Disclosed Limited Agency causes confusion at times, particularly when viewed through the lens of the default exclusivity of agency relationships. Clarity is required to square the circle of agency law and agency relationships, and to understand why and how a properly administered disclosed limited agency operates.
Under ORS 696.800(1), an “agent” can be several things:
- a principal broker in a listing agreement with a Seller;
- a principal broker in a service contract with a Buyer;
- a principal broker who is part of a disclosed limited agency agreement; and
- a “real estate broker associated with a Principal Broker in order to act as the Principal Broker’s agent in connection with acts requiring a real estate license and to function under the principal real estate broker’s supervision.”
It is worth noting that the preamble to ORS 696.800 states that the definitions are to be used “unless the context requires otherwise.” In other words, the definitions in ORS 696.800 are useful until they aren’t, at which point context determines further meaning. For the purposes of ORS 696.800, a real estate broker is an “agent,” but only insofar as they are an agent of the principal broker, brought in to act under the principal broker’s supervision. In contrast to the broker, a principal broker can be the client’s agent directly. The real estate brokers associated with the principal broker are legal appendages of that principal broker, deputized by that principal broker and imbued with all of that principal broker’s obligations and responsibilities to the principal broker’s client, allowing the broker to act in the principal broker’s stead throughout the transaction. The ultimate responsibility for the agent’s actions, however, is on the principal broker. Hence the principal broker’s supervisory requirement over actions of associated broker at law and rule.
Agency as a concept has been further sub-defined by the Oregon Real Estate Agency (OREA) in rule with OAR 863-015-0200(1), which explains that the parties may establish only the following types of “agency relationships” [unless the parties expressly agree to something not otherwise prohibited by law]:
- exclusive seller agency;
- exclusive buyer agency;
- disclosed limited agency where licensees are associated with the same Principal Broker and represent both seller and buyer;
- disclosed limited agency where licensees are associated with the same Principal Broker and are designated to represent, respectively, the buyer exclusively and the seller exclusively; or
- disclosed limited agency where licensees are associated with the same Principal Broker and represent more than one buyer.
The “agency relationship” is established by the written agreement or through course of conduct with a seller or a buyer. The “disclosed limited agency relationship” is established when either the principal broker or licensees associated with a principal broker shares representation of multiple parties in a transaction.[1] Disclosed limited agency [through ORS 696.800(4)] is understood to be “a real property transaction in which the representation of a buyer and seller or the representation of two or more buyers occurs within the same real estate business.” Disclosed limited agency as a term is a reference to the transaction as a whole, separate from the traditional phrase you may hear “dual agent” or “disclosed limited agent” which is a reference to the broker/principal broker operating as an adverse party with the principal’s [client’s] consent. Per OAR 863-015-0200(2)(c), the agent is only a disclosed limited agent of both buyer and seller when they are in a transaction where the agent represents more than one buyer in the same transaction, or when agent represents both seller and buyer in the same transaction. OAR 863-015-0200(2)(c) does not establish any “disclosed limited agent” problem for a principal broker’s agents in situations where the principal broker’s agents are designated to respectively represent the buyer and seller exclusively. It is never stated, but the presumption is that the client must be the one being told the agent is designated as an exclusive agent of that client. Furthermore, OAR 863-015-0200(3)(a) establishes the principal broker as the client’s disclosed limited agent whenever an agency relationship is formed.
Said in a more simplified way: the supervising PB is always a disclosed limited agent when there is a disclosed limited agency relationship. The brokers are only disclosed limited agents when they are in established agency relationships with multiple parties to a transaction. Simply the fact that the PB is a disclosed limited agent does not mean that all brokers associated with that PB are now disclosed limited agents. If the brokers are not disclosed limited agents, they are treated as exclusive agents of their respective party [buyer/seller].
Note: Since the PB is always a disclosed limited agent any time a disclosed limited agency transaction exists or any time the PB has two brokers exclusively working on different sides of the same transaction, that supervising PB should always be requesting a Disclosed Limited Agency Agreement from all clients who cross their desk, even if that PB is merely supervising the activities of their legions of brokers.
Under ORS 696.815, a disclosed limited agency relationship requires a disclosed limited agency agreement. If the agent is acting in a disclosed limited agency relationship without a prior written disclosed limited agency agreement signed by both the parties [seller & buyer or buyer1 & buyer2] they are in violation of ORS 696.815. The principal broker should equally establish a disclosed limited agency agreement with all clients. Section (2)(b) of the Disclosed Limited Agency Agreement expressly states, “[i]n a transaction involving the listed property where the buyer is represented by an agent who works in the same real estate business as the Listing Agent and who is supervised by the Listing Agent’s Principal Broker [“Listing Agent” is an undefined term, we can presume this means “licensee associated with principal broker” based on the subsequent reference to “Listing Agent’s Principal Broker”], the Principal Broker may represent both Seller and Buyer. In such a situation, the Listing Agent will continue to represent only the [client] and the other agent will represent only the [other party] consistent with the applicable duties and responsibilities as set out in the initial agency disclosure pamphlet.” [see OAR 863-015-0210(3) & (4) for language of disclosed limited agency agreements].
Questions arise about conflicts of interest: does the PB need to disclose the conflict of interests if they are a disclosed limited agent? The simple answer is no. The normal conflict of interest analysis arises from violations of the agent’s various duties to the client, particularly the duty of loyalty. As a general principle, “an agent is subject to a duty to their principal to act solely for the benefit of the principal in all matters connected with their agency.” Restatement (Second) of Agency, §387. This is also spelled out in ORS 696.805 and 696.810 which states that an agent must be “loyal to the [principal] by not taking action that is adverse or detrimental to the [principal’s] interest in a transaction. When an agent favors another person or favors themselves over and above the client, there is a conflict of interests and ORS 696.805 and 696.810 mandate disclosure of those conflicts. The Disclosed Limited Agency Agreement discloses the conflict and by signing the agreement, a client approves and ratifies the conflict as nonmaterial to the agency relationship. The common law principles of agency permit dual agency;[2] seeing it as an element of the right to contract that Americans receive through the 5th and 14th amendment Due Process Clauses and caselaw.[3] For that reason, the Seller and Buyer can choose to limit their own protections and allow an agent to represent both them and the opposite party.
Some confusion arises in how the Final Agency Acknowledgement (FAA) interplays with the rules of agency. The FAA is required under ORS 696.845 and OAR 863-015-0200(12), but it is an acknowledgement and consent to the existing state of the agency relationships. It does not create a disclosed limited agency nor does it create a buyer-broker relationship. The FAA merely exists as the Buyer and Seller confirming the brokers in the transaction and confirming existing disclosed limited agency agreements [in the event both sides of the transaction have agents from the same real estate firm]. Within a single FAA, the Buyer’s Agent can mark that they are the Agent of the Buyer exclusively, and the Seller’s Agent can mark that they are the Agent of the Seller exclusively, and the Principal broker who supervises both those agents can simultaneously be declared the disclosed limited agent of both parties. Exclusivity in this context is in reference to the individual brokers acting in their capacity as either Buyer’s Agent or Seller’s Agent and exclusively representing the interests of the respective client.
The above is not to say that there are not inconsistencies and weaknesses in the drafting and language revolving around agency. For example, OAR 863-015-0200(3)(a) states that the Principal Broker is a disclosed limited agent of a client at any time that an agency relationship is formed under OAR 863-015-0200(2). OAR 863-015-0200(2) then references every variation of agency relationship. If read literally, OAR 863-015-0200(3) states that the principal broker is 100% of the time, always a disclosed limited agent, even if the principal broker only has one agent in the transaction and the agent is merely acting as an exclusive agent of one party. Likely, it was a drafting error that slipped through and the principal broker was only meant to be considered a disclosed limited agent when the agency relationships in OAR 863—015-0200(1)(c), (d) or (e) are involved. The rule, read literally, is absurd and your Association will petition OREA for changes to that rule to clean up the nonsensical reading.
Similar absurd readings can be found in how ORS 696.815(2) declares that the licensee has duties and obligations “(a) to the seller, the duties under ORS 696.805” and “(b) to the buyer, the duties under ORS 696.810.” ORS 696.805 and ORS 696.810 both contain clauses (3)(c) mandating the agent be loyal to the client and not take any action that is adverse or detrimental to the client. Inherently, disclosed limited agency violates this duty of loyalty requirement. The reasonable reading would normally be “ah yes, but forming a disclosed limited agency with the disclosed limited agency agreement operates as the client waiving a portion of the duty of loyalty,” however section (5) of both ORS 696.805 and ORS 696.810 state that the affirmative duty of loyalty is one of the unwaivable duties. Given the conflict between the statements in ORS 696.815 and the entire remaining litany of laws related to disclosed limited agency, it is reasonable to argue that the courts would interpret the laws in a manner that avoids internal legal conflicts [known as the “avoidance canon of statutory construction”]. Beyond that, dual agency is a keystone element of agency law and is so deeply entrenched in common law that it would be nigh impossible to upend; together with presumptions against implied repeals, the end run of the absurd drafting in ORS 696.815 would be to read it as “you owe a buyer and seller all the duties under ORS 696.805 and 696.810, but you can blur the lines on the duty of loyalty a little bit for this transaction.” If the legislature will have it in the 2025 long session, your Association has plans to clean and correct the language of ORS 696 where needed, ideally to remove these sort of drafting errors and end any pedantic conflicts over semantic meaning.
[1] see OAR 863-015-0200(2)
[2] “[a]n agent who, to the knowledge of two principals, acts for both of them in a transaction between them, has a duty to act with fairness to each and to disclose to each all facts which he knows or should know would reasonably affect the judgment of each in permitting such dual agency, except as to a principal who has manifested that he knows such facts or does not care to know them.” Restatement (Second) of Agency, §392.
[3] See Lochner v. New York, 198 U.S. 45 (1905).