Codes of ethics
Fraud and negligence
Codes of ethics The real estate industry has developed a code of professional standards and ethics as a guideline in serving the real estate needs of consumers. This professional code has emerged from three primary sources:
federal and state legislation
state real estate licensing regulation
industry self-regulation through trade associations and institutes
Federal legislation focuses primarily on anti-discrimination laws and fair-trade practices. State laws and licensing regulations focus on agency and disclosure requirements and regulating certain brokerage practices within the state jurisdiction. Real estate trade groups focus on professional standards of conduct in every facet of the business.
By observing professional ethics and standards, licensees will serve clients and customers better, foster a professional image in the community, and avoid regulatory sanctions and lawsuits.
Today’s professional ethics are not only important for one’s career; they are also legal imperatives. Unethical practice, such as misrepresentation of material facts, fraud, and culpable negligence, is prohibited and punishable in all aspects of real estate practice.
Disclosure Proper disclosures are an integral part of ethical behavior. In compliance with applicable laws and to promote respect for the real estate profession, licensees should be careful to disclose
that the agent is going to receive compensation from more than one party in a transaction
property defects if they are reasonably apparent; however there is no duty to disclose a defect which it would require technical expertise to discover
any interest the agent has in a listed property if the agent is representing a party concerning the property
any profits made on a client’s money
the agent’s identity in advertisements
the agent’s representation of both parties in a transaction
the existence of accepted offers
identity of broker and firm in advertising as required by state law
negligence Fraud. Fraud is a misrepresentation of a material fact used to induce someone to do something, like sign a contract. Actual fraud occurs when one person 106 Principles of Real Estate Practice in Florida
intentionally deceives another person by misrepresenting a material fact that induces the person to rely upon the fact. Negative fraud is intentionally failing to disclose a material fact.
For a cause of action for fraud to be initiated, the following elements must exist:
The licensee must have misrepresented a material fact or must have failed to disclose the material fact.
The licensee must have known or should have known that he or she was misrepresenting the fact or that he or she should have disclosed the fact.
The buyer or other party to whom the licensee misrepresented the fact relied on what the licensee said.
The buyer or other party to whom the licensee misrepresented the fact or failed to disclose the fact was damaged as a result of the misrepresentation or omission.
Culpable negligence. Culpable negligence occurs when a person, such as a real estate broker, does not perform his or her required duties and responsibilities as the broker knows he or she should. The failure to perform need not be intentional to be considered negligent. It is more of a disregard of the duties and consequences of not performing them. Remember, three critical duties of brokers are skill, care, and diligence. Failure to perform real estate activities with skill, care, and diligence may be ruled culpable negligence. In Florida, culpable negligence is not only unethical, but is also a second-degree misdemeanor.
cooperation Professional conduct excludes disparagement of competitors. Real estate professionals also
forgo pursuit of unfair advantage
arbitrate rather than litigate disputes
respect the agency relationships of others
conform to accepted standards of co-brokerage practices
assistants Sales associates are permitted to have personal assistants if they so choose. They should discuss this with their broker prior to hiring a personal assistant. The personal assistant may be a licensed or unlicensed person.
An unlicensed personal assistant may help an agent create advertisements, run errands, enter information into the computer, etc. FREC and Florida Realtors® have a list of the duties unlicensed assistants may perform listed on their respective websites. Unlicensed personal assistants may not be hired as independent contractors but must be treated as employees.
Either the broker or the licensee may pay the personal assistant. Whoever pays the assistant must withhold the required state and federal employment taxes. This party is also responsible for forwarding funds to the government according to federal employment law. Section 5: Real Estate Brokerage Activities and Procedures 107
A licensed personal assistant is allowed to perform all real estate services on the licensee’s behalf. If a personal assistant receives a salary or hourly pay, either the licensee or the broker may pay it. Any commission must be paid the broker. The personal assistant must be registered under the broker’s name with DBPR.