Dual Agency

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 What Is Dual Agency?

When a real estate agent represents both the buyer and seller in a real estate transaction, the agent is deemed a dual agent. Since the broker represents both sides, the broker cannot maintain all their duties to both parties.

Because of the broker’s potential conflict of interest, the broker must obtain both parties’ consent to the dual agency.

What Does the Consent Involve?

When a broker represents both sides of a transaction, the broker must ask for both parties’ consent in writing. When the parties consent to a dual agency, they accept limitations to a traditional real estate broker/client relationship. These restrictions include that the agent will deal impartially with both parties.

What Are the Advantages and Disadvantages of Dual Agency?

Buyers and sellers may agree to a dual agency for a few reasons. First, the clients may be comfortable with an agent and do not want to switch agents, even if the current agent is also representing the other party.

Second, suppose a broker for one party quits representing the transaction. In that case, having the remaining agent act as a dual agent can provide some continuity to conclude the transaction without further delays. Finally, some clients might be able to negotiate lower commissions for the dual agent, as both parties will be paying the agent. The cost of the agent can be spread between the two parties.

The downsides of the dual agency are the potential for conflict of interest and reduced efficiency in executing the fiduciary duty that real estate brokers have to their clients. Real estate brokers are expected to use their experience and expertise to represent their clients to the best of the agent’s ability.

Nevertheless, a broker representing both buyer and seller must always be cautious not to hurt one party while advancing the interests of the other. As a result, specific information and decision-making found in a single agent/client relationship are forbidden in the dual agency.

What Constitutes a Breach of Fiduciary Duty?

Suppose you think you may have a case for breach of fiduciary duty. In that case, it is essential to make sure that you can prove every element of your case before filing a civil lawsuit, as civil lawsuits can often be costly.

The elements needed to prove that there was a breach of fiduciary duty include the following:

  1. It must be proved that a fiduciary relationship existed between the plaintiff and the defendant at the time of the dispute;
  2. The plaintiff must show the scope of the relationship and the duties of the fiduciary;
  3. That the defendant breached the duties as outlined within the scope of the relationship and caused harm to the plaintiff; and
  4. There is a remedy available for the harm that occurred due to the breach.

If you can establish the above elements, you may be able to form a suit against the fiduciary. Nevertheless, sometimes when fiduciary relationships are outlined in an agreement, there are arbitration clauses that may prevent you from being able to sue for breach of fiduciary duty. This means that if you signed a contract agreeing to arbitrate such disputes, you would have to resolve the business dispute through arbitration instead of civil court.

Can You Go to Jail for Breaching Your Fiduciary Duty?

Each state dictates what remedies may be applied to breach fiduciary duty. Further, the available remedies depend on the severity of the breach and the breach itself. The most common remedies for a breach of fiduciary duty include paying fines such as reimbursing any lost profits and out-of-pocket losses.

Often, this requires hiring an economist to prove the number of damages that resulted from the breach.

Although most cases for breaching fiduciary duty often only result in civil liability, such as paying fines, some breaches of fiduciary duty may result in criminal liability.

Additionally, a fiduciary may be criminally liable for embezzling business or client funds. Other breaches of fiduciary duty that may result in criminal liability include other forms of self-dealing, securities and commodities fraud, or criminal insider trading. Consequences for committing the above-listed breaches of fiduciary duty may include lengthy prison sentences, heavy fines, or both.

What Can be Done About a Breach of Fiduciary Duty?

Each state has its specific laws regarding fiduciary duties, relationships, and what remedies are available for fiduciary breaches. Nevertheless, suppose you think that a breach of fiduciary duty has happened during your real estate transaction and that breach has resulted in measurable losses for you. In that circumstance, you may be able to file a civil lawsuit to recover your damages.

First, you must be able to prove the elements outlined above. If you can do so, you should start a civil lawsuit against the fiduciary or agent according to the civil procedure rules outlined by your local jurisdiction. Often this means drafting a complaint, serving the agent, conducting discovery, and possibly appearing in court.

Once again, however, arbitration may be the remedy that you have to follow. In that case, you will have to proceed through the arbitration process, and you won’t be able to file a civil lawsuit. Since arbitration agreements are standard, it’s essential to check if you have an arbitration deal with your double agent deal before proceeding.

How Does a Dual Agent Avoid Improper Disclosure?

When the parties consent to a dual agency, the broker will have a duty to disclose information to both parties. The broker must be sincere with both parties as long as the broker does not give away details that may weaken or hurt the other party’s bargaining position. For instance, a broker must disclose known defects in the property.

However, there are exceptions to the disclosure policy:

  • The agent will not disclose that the:
    • The buyer is willing to pay a higher price
    • The seller is willing to sell for a lower price
    • The buyer or seller is willing to accept different terms
  • The agent will not disclose without prior authorization:
    • The motivation of the buyer or seller
    • Personal information about the buyer or seller

Do I Need a Lawyer if I Work with a Dual Agency Broker?

Because of the risks associated with dual agency, you are strongly encouraged to meet with an experienced real estate attorney. A real estate lawyer can determine if a dual agency is appropriate for you and can review documents and contracts before you sign them.

If you believe an agent acted improperly in a dual agency, a real estate attorney can explain your rights and remedies. Real estate and property law also comprise the financing aspects of the property. You may want to consult with a real estate lawyer to protect yourself from any unforeseen liabilities.

Occasionally, the risks associated with dual agency result in a lawsuit. If your dispute requires filing a lawsuit, a real estate attorney can best represent your legal rights and needs. Your issues with a dual agency broker will likely be resolved much faster if you take the necessary steps and hire a real estate attorney. In addition, a real estate attorney can represent you and your interests if the dispute goes to court. Use LegalMatch to start resolving your double agency issue today.

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