BROKERAGE RELATIONSHIP DISCLOSURE ACT
Single agency relationships
Transaction broker relationships
Transitioning to transaction broker
Designated sales associate
transactions Under the Brokerage Relationship Disclosure Act, all real estate transactions impose certain duties and obligations on licensees. Written disclosures, however, are required only when a brokerage is acting as a single agent or in a no-brokerage relationship in a residential sale transaction.
Residential sale transactions are those involving
4 improved residential properties with four or fewer dwelling units
4 unimproved residential properties zoned for four or fewer residential units
4 agricultural properties of ten acres or less
The requirement for agency disclosures to be written thus excludes
4 non-residential transactions
4 rental or leasing transactions and sales of business opportunities unless they include an option to purchase a property with four or fewer residential units
No written disclosure is needed when the brokerage is acting as a transaction broker, as this relationship is the default presumed under Florida law.
Disclosure notices The mandated disclosures do not include language about whom the agent represents or about the choices of representation the clients or customers have; they simply disclose the duties. However, there are separate disclosures for each relationship which do include the type of representation.
Other disclosure notices include “No Brokerage Relationship Notice” and “Consent to Transition to Transaction Broker.” This second disclosure includes the duties owed by the transaction broker to the customer.
The authorized relationships, duties, and disclosure notices are described below.
Under Florida’s Brokerage Relationship Disclosure Act, licensees may establish a relationship with a buyer or seller as either a transaction broker or as a single agent. The licensee may also assist a buyer or seller with no brokerage relationship, known as nonrepresentation. The licensee may not establish a dual agency relationship with both a buyer and a seller in the same transaction. The relationship established must be disclosed in writing to the involved party(ies). The licensee may transition from one type of relationship to the other type with the consent of the buyer and/or seller and with the disclosure of the duties owed to the client or customer under the new relationship.
The customer is not required to enter into any brokerage relationship with a licensee.
relationships A licensee may enter into a listing agreement with a seller and be paid a commission or other compensation while having no brokerage relationship with buyer or seller. In this situation, the licensee owes no loyalty or other fiduciary duties to either party but still owes certain duties to the party or parties as customers. Those duties must be disclosed in writing before the licensee shows a property. F.S. Chapter 475.278(4)(c) mandates the following form and language for the disclosure:
NO BROKERAGE RELATIONSHIP NOTICE
FLORIDA LAW REQUIRES THAT REAL ESTATE LICENSEES WHO HAVE NO BROKERAGE RELATIONSHIP WITH A POTENTIAL SELLER OR BUYER DISCLOSE THEIR DUTIES TO SELLERS AND BUYERS.
As a real estate licensee who has no brokerage relationship with you, (insert name of Real Estate Entity and its Associates) owe to you the following duties:
- Dealing honestly and fairly.
- Disclosing all known facts that materially affect the value of the residential property that are not readily observable to the buyer.
- Accounting for all funds entrusted to the licensee.
A buyer or seller who is looking for additional duties and a different level of assistance needs to enter into an agency relationship with the broker.
relationships The agent represents one party in a transaction. The client may be either seller or buyer.
Seller agency. In the traditional situation, a seller or landlord is the agent’s client. A buyer or tenant is the customer.
Buyer agency. Recently, it has become common for an agent to represent a buyer or tenant. In this relationship, the property buyer or tenant is the client and the property owner is the customer.
Dual agency. An agency relationship is established with a brokerage firm and not with any one agent within the firm. Therefore, a dual agency would exist if one agent within the firm represented the seller while another agent in the same firm represented the buyer. Dual agency as a form of representation is prohibited in Florida whether it is disclosed or nondisclosed.
Subagency. In a subagency, a broker associate or sales associate works as the agent of a broker who is the agent of a buyer or seller. In effect, the associate, as agent of the broker, is the subagent of the client. The subagent owes the same duties to the broker’s client as the broker does.
The disclosure required for single agency is as follows. The disclosure must be made at the time of, entering into a listing agreement or an agreement for representation or before showing the property, whichever occurs first.
SINGLE AGENT NOTICE
FLORIDA LAW REQUIRES THAT REAL ESTATE LICENSEES OPERATING AS SINGLE AGENTS DISCLOSE TO BUYERS AND SELLERS THEIR DUTIES.
- As a single agent, (insert name of Real Estate Entity and its Associates) owe to you the following duties:
- Dealing honestly and fairly;
- Full disclosure;
- Accounting for all funds;
- Skill, care, and diligence in the transaction;
- Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing; and
- Disclosing all known facts that materially affect the value of residential real property and are not readily observable.
relationships Florida prohibits both parties to a transaction from being represented by the same brokerage in a dual agency relationship. Instead, the transaction broker relationship was created to allow a single brokerage to provide limited representation and duties to both the seller and the buyer in the same transaction. Limited representation means neither party is responsible for the licensee’s actions.
In a transaction broker relationship, the broker does not represent either party in a fiduciary capacity or as a single agent. Neither party has the right of the licensee’s undivided loyalty. Further, because the broker is not representing either one of the parties as a client, then all parties to the transaction are considered customers.
The transaction broker relationship is between the brokerage and the client. Consequently, one licensee within the brokerage may represent both the seller and the buyer, or one licensee may represent the seller while another licensee within the same brokerage represents the buyer. All licensees in the firm are providing the same limited representation to both parties. Neither the seller nor the buyer may be represented to the detriment of the other party.
Florida law makes the presumption that all licensees are operating as transaction brokers unless the broker and the customer have entered into a written single agent or nonrepresentation agreement. Consequently, transaction brokers are not required to provide customers with a transaction broker relationship notice or disclosure.
Duties of a transaction broker. As with any Florida agency relationship, the broker must disclose the duties owed to both parties.
4 dealing honestly and fairly
4 accounting for all funds
4 using skill, care, and diligence in the transaction
4 disclosing all known material facts that are not readily observable and that affect the property’s value
4 presenting all offers and counteroffers in a timely manner unless directed otherwise
4 providing limited confidentiality unless either party waives in writing
4 performing any additional duties agreed upon by both parties
The duty of limited confidentiality prevents the broker or licensee from disclosing any of the following information:
4 the seller will accept a price less than the asking or listed price
4 the buyer will pay a price greater than the price submitted in a written offer
4 the motivation of any party for selling or buying property
4 a seller or buyer will agree to financing terms other than those offered
4 any other information requested by a party to remain confidential
Duties not imposed on the transaction broker. Since there are no fiduciary duties binding the transaction broker, the broker is held to standards for dealing with customers as opposed to clients. These include honesty, fair dealing, and reasonable care. The transaction broker is under no obligation to inspect the property for the benefit of a party or verify the accuracy of statements made by a party.
transaction broker Timing. A single agency relationship may transition to a transaction broker relationship at any time the agent and principal wish to do so. With the transition, the licensee will now be providing limited representation and can assist both the buyer and the seller with no dedicated loyalty. The licensee must not represent one party to the detriment of the other party.
Procedure. The licensee must obtain the principal’s written consent to the single agency before or at the time of entering into a listing agreement, entering into an agreement for representation, or showing a property, whichever occurs first. Consent to change the relationship from single agent to transaction representation must be obtained before the change occurs.
Format. When the disclosure of relationship change is part of other documents, it must be the same type size or larger and be placed conspicuously with the first sentence in uppercase and bold type. It must include its own initials or signature line directly under the disclosure language. The disclosure must also include the duties the licensee owes to the principal. The consent to transition form below can also be found in F.S. Chapter 475.278.
CONSENT TO TRANSITION TO TRANSACTION BROKER
FLORIDA LAW ALLOWS REAL ESTATE LICENSEES WHO REPRESENT A BUYER OR SELLER AS A SINGLE AGENT TO CHANGE FROM A SINGLE AGENT RELATIONSHIP TO A TRANSACTION BROKERAGE RELATIONSHIP IN ORDER FOR THE LICENSEE TO ASSIST BOTH PARTIES IN A REAL ESTATE TRANSACTION BY PROVIDING A LIMITED FORM OF REPRESENTATION TO BOTH THE BUYER AND THE SELLER. THIS CHANGE IN RELATIONSHIP CANNOT OCCUR WITHOUT YOUR PRIOR WRITTEN CONSENT.
As a transaction broker, (insert name of Real Estate Firm and its Associates) , provides to you a limited form of representation that includes the following duties:
- Dealing honestly and fairly;
- Accounting for all funds;
- Using skill, care, and diligence in the transaction;
- Disclosing all known facts that materially affect the value of residential real property and are not readily observable to the buyer;
- Presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing;
- Limited confidentiality, unless waived in writing by a party. This limited confidentiality will prevent disclosure that the seller will accept a price less than the asking or listed price, that the buyer will pay a price greater than the price submitted in a written offer, of the motivation of any party for selling or buying property, that a seller or buyer will agree to financing terms other than those offered, or of any other information requested by a party to remain confidential; and
- Any additional duties that are entered into by this or by separate written agreement.
Limited representation means that a buyer or seller is not responsible for the acts of the licensee. Additionally, parties are giving up their rights to the undivided loyalty of the licensee. This aspect of limited representation allows a licensee to facilitate a real estate transaction by assisting both the buyer and the seller, but a licensee will not work to represent one party to the detriment of the other party when acting as a transaction broker to both parties.
I agree that my agent may assume the role and duties of a transaction broker. [must be initialed or signed]
associate Non-residential transaction limitations. When a broker is dealing with a non-residential transaction where the buyer and seller have assets of $1 million or more, the customers may request that the broker designate sales associates to act as single agents for each customer in the same transaction. In other words, the broker may designate one sales associate to the buyer and another sales associate to the seller. Each of these sales associates has the same duties to the customer as a single agent does, including disclosures.
Disclosure requirements. While brokers who deal in residential sale transactions must comply with mandated disclosure requirements, those who deal in non-residential transactions do not have the same mandated disclosure requirements. The broker does not have to disclose duties to the customers, but the designated sales associates must disclose their single agent duties.
Additionally, the buyer and the seller must each sign disclosures stating that their assets meet the $1 million requirement and that they are requesting designated sales associates. The disclosure must include the following language:
FLORIDA LAW PROHIBITS A DESIGNATED SALES ASSOCIATE FROM DISCLOSING, EXCEPT TO THE BROKER OR PERSONS SPECIFIED BY THE BROKER, INFORMATION MADE CONFIDENTIAL BY REQUEST OR AT THE INSTRUCTION OF THE CUSTOMER THE DESIGNATED SALES ASSOCIATE IS REPRESENTING. HOWEVER, FLORIDA LAW ALLOWS A DESIGNATED SALES ASSOCIATE TO DISCLOSE INFORMATION ALLOWED TO BE DISCLOSED OR REQUIRED TO BE DISCLOSED BY LAW AND ALSO ALLOWS A DESIGNATED SALES ASSOCIATE TO DISCLOSE TO HIS OR HER BROKER, OR PERSONS SPECIFIED BY THE BROKER, CONFIDENTIAL INFORMATION OF A CUSTOMER FOR THE PURPOSE OF SEEKING ADVICE OR ASSISTANCE FOR THE BENEFIT OF THE CUSTOMER IN REGARD TO A TRANSACTION. FLORIDA LAW REQUIRES THAT THE BROKER MUST HOLD THIS INFORMATION CONFIDENTIAL AND MAY NOT USE SUCH INFORMATION TO THE DETRIMENT OF THE OTHER PARTY.
Single agent duties. As a designated single agent, the sales associate has the following duties to buyers and sellers:
- dealing honestly and fairly
- full disclosure
- accounting for all funds
- skill, care, and diligence in the transaction
- presenting all offers and counteroffers in a timely manner, unless a party has previously directed the licensee otherwise in writing
- disclosing all known facts that materially affect the value of residential real property and are not readily observable
Documentation Brokers are required to keep their business records for at least 5 years from the date of agreement execution. Disclosure documents related to transactions that resulted in a written contract to sell or purchase must be retained for 5 years.
Any document that has been the subject of or served as evidence in any civil action or appellate proceeding must be retained for at least 2 years after the conclusion of the action or proceeding, but no less than the required 5 years.
Even records related to transactions that did not close should be retained for 5 years.