Real Estate Licensees: Dual Agency and Fiduciary Duty

  A licensed real estate salesperson has a fiduciary duty equivalent to the duty owed by the employing broker. A dual agent has fiduciary duties to both the buyer and seller. When a broker is the dual agent of both the buyer and the seller in a real property transaction, the salespersons acting under the broker have the same fiduciary duty to the buyer and the seller as the broker. What is that duty?

  A broker’s fiduciary duty to his client requires the highest good faith and undivided service and loyalty. The broker has a duty to learn the material facts that may affect the principal’s decision. He is hired for his professional knowledge and skill; he is expected to perform the necessary research and investigation in order to know those important matters that will affect the principal’s decision, and he has a duty to counsel and advise the principal regarding the propriety and ramifications of the decision. The agent’s duty to disclose material information to the principal includes the duty to disclose reasonably obtainable material information.

  A fiduciary must tell its principal of all information it possesses that is material to the principal’s interests. A fiduciary’s failure to share material information with the principal is constructive fraud—a term of art obviating actual fraudulent intent.

  What is constructive fraud? Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship. Most acts by an agent in breach of his fiduciary duties constitute constructive fraud. The failure of the fiduciary to disclose a material fact to his principal that might affect the fiduciary’s motives or the principal’s decision, which is known or should be known to the fiduciary, may constitute constructive fraud. A careless misstatement may also constitute constructive fraud.

  Real estate salespersons commonly believe that there is no dual representation if one salesperson represents one party to the transaction and another salesperson employed by the same broker represents another party to the transaction. This belief is mistaken.

  A real estate sales person that is an “independent contractor” for tax purposes must still be “employed” by a broker. Salespersons who are employed by the same broker in a real estate transaction each owe the same fiduciary duty to each of the parties as their employing broker. In such circumstances, for example, the salesperson representing the seller may be liable to the buyer for breach of fiduciary duty for careless misstatements, such as the square footage of a structure or lot, or for failure to disclose other material facts. [See, Horiike v. Coldwell Banker.]

   Mr. Daymude consults with clients and accepts cases involving real estate transactions, including those where it is alleged that brokers or salespersons have breached their fiduciary duty and their principal has suffered damage. For other types of cases accepted, please scroll the Home and My Practice pages. If you are seeking a legal consultation or representation, call Michael Daymude at 818-971-9409.

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