-Western, Cengage Learning Florida Brokerage Relationship Disclosure Act Chapter 475: Duties and obligations of disclosure to the parties in a transaction Residential Sale Improved land for 1- 4 family units Unimproved land intended for 1- 4 family units Farm/agricultural land – up to 10 acres © 2009 by South-Western, Cengage Learning Florida Brokerage Relationship Disclosure Act Nonresidential transactions Auctions Appraisals Rentals or leasing of property Unless option to purchase Business enterprises or opportunities © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships 3 Choices Nonrepresentative Single agent Transaction broker Dual Agency: not permitted in Florida Agent represents both parties in the transaction Consent to transaction: change relationship with principal Always requires written consent © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Agency is not required Agent is a facilitator Compensation does not create an agency © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Accountability Fair and honest practice Full disclosure of property defects © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships No Brokerage Relationship Notice must be provided: 1st substantive contract Prior to showing property © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Represented by another broker as: Single agent Transaction broker Following does not occur @ open house: Negotiations Exchange of confidential info Agency agreement Meeting with no discussion of above Replying to question on advertized listing © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Represent buyer or seller but never both in same transaction Full fiduciary responsibilities © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Fair & honest practice Care Loyalty Obedience Accountability Full disclosure Submitting all offers © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Single Agent Notice Separate document or included in another document Same size type or larger Conspicuous 1st sentence: upper case or bold print Notice given: When entering into the relationship Showing of property © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Limited representation to one or both parties Not fiduciary Transaction broker unless single or no agency established in writing No liability for acts of licensee Agent will not act to detriment of other party © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Accountability Care Disclosure of property defects Fair & honest practice Submitting all offers Limited Confidentiality © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Transaction Broker Notice When entering agreement for representation with a customer Showing property © 2009 by South-Western, Cengage Learning Types of Authorized Agency Relationships Transaction Broker Notice NOT required after July 1, 2008 Buyer or Seller not responsible for act of licensee Agent has no duty of undivided loyalty Licensee may not favor one to the detriment of another © 2009 by South-Western, Cengage Learning Transitioning to Another Authorized Relationship Consent to Transaction to Transaction Broker Principle consents prior to actual transition Permission evidenced by signature on disclosure form © 2009 by South-Western, Cengage Learning Maintaining Records Written sales contracts: Disclosures kept for a least 5 years All residential transactions Closed Not closed Purchase contract Escrow document and bank statements Agency disclosure forms Nonresidential transaction with designated sales associates © 2009 by South-Western, Cengage Learning Designated Sales Associate Nonresidential transactions Designated sales associate One broker Two agents Each act as single agent Broker is not a dual agent Neutral party © 2009 by South-Western, Cengage Learning Designated Sales Associate Requirements: Request made by both parties Both parties have assets of $1,000,000 Broker acts as advisor Confidential info used only to advise sales associate Same duties as single agent © 2009 by South-Western, Cengage Learning Termination of Agency e evocation / Renunciation xpiration greement eath ncapcity xpiration © 2009 by South-Western, Cengage Learning Termination of Agency Termination of Agency Acts of the parties Revocation Renunciation Expiration Agreement Incapacity Extinction Acts of law Death © 2009 by South-Western, Cengage Learning Figure 4.3
