Agency
  • Agency Law

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    TENNESSEE AGENCY LAW

    CREATING AGENCY RELATIONSHIPS ( TCA 62-13-401 )

    A real estate licensee may provide real estate services to any party in a prospective transaction, with or without an agency relationship to one or more parties to the transaction. Until such time as a licensee enters into a specific written agreement to establish an agency relationship with one or more parties to a transaction, such licensee shall be considered a facilitator and shall not be considered an agent or advocate of any party to the transaction. An agency or subagency relationship shall not be assumed, implied or created without a written bilateral agreement that establishes the terms and conditions of such agency or subagency relationship.

    Limited Agency ( 62-13-402 )

    (a) If a real estate licensee is engaged as an agent, such real estate licensee serves as a limited agent retained to provide real estate services to a client. Such licensee shall function as an intermediary in negotiations between the parties to a transaction unless such parties negotiate directly.

    b) A real estate licensee shall owe all parties to a transaction the duties enumerated in TCA 62-13-403. A licensee shall owe to such licensee's client the duties enumerated in TCA 62-13-404.

    (c) Notwithstanding any provision of law to the contrary, the duties enumerated in TCA 62-13-403 and TCA 62-13-404 shall supersede any fiduciary or common law duties owed by a licensee to such licensee's client on January 1, 1996.

    Duty owed to all parties ( TCA 62-13-403 )

    "A licensee who provides real estate services in a real estate transaction shall owe all parties to such transaction the following duties, except as provided otherwise by TCA 62-13-405, in addition to other duties specifically set forth in the official manual of the Tennessee Real Estate Commission or the rules of the commission:

    1. Diligently exercise reasonable skill and care in providing services to all parties to the transaction.

    2. Disclose to each party to the transaction any adverse facts of which licensee has actual notice or knowledge.

    3. Maintain for each party to a transaction the confidentiality of any information obtained by a licensee prior to disclosure to all parties of a written agency or subagency agreement entered into by the licensee to represent either or both of the parties in a transaction. This duty of confidentiality extends to any information which the party would reasonably expect to be held in confidence, except for information which the party has authorized for disclosure, information required to be disclosed under this part, and information otherwise required to be disclosed pursuant to this chapter. This duty survives both the subsequent establishment of an agency relationship and the closing of the transaction.

    4. Provide services to each party to the transaction with honesty and good faith.

    5. Disclose to each party to the transaction timely and accurate information regarding market conditions that might affect such transaction only when such information is available through public records and when such information is requested by a party.

    6. Timely account for trust fund deposits and all other property received from any party to the transaction.

    7. (a) Not engage in self-dealing nor act on behalf of licensee's immediate family, or on behalf of any other individual, organization, or business entity in which the licensee has a personal interest without prior disclosure of such interest and the timely written consent of all parties to the transaction.

    (b) Not recommend to any party to the transaction the use of services of another individual, organization or business entity in which the licensee has an interest or from whom the licensee may receive a referral fee or other compensation for the referral, other than referrals to other licensees to provide real estate services under the Tennessee Real Estate Broker License Act of 1973, without timely disclosing to the party who receives the referral, the licensee's interest in such referral or the fact that a referral fee may be received.

    Duty owed to licensee's client ( TCA 62-13-404 )

    Any licensee who acts as an agent in a transaction regulated by the Tennessee Real Estate Broker License Act of 1973 owes to such licensee's client in that transaction the following duties, to:

    1. Obey all lawful instructions of the client when such instructions are within the scope of the agency agreement between licensee and licensee's client.

    2. Be loyal to the interests of the client. A licensee must place the interests of the client before all others in negotiation of a transaction and in other activities, except where such loyalty duty would violate licensee's duties to a customer under TCA 62-13-402 or a licensee's duties to another client in a dual agency.

    WRITTEN DISCLOSURE OF AGENCY RELATIONSHIPS ( TCA 62-13-405 )

    (a) If a licensee personally assists a prospective buyer or seller in the purchase or sale of a property, and such buyer or seller is not represented by this or any other licensee, the licensee shall verbally disclose to such buyer or seller the licensee's facilitator, agent, subagent or designated agent status in the transaction before any real estate services are provided. Known adverse facts about a property must also be disclosed under the Tennessee Residential Property Disclosure Act, title 66, chapter 5, part 2, but licensees shall not be obligated to discover or disclose latent defects in a property or to advise on matters outside the scope of their real estate license.

    (b) The disclosure of agency status pursuant to subsection (a) must be confirmed in writing with an unrepresented buyer prior to the preparation of an offer to purchase. The above disclosure of agency status must be confirmed in writing with an unrepresented seller prior to execution of a listing agreement or presentation of an offer to purchase, whichever comes first. Following delivery of the written disclosure, the licensee shall obtain a signed receipt for such disclosure from the party to whom it was provided.

    (c) The disclosure of agency or facilitator status, as provided in subdivision (a), shall not be construed as, or be considered a substitute for, a written agreement to establish an agency relationship between the broker and a party to a transaction as referenced in TCA 62-13-406.

    (d) Upon initial contact with any other licensee involved in the same prospective transaction, the licensee shall immediately disclose such licensee's role in the transaction, including any agency relationship, to this other licensee. If the licensee's role changes at any subsequent date, such licensee shall immediately notify any other licensees and any parties to the transaction relative to such change in status.

    (e) Real estate transactions involving the transfer or lease of commercial properties, the transfer of property by public auction, the transfer of residential properties of more than four units, or the lease or rental of residential properties shall not be subject to the disclosure requirements of TCA 62-13-403, 62-13-404 and this section.

    Designated Agency – Managing Broker ( 62-13-406 )

    (a) A licensee entering into a written agreement to represent any party in the buying, selling, exchanging, renting or leasing of real estate, may be appointed as the designated and individual agent of this party by the licensee's managing broker, to the exclusion of all other licensees employed by or affiliated with such managing broker. A managing broker providing services under the provisions of the Tennessee Real Estate Broker License Act of 1973, shall not be considered a dual agent if any individual licensee so appointed as designated agent in a transaction, by specific appointment or by written company policy, does not represent interests of any other party to the same transaction.

    (b) The use of designated agency does not abolish or diminish the managing broker's contractual rights to any listing or advertising agreement between the firm and a property owner, nor does this section lessen the managing broker's responsibilities to ensure that all licensees affiliated with or employed by such broker conduct business in accordance with appropriate laws, rules and regulations.

    (c) There shall be no imputation of knowledge or information among or between clients, managing broker and any designated agent(s) in a designated agency situation.

    Liability ( 62-13-407)

    A client or other party to whom a real estate licensee provides services as an agent, subagent or facilitator shall not be liable for damages for the misrepresentations of the licensee arising out of such licensee's services, unless the client or party knew, or had reason to know, of the misrepresentation.

    This section shall not limit the liability of a licensee's managing broker for the misrepresentations of the managing broker's licensees.

     
  • Are You An Agent for Your Client?

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    WITHOUT A WRITTEN CONTRACT YOU ARE NOT AN "AGENT"

    Tennessee law states that an agency relationship does not exist without a bilateral, written agency agreement between the licensee and the buyer or seller. A disclosure form is not an agreement/contract! If a licensee simply "declares" that he or she is a buyer's agent, or gives somebody a disclosure form that says he/she is a buyer's agent, but has not negotiated and signed a written buyer agency agreement with that buyer, then the licensee is not a Buyers Agent. The licensee is still a Facilitator -Transaction Broker regardless of what he or she says; to represent himself or herself as a buyer's agent is misrepresentation, another violation of law. The law is very clear: an agency relationship can be created in only one way through a written agency agreement with a consumer. The law states very clearly than an "agency relationship shall not be assumed, implied or created without a written bilateral agreement that establishes the terms and conditions of such agency relationship". The law also states very clearly that "the disclosure of agency or facilitator/transaction broker status ... shall not be construed as, or be considered a substitute for, a written agreement to establish an agency relationship between the broker and a party to a transaction... This means that if you are going to be a seller's agent or a buyer's agent in a transaction, you must have a written Agency agreement.

     
  • Explanation of Agency Terms

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    AN EXPLANATION OF AGENCY RELATIONSHIP TERMS

    AGENT FOR THE SELLER:

    The licensee's company is working as an Agent for the Seller of the property and owes primary loyalty to the Seller.  Even if the licensee is working with a prospective buyer to locate property for sale, rent or lease, the licensee and his/her company are legally bound to work in the best interests of any property owners whose property is shown to this prospective buyer.  An agency relationship of this type cannot,  by law, be established without a Written Seller Agency Contract.

    DESIGNATED AGENT FOR THE SELLER:

    The individual licensee is working as a Designated Agent for the Seller in this consumer's prospective transaction, to the exclusion of all other licensees in his/her company.  Even if someone else in this licensee's company represents a possible buyer for this Seller's property, the Designated Agent for the Seller will continue to work as an advocate for the best interest of the Seller.  An agency relationship of this type cannot,  by law, be established without a Written Seller Agency Contract.

    AGENT FOR THE BUYER:

    The licensee's company is working as an Agent for the Buyer, and owes primary loyalty to the Buyer, and will work as an advocate for the best interests of the Buyer.  An agency relationship, of this type cannot, by law, be established without a Written Buyer Agency Contract.

    DESIGNATED AGENT FOR THE BUYER:

    The individual licensee is working as a Designated Agent for the Buyer in this consumer's transaction (or prospective transaction), to the exclusion of all other licensees in his/her company. Even if someone else in this licensee's company represents a seller in whose property this Buyer is interested, the Designated Agent for the Buyer will continue to work as an advocate for the best interest of the Buyer.  An agency relationship of this type cannot,  by law, be established without a Written Buyer Agency Contract.

    DISCLOSED DUAL AGENT:

    The licensee's company - or the individual licensee has become a Disclosed Agent for Both Parties in this consumer prospective transaction.  Because of loyalties owed to Both Parties in the transaction, the licensee(s) involved in a Disclosed Dual Agency relationship must become NEUTRAL and therefore cannot legally serve as an advocates or an advisor for either Party in the transaction.  An agency relationship of this type cannot, by law, be established without a Written Agency Contract with Both Parties.

    FACILITATOR or TRANSACTION BROKER

    (Not an Agent for Either Party):

    The licensee's company is NOT working as an Agent for either Party in this consumer transaction. This licensee is therefore NEUTRAL and cannot serve as an advocate or advisor for either party in the transaction. (By law, any licensee or company who has not entered into a written agency agreement with either Party in the transaction is considered a Facilitator or Transaction Broker until such time as an agency agreement is established.)

    CONFIDENTIALITY:

    By law, every licensee is obligated to protect some information as confidential.  This includes any information revealed by a consumer which may be helpful to the other party. IF it was revealed by the consumer BEFORE the licensee disclosed an agency relationship with that other party, any such information which the consumer THEN reveals must be passed on by the licensee to that other party.
     
  • How to do Agency Disclosure

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    AGENCY DISCLOSURE IN TENNESSEE

    What the Tennessee Law requires on Agency Disclosure is found on the "Official Manual of The Tennessee Real Estate Commission" Title 62-Chapter 13-Section 405.

    [Disclosure of Agency] (a) "If a licensee personally assists a prospective buyer or seller in the purchase or sale of a property, and such buyer or seller is not represented by this or any other licensee, the licensee shall verbally disclose to such buyer or seller the licensee's facilitator, agent, subagent, or designated agent status in the transaction before any real estate services are provided."

    (WHO) - a licensee (WHAT) - must disclose how they are working or will be working in a transaction (WITH) - buyers and sellers not already represented by another licensee (WHEN) - before any real estate services are provided (HOW) - verbally.

    [ Written Disclosure ] (b) "The disclosure of agency or facilitator status, as provided in subdivision (a) must be confirmed in writing with an unrepresented buyer prior to the preparation of an offer to purchase. The above disclosure of agency status must be confirmed in writing with an unrepresented seller prior to execution of a listing agreement or presentation of an offer to purchase, whichever comes first. Following delivery of the written disclosure, the licensee shall obtain a signed receipt for such disclosure from the party to whom it was provided."

    (WHO) - a licensee (WHAT) - must disclose how they are working or will be working in a transaction (WITH) - buyers and sellers not already represented by another licensee (WHEN) - prior to preparation of an offer for customers or buyers; or prior to the execution of a listing agreement for sellers; or prior to the presentation of an offer to purchase to an unrepresented seller (FSBO) (HOW) – in writing.

    THE LAW DOES NOT STATE A REQUIREMENT FOR A PARTICULAR FORM OR TYPE OF FORM TO BE USED FOR THE WRITTEN DISCLOSURE OF AGENCY STATUS.

    The Forms "Agency Disclosure Form As Required By Tennessee Law", "Working With A Real Estate Professional", and "Confirmation Of Agency Status" are all acceptable method to satisfy the written agency disclosure requirement. A disclosure form developed by licensee or the Broker would be an acceptable method to satisfy the written agency disclosure requirement. A simple statement of the licensee's agency status in a real estate transaction written on the company letterhead, signed by the licensee and the person to whom the licensee is providing real estate services will satisfy the written agency disclosure requirement. Remember, the law simply states that a licensee must confirm in writing that the consumer was told how the licensee would be working in a real estate transaction and to whom the licensee would be providing real estate services and to whom the licensee would be working with as a non-agent Transaction Broker/Facilitator or working for as an agent.

    (c) The disclosure of agency or facilitator status, as provided in subdivision (a), shall not be construed as, or be considered a substitute for, a written agreement to establish an agency relationship between the broker and a party to a transaction as referenced in TCA 62-13-406.

    What does the LAW require of a licensee when they are working with another licensee in the same real estate transaction?

    [Working With Other Licensees ] (d) "Upon initial contact with any other licensee involved in the same prospective transaction, the licensee shall immediately disclose such licensee's role in the transaction, including any agency relationships, to this other licensee."

    (WHO) - a licensee (WHAT) - must disclose how they are working or will be working in a transaction (WITH) - any other licensee involved in the same prospective transaction (WHEN) - immediately (at first contact with the other licensee ) (HOW) - Verbally.

    What happens if your role changes during the transaction?

    [Working With Other Licensees ] (d) "If the licensee's role changes at any subsequent date, such licensee shall immediately notify any other licensees and any parties to the transaction relative to such change in status."

    (WHO) - a licensee (WHAT) - must disclose any change in status (WITH) - any other licensee or other parties (not represented by another licensee) involved in the same transaction (WHEN) - immediately upon changing your status) (HOW) – verbally.

    The Tennessee Agency Law does not require licensees to share a written agency disclosure with anyone except the person with whom they are providing real estate services. Licensees are simply required to tell other parties to a transaction (including other licensees) of their agency status. Written agency disclosure or changes in agency status is not required between licensees or other parties in a transaction. However, REALTORS® are required by Standard of Practice 16-10 of the REALTORS® Code of Ethics to provide written confirmation of their Agency Status to other REALTORS® involved in a real estate transaction no later than the execution of a purchase agreement or lease. Tennessee Agency Law does not require licensees to give confirmation of their Agency Status to other licensees with whom they are cooperating. The REALTORS® Code of Ethics requires only REALTORS® to so. The REALTORS® Code does not require licensees to share their Agency Disclosure Form. It requires only that REALTORS® give a written statement of their agency status. REALTORS® are free to use their Agency Disclosure Form, or they could simply give a written statement of their agency status.

    A licensee, who uses the TAR "Confirmation of Agency Status Form" for their Agency Disclosure, should notice that the form does not request the signatures of both the buyer and seller involved in the transaction. The form requests only the signature of either the Buyer OR Seller, whichever one the licensee is working with as a non-agent Transaction Broker/Facilitator or working for as an agent.

    There is neither a requirement nor provision in Tennessee Agency Law for a licensee to have all parties (both buyers and sellers and all real estate licensees) involved in a real estate transaction to sign the same agency disclosure form. If a licensee or real estate firm refuses to present a cooperating licensee's Offer to Purchase or Lease to their client until they receive a written copy of the licensee's Agency Disclosure, they are in violation of multiple laws and rules. ( Federal Law - Title VIII, Tennessee Law - TCA 62-1311, Tennessee Real Estate Commission Rules – 1260-2-08, The REALTOR®S Code of Ethics – Article 1 Standard of Practice 1-6, and the MLS Rules – Section 2.2 ). These Laws and Rules require that all Written Offers to Purchase or Lease must be presented. When a listing company refuses to present an Offer to Purchase or Lease, the licensee has been released to contact the listing company's client directly to make arrangements to present their Buyer or Customer's Offer or Lease. If this is the course of action a licensee has to pursue, the licensee will not be in violation of any Laws, Rules, or Code of Ethics. ( Texas is currently the only state with a law that specifically prohibits this action. )

    While some licensees and real estate companies may desire a written agency disclosure from everyone involved in a real estate transaction, this desire is not a requirement and cannot impede the presentation of an Offer to Purchase or a Lease nor the negotiation or completion of the transaction.

    READ YOUR LICENSEE LAW MANUAL BEFORE YOU ACT ON WHAT YOU ARE TOLD BY OTHERS. IF SOMEONE TELLS YOU WHAT THEY THINK YOU SHOULD BE DOING IN REAL ESTATE, OR HOW AND WHEN THEY THINK YOU SHOULD BE DOING IT, ASK THEM TO SHOW YOU WHERE IT IS FOUND IN THE LICENSE LAW MANUAL, OR LOOK IT UP YOURSELF.

     
  • The REALTORS Code of Ethics and Agency Disclosure

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    CODE OF ETHICS AND AGENCY DISCLOSURE

    • Standard of Practice 16-10

    REALTORS®, acting as buyer or tenant representatives or brokers, shall disclose that relationship to the seller/landlord's representative or broker at first contact and shall provide written confirmation of that disclosure to the seller/landlord's representative or broker not later than execution of a purchase agreement or lease. (Amended 1/04)

    • Standard of Practice 16-11

    On unlisted property, REALTORS® acting as buyer/tenant representatives or brokers shall disclose that relationship to the seller/landlord at first contact for that buyer/tenant and shall provide written confirmation of such disclosure to the seller/landlord not later than execution of any purchase or lease agreement. (Amended 1/04)

    REALTORS® shall make any request for anticipated compensation from the seller/ landlord at first contact. (Amended 1/98)

    • Standard of Practice 16-12

    REALTORS®, acting as representatives or brokers of sellers/landlords or as subagents of listing brokers, shall disclose that relationship to buyers/tenants as soon as practicable and shall provide written confirmation of such disclosure to buyers/tenants not later than execution of any purchase or lease agreement. (Amended 1/04)