Because the agent in an agency relationship is acting on behalf of another person, the law has long imposed legal duties on agents. These duties result from the fact that in an agency relationship the principal must trust and rely on the agent to accomplish the object of the relationship. Relationships involving trust and reliance are considered “fiduciary” relationships.
The common law imposes six legal duties on fiduciaries. They are the duties of loyalty, obedience, disclosure, confidentiality, diligence, and accounting. With the exception of the duties of confidentiality and diligence, fiduciary duties are fairly easy to understand.
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The ease with which agency relationships can be created raises more problems than just unintended relationships. Because the agency relationship can be implied from conduct alone, the “scope” of the relationship is often left undefined. The scope of an agency relationship is its range of operation or purpose. The scope of an agency relationship is determined by what the parties intend the agent to accomplish. It is the scope of the relationship that establishes the agent’s authority and obligations to the principal.
Because of its sales origin, the real estate industry has, until recently, paid little attention to the scope of agency relationships. For almost a century, the industry operated by “listing” the seller’s property and then “working with” unrepresented buyers to get the seller’s property sold. The only agency relationship intended was that between broker and seller.
The scope of a sales relationship with a seller is pretty simple: market the property to find a buyer ready, willing and able to purchase. Not only was the scope of the sales relationship pretty simple, but it was spelled out in a written listing agreement. Thus, historically, there was little need to worry about the scope of agency relationships. All this is changing.
The advent of buyer agency in the late 1980s placed new emphasis on the scope of agency relationships. For the most part, buyer agency relationships arise by conduct and, therefore, are not defined by written agreement. At the same time, a buyer’s needs are both greater than and less defined than a seller’s. A seller has only one piece of property to sell. The object of the relationship is, therefore, very narrow. Not so with buyers.
Buyers are fundamentally shoppers. They are going to exchange something of known value (money) for something of unknown value (a used house). Not only is the condition of the house unknown at the time of offer but so are offsite conditions that can affect value. This greatly increases the buyer’s risk in the transaction which, depending on the scope of the agency relationship, greatly increases their agent’s risk.
A good way to think about the scope of buyer representation is to ask yourself exactly what a buyer agent is supposed to do for the buyer. Does a buyer’s agent just have to find the buyer property to look at? Or does the agent have to make sure the property found is really suitable to the buyer’s needs, free of defects and worth the price paid? Your answer is probably somewhere between these extremes, but where?
When nothing is said between buyer and agent about the scope of the relationship, it is very likely the buyer will believe the agent is “guaranteeing” satisfaction. At the same time, the agent is likely to believe they are merely showing property. This mismatch of expectations, coupled with the ambiguity created by not defining the scope of the relationship, is what drives liability risk on the selling side of transactions.
There are two simple solutions to the scope of agency problem inherent in buyer agency. One is the growing use in the industry of buyer service agreements. Written service agreements between buyers and agents are helpful in a number of regards, but none so much as in defining the scope of the relationship. A buyer’s agent can use the written service agreement to both explain and limit the services they will provide. In this way, they can control the scope of the relationship and with it their risk. Click here for a copy of a sample buyer service agreement.
The second way in which a buyer’s agent can control the scope of their agency relationship with the buyer is to use what is called a “client engagement letter.” Because agency relationships do not require agreement, it is not necessary to have a service agreement or contract to define the scope of the relationship. All that is necessary is for one party to define the services offered and the other party to consent to those services.
Defining the scope of agency relationship is simply a matter of the agent telling the client what services will and won’t be provided and the client continuing the relationship. It is here that the “act and consent” basis of agency relationships can work to the agent’s advantage. See the Establishing and Terminating Agency Relationshipssection of the topic for a complete discussion of the “act and consent” issue. To capitalize on that advantage, it is only necessary to develop a letter that defines the services offered and send it to each client as soon as an agency relationship has been established.
Client engagement letters are routinely used by other service professionals like lawyers, accountants and tax professionals. Such professionals use engagement letters to confirm the agency relationship by welcoming the principal as a client and informing the client about the nature of the professional’s services. The nature of the service includes spelling out the professional’s authority to act on behalf of the client, the services the professional will and will not provide, and any specific responsibilities the client will have during the relationship.
Engagement letters do not create agency relationships. The relationship is created by the acts of the agent and the consent of the principal. What an engagement letter does is acknowledge the relationship and, in doing so, defines it. An engagement letter works to protect buyer agents by preventing the client from later claiming the agent was responsible for seeing to that no harm whatever came to the buyer as the result of the transaction. Click here for a copy of a sample client engagement letter.
Something similar to an engagement letter can also be used to deal with limited service listings. A limited service listing is any listing in which the listing broker limits the services they will provide to the seller. At the extreme, this can mean limiting the service the listing broker will provide the seller to nothing more than putting the property in the MLS. Such listings are often called “MLS-only” listings.
MLS-only and other limited service listings work because under the common law the agent and the principal are free to define the scope of their relationship. If the agent and principal agree that the agent’s only obligation will be to place the property in the MLS, the scope of their agency relationship is limited to that act. Although all the fiduciary duties of an agent attach to the agent, they apply only to those acts the agent and principal have agreed will be the agent’s responsibility.
The ability to limit the scope of agency relationships on the listing side is causing considerable consternation in the real estate industry. Some buyer agents do not like working with a seller who is not represented by an agent because they believe it increases their own work and liability risk. Click HERE for a detailed explanation of the issue and potential solutions, including sample clauses and letters. Some brokers see limited service brokerage as a threat to their “full service” brokerage business models. Great turmoil in the industry has resulted. Click here for a detailed white paper on the subject.
Notwithstanding the turmoil the ability to control the scope of agency relationships has recently created on the listing side, scope is a critical component of the law of agency. As a general rule, the greater the scope of the agent’s obligations to the principal the greater the agent’s potential liability. That makes controlling the scope of the relationship an important risk management issue. So important, in fact, that in addition to using written agency agreements or client engagement letters, the industry has begun to talk about developing industry-wide standards of practice.
Industry standards, whether self-adopted or imposed by government, are used in many professions. Most real estate licensees are familiar with USPAP, the Uniform Standards of Professional Appraisal Practice. Engineers and architects have industry-wide standards imposed by their professional associations. Home inspectors in Oregon have adopted professional standards and gotten the Construction Contractors Board to adopt them as administrative rules.
Whether imposed as industry standards by a professional organization or by governmental action, standards of practice define the minimum scope of relationships in the industry. Industry standards can increase or limit scope of agency relationships in the same way a contract between agent and principal can. Standards of practice, like the scope of an agency relationship, are not the same as agency duties.
Agency duties, like all legal duties, attach to relationships. That means whether the duty arises or not depends on the legal relationship of the parties involved. Here, that relationship is agent/principal. But that does not mean individuals cannot structure the scope of their relationships to limits the universe of things to which the duties will apply.
Think of defining the scope of an agency relationship, or industry standards of practice, like a housekeeper telling a homeowner they do not do windows. That agreement regarding windows limits the scope of the housekeeper’s work. If the housekeeper limits the scope of their work, dirty windows in the home will not be the fault of the housekeeper even if a housekeeper had the legal duty to keep things clean and shiny. The “clean and shiny” legal duty simply would not attach to windows.
The distinction between agency duties and the scope of an agency is very poorly understood in the real estate industry. The industry has been slow to adopt industry-wide Standards of Practice. It has been equally slow to use private agreements to limit the scope of agency relationships with buyers. Things, however, are starting to change. Whatever the standards of practice or scope of agency changes coming, it will remain important to understand the agency duties the law imposes on all agency relationships whatever their scope.
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Equally confusing on the selling side is termination of agency relationships. Like any agency relationship, a selling side agency relationship lasts for a stated term, for a reasonable time in the circumstances if no term is stated, until the object of the agency is accomplished or otherwise ceases to exist, or until terminated by the parties. In the typical selling side situation where there is no agreement between the agent and the buyer, there is no stated term and it is very hard to say how long a buyer who hasn’t found anything is still “in the market.”
The lack of formality on the selling side makes it difficult, absent completion of the object or termination by the parties, to say how long a selling side agency relationship exists. This uncertainty is, however, tempered by the fact that buyer agency relationships created only by conduct are non-exclusive. This non-exclusivity, coupled with ORS 696.810(4), means it is not a breach of the duty of loyalty to show property to competing buyers.
Non-exclusivity and ORS 696.810(4) are no help, however, when it comes time to write offers for competing buyers. Two buyers competing for the same property means disclosed limited agency rules kick in. Disclosed limited agency disclosure and consent rules make representing two buyers for one property difficult and unusual. A complete discussion of disclosed limited agency can be found in the Agency Disclosure section of this topic
One place where termination of a buyer agency relationship can become an issue is when the agent wants to purchase property that might be of interest to their buyer client. Before purchasing a property of potential interest to a buyer client, an agent must offer the property to the client. This is a function of the duty of loyalty. An agent who represents buyers must, therefore, consider their current list of clients before purchasing property for themselves.
Any uncertainty over who is still a client should be resolved in the client’s favor. That means that prior to purchasing property themselves, buyer agents should determine the property does not meet existing clients’ needs, offer the property to the clients first or terminate the conflicting agency relationships. Of these choices, offering the property to existing clients is the safest if there is doubt about the client’s real estate needs.
Determining what might meet a buyer client’s needs means having a good idea of those needs. If the buyer is looking for an executive home with three baths and five bedrooms and is willing to pay a half a million dollars for it, you don’t have to offer them the little fixer upper you found for yourself over on the “wrong” side of town. If you have clients actively looking for inexpensive property on that side of town, it would be foolish to buy the property without making them aware of it. In between these extremes lie all the rest of your clients. When self-interest is involved, it is wise to err on the side of clients.
Terminating an agency relationship on the selling side does not usually raise the same breach of contract issues as on the listing side. A non-exclusive agency relationship that exists without a contract is pretty much the same as “at will” employment as far as termination is concerned: either party can terminate at any time for any reason or for no reason at all. All that is required is notice to the other party. Although the notice need not be in writing and can even be implied from the circumstances, written notice is always preferable – especially in cases where agent self-interest may be an issue.
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Although buyer agency by written agreement is becoming more prevalent in the industry, the majority of agency relationships with buyers still do not involve written agreements. Instead, the buyer and the agent simply start interacting and at some point during that interaction an agency relationship is created. This manner of doing business makes it very difficult to determine exactly when a selling side agency relationship is established.
Unless there is a writing, figuring out when a business relationship becomes an agency relationship involves determining when consent was given and acted upon. That is, at what point the principal (here the buyer) manifested consent for the agent to act on their behalf and the agent consented by acting on that manifestation. Establishing an agency relationship by conduct instead of contract means depending on who says and does what, when. It is for this reason that the establishment of buyer agency relationships remains a matter of confusion in the industry.
Fortunately, when exactly an agency relationship is established on the selling side rarely matters. First, without it in writing, the relationship is not exclusive – hence the old industry saying: “nobody owns a buyer.” By the time a buyer identifies a particular property and attempts to purchase it, there is (unless there is something in writing to the contrary) no doubt the agent “working with” the buyer has established an agency relationship. Until the buyer identifies property and decides to purchase, nothing likely has happened to cause the buyer, or the agent, serious damage. Thus, the lack of certainty as to when an agency relationship begins on the selling side causes few, if any, real problems.
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An agency relationship lasts for a stated term, for a reasonable time in the circumstances if no term is stated, until the object of the agency is accomplished or otherwise ceases to exist, or until terminated by the parties. On the listing side, the term of the agency is stated – it’s the term of the listing. If the property sells before the listing “expires” (or the house burns down), the agency will end because the object of the agency is accomplished (or rendered impossible). That leaves only “terminated by the parties” to cause trouble on the listing side.
Agency relationships are just that: relationships. Although agency relationships can be established by contract, the relationship itself is not a contract. This is where the difference between agreement and consent comes in. One person cannot force another to consent. It follows that either party to an agency relationship can terminate the agency relationship unilaterally at any time by simply withdrawing the consent to act.
The ability to terminate an agency relationship unilaterally does not mean there may not be legal consequences, contractual or otherwise, for ending the relationship. In real estate, such consequences often become an issue when the seller wants to terminate the listing before it expires. The seller’s right to terminate the listing agreement as a contract is not the same as their right to terminate the agency relationship by withdrawing consent. The agency relationship itself will end the moment the seller withdraws their consent to act on their behalf, but doing so, depending on the circumstances, may also breach the listing agreement.
Real estate agents often confuse termination of the agency relationship with performance or breach of the listing contract. There are usually provisions in the listing agreement about damages if the seller breaches the agreement by withdrawing consent to act as the seller’s agent. Breach of contract issues, however, have nothing to do with whether or not the broker can continue to act on the seller’s behalf to market the property. An agent cannot continue to represent a seller without the seller’s consent even if withdrawing that consent breaches the listing agreement and entitles the broker to damages.
The breach of contract issues created when a seller terminates a listing before the expiration date can be very complex legally. Click here for a legal analysis of these issues in Oregon. What is not complex is the effect of the seller’s withdrawal of consent to act on their behalf. Without that consent, the agent can no longer market the property or hold themselves out as the seller’s agent. Attempts to force the seller to continue the agency once the seller gives notice of termination of the agency relationship are common in the industry but very dangerous legally.
Brokers will sometimes try to force the seller to allow them to continue with the agency relationship by threatening the seller with the liquidated damages clause in listing agreements. Such clauses often purport to entitle the listing broker to a full commission if the seller terminates the listing. Whatever the enforceability of such clauses, the use of them to threaten clients raises serious agency duty issues. The problem with threatening your own client is that if you are successful they remain your client. If they remain your client, you have an obligation not to threaten them, especially if the threat involves the agent making statements about the client’s legal rights.
Because of the problems associated with trying to force a seller to continue a listing against their will, some brokers attempt to avoid dealing with “termination” of the listing altogether. Rather than terminate the listing, they merely “withdraw” it from the MLS by having the seller sign a listing withdrawal form. If the distinction between termination and withdrawal is not carefully explained, most sellers will assume the listing is being terminated when they sign the withdrawal form. If the seller does not understand fully what is actually going on, this manner of doing business places the broker’s interest in direct conflict with their client’s, can involve misrepresenting the seller’s options and harms the seller by continuing the listing (and agency relationship) while seriously diminishing exposure to the market.
Bluffing a seller (even innocently) into continuing a listing is asking for trouble. That trouble often starts when the seller approaches another broker and tries to list the property. Simply put, trying to hold onto a listing in the face of a seller’s desire to terminate is a poor business practice. When a client seller wants out of a listing agreement, the real issue is damage to the broker. And it is by focusing on damages that the broker can determine their best course of action.
Damages in listing termination cases depend mostly on how long the listing has been active, the broker’s expenses in marketing the property and the likelihood of a sale during the remaining listing period. A seller who terminates a listing near its end, trying to avoid a commission on a likely sale, is not the same as a seller who terminates because there have been no offers for months is not the same as a seller who terminates within a week of creating the listing because they want to stay in the house and care for their sick spouse. Each of these situations is different. Unfortunately, the liquidated damage clause found in most listing contracts treat each of these situations exactly the same by demanding the full commission as damages.
When faced with a listing termination issue, the broker should first look at the situation, not the termination clause of the listing contract. Is the issue seller greed? Is it changed seller circumstances? Is it dissatisfaction with service? If the issue is greed, a hard line and a demand for a full commission might be the best course of action. If changed circumstances, a no cost release might preserve the business relationship so that when circumstances change again, the listing might come back. If the issue is services, an honest assessment of the seller’s perspective is in order. It is only after that honest assessment that the broker can begin to consider negotiating a settlement with the seller. It is in these negotiations over the cost to the broker that the liquidated damage clause in the contract becomes important.
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Creating Listing Side Relationships
Because the listing side agency relationship is created in a written contract, it is easy to determine when the agency relationship begins. It begins on the effective date of the listing contract. When marketing or MLS filing is to be delayed under the listing agreement, it is wise to add a clause that makes clear that all other terms of the listing are to be in force on the effective date of the listing. In this way, arguments can be avoided if a buyer emerges prior to the marketing or MLS filing date.
Notwithstanding the certainty created by using a written agreement on the listing side, there is one situation that can cause confusion of agency duties when listing property. That situation arises when the seller discloses confidential information to the agent during the listing presentation but, for whatever reason, does not then list the property. Although it would seem the agent has no duty to protect the confidences if the seller does not enter into a listing agreement, courts do not look at the situation that way. Instead, courts conclude that a limited agency relationship created by conduct existed for the purpose of the listing presentation. It follows that information exchanged during the presentation is confidential even if the seller does not continue the relationship by entering into a listing agreement.
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Agency relationships are the backbone of the real estate business. Real estate license law in most states assumes such relationships. Those same license laws define the duties involved in agency relationships. Indeed, agency relationships are so central to the practice of real estate that real estate licensees call themselves real estate “agents.”
Notwithstanding the critical role of agency relationships in the practice of real estate, the law of agency is poorly understood by most real estate licensees. As a result, the industry is rife with myths about agency and agency relationships. The whole thing can seem quite scary and complex. Yet, the law of agency is simple law.
“Agency,” according to legal dictionaries, is “the fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other so to act.” Typical of legalese, the definition doesn’t seem too helpful. If, however, you read the definition carefully, you’ll see it contains some very important concepts.
First, agency relationships require “consent,” not an “agreement.” The relationship “results” from the “manifestation” of this consent. What is consented to is for one person “to act” on behalf of another. That is, one person consents to another acting on his behalf and the other acts according to that consent. All that is needed is for one person to consent and the other act on it. This seemingly asymmetrical feature of the law of agency can cause real estate agents serious grief.
If you think in terms of “manifesting consent” and “acting,” you can see how easy it is to create an agency relationship. An agency relationship can be formed without the principal and the agent even discussing the matter. All that is necessary is for the principal to manifest consent for the agent to act on the principal’s behalf and for the agent to do something on the principal’s behalf. It is so easy to create an agency relationship during a real estate transaction that real estate education often discusses “accidental” agency.
There is, of course, no such thing as an “accidental” agency. People don’t consent to accidents. It is more accurate to talk about an “unintended” agency relationship. The lack of intention is typically on the agent’s side. Because all that is needed to raise an agency relationship question is evidence that one person (the agent) took some action consistent with acting on behalf of another (the principal) and the principal took advantage of that action, such relationships can exist without the agent intending the relationship. The problem, of course, is that an agent who thinks they have only a customer is unlikely to meet the duties owed to a client.
Think about an agent who represents only the seller showing property to buyers, writing offers for them and then helping them perform the contract. On whose behalf is the agent acting? Is the agent acting for the seller, for the buyer or for both? The answer, if there is nothing in writing, depends upon conduct. Without something in writing, deciding whether there is or isn’t an agency relationship can become a “liars contest.” It is this simple truth that caused the real estate industry to lobby agency disclosure laws into existence in all fifty states. A complete discussion of agency disclosure can be found in the Agency Disclosure section of this topic.
Notwithstanding agency disclosure statutes, the ease with which agency relationships can be created continues to cause dysfunction and paranoia in the industry. One place this dysfunction and paranoia manifests itself is on the selling side of transactions. Because selling side agency relationships are typically established without benefit of a service agreement or other writing, there is a great deal of confusion around when a selling side agency relationship begins. The lack of written understanding also leaves open to debate exactly what services the agent has undertaken to provide to the buyer and how long the agency relationship lasts.
Agency relationships, until very recently, have not been as big a problem on the listing side. All that has changed with the advent of what are called “limited service listings.” Limited service listings are listings in which the listing broker limits the services they will provide to the seller. Often, the services offered the seller is nothing more than filing the listing with the MLS. This manner of doing business leaves the seller more or less unrepresented. Buyer’s agents dealing with unrepresented sellers then have to worry about forming unintended agency relationships with the seller. Click here for information on dealing with unrepresented sellers.
If you think about it, you will see that much of the confusion surrounding agency relationships is generated because of the ambiguity surrounding the establishment and scope of agency relationships. Establishing and terminating agency relationships and controlling their scope have not been a priority in the industry, historically. The rise of buyer agency, and now limited service listings, is putting pressure on real estate professionals to better understand agency relationships. That understanding begins with establishing and terminating agency relationships.
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Oregon Administrative Rule 863-015-0200 Agency Relationships.
OAR 863-015-0200 defines and fleshes out by administrative rule the types of agency relationships allowed by statute. The rule makes it clear that an agency relationship can be created by agreement or conduct. Disclosed limited agency and designated agency relationships are defined in the rule more closely than in ORS 696.815, but no new obligations are imposed. The rule is strictly definitional as far as agency relationships are concerned. The rule also contains the full text of the Final Agency Disclosure form required by statute. Agency disclosure requirements are discussed in detail in the Agency Disclosure section of this topic.
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Oregon Administrative Rule 863-015-0205 Disclosed Limited Agency.
OAR 863-015-0205 is the administrative rule that controls disclosed limited agency relationships. Under the statute, such relationships can be established only by written agreement. Disclosed limited agency agreements must meet all of the requirements of OAR 863-015-210.
OAR 863-015-0205 allows for designated agency and even, under subsection (5), for true single agency relationships within the same company. The key to designated agency and in-company single agency is the control of confidential information. OAR 863-015-205(4) demands that principal brokers have “established procedures to assure that a licensee who represents one client will not have access to and will not obtain confidential information concerning another client involved in the same transaction.” For in-company single agency to work, the principal broker must also have divided supervision and control agreements in place so there is no overlapping supervision of both the listing and selling licensees.
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Oregon Administrative Rule 863-015-0210 Disclosed Limited Agency Agreement.
OAR 863-015-210 contains the administrative rule requirements for disclosed limited agency agreements. The required contents of such agreements are contained in the first two subsections of the rule. Subsection (3) of the rule sets out a statutorily sufficient form for disclosed limited agency agreements. The form is not “required” by the rule, but the rule does make it clear that use of the statutory form is evidence of having complied with the requirements of the rule. Not surprisingly, the statutory form is universally used in Oregon real estate. Click Here for a detailed discussion of Disclosed Limited Agency.
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Oregon Administrative Rule 863-015-0215 Initial Agency Disclosure Pamphlet.
OAR 863-015-0215 is the administrative rule that sets out the requirements for the statutorily required Initial Agency Disclosure Pamphlet. Agency disclosure is peculiar to real estate and its form and substance is controlled by the Real Estate Agency. Agency disclosure is discussed in detail in the Agency Disclosure section of this topic. Click Here for a copy of the Initial Agency Disclosure Pamphlet.
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Oregon Administrative Rule 863-015-0220 Written Company Policy.
OAR 863-015-0220 is the last of the administrative rules dealing with agency relationships. Under the rule, “each real estate business shall develop and maintain a written company policy that sets forth the types of relationships real estate licensees associated with the business may establish” It is in these policies that the principal broker must detail what agency relationships the broker’s agents will be allowed to form and how the broker will comply with the agency relationships set forth in OAR 863-015-0200. Chief among the required policies are those that will ensure protection of confidential information. Agents should be aware of the policies adopted by their company under these rules because the policies can affect the kinds of agency relationships the agent is allowed to form.
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Oregon Revised Statute 696.800 Agent’s Obligations – Definitions. If you want to know what the critical words of a statute mean, this is the place to look. In Oregon 696.800 you will find, among others, the definition of “agent,” “confidential information,” “disclosed limited agency,” and “real property transaction.”
ORS 696.800 defines more than a dozen terms used in the statutory regulation of agency relationships. You should keep ORS 696.800 in mind when reading the substantive provisions of the agency statutes. The definitions found in ORS 696.800 explain and qualify the words used in the substantive statutes. For instance, “real property” is defined in ORS 696.800(10) to not include leasehold. This definition can change a licensee’s obligation if the transaction involves a lease instead of a sale.
Among the most important definitions found in ORS 696.800 is one for “confidential information.” ORS 696.800(3) defines “confidential information” broadly to cover any information communicated to an agent by their client. This includes, but is not limited to price, terms, financial qualifications or motivation to buy or sell. There are two exceptions to this broad definition. Information a client instructs an agent to disclose is not confidential. Neither is information that must be disclosed to avoid a fraudulent misrepresentation.
The statutory definition of “confidential information” applies only to transactions involving “one to four residential units.” This exceedingly odd provision was inserted into the statutory definition at the request of commercial real estate brokers. Evidently, they believed that “confidentiality” in commercial transactions is different from confidentiality in residential transactions. Actually, confidentiality is a common law agency duty that attaches without regard to the object of the agency relationship.
What is and isn’t confidential information under the common law is a matter of circumstance but, generally, the definition is the same as the statutory one. That is, you start with the idea that everything communicated between client and agent is confidential. Under the common law, the only things that aren’t confidential are those the client wants disclosed or that the law otherwise requires disclosed.
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Oregon Revised Statute 696.805 Real Estate Licensee as Seller’s Agent; obligations. ORS 696.805 controls the establishment of listing side agency relationships and the duties imposed on an agent who represents only the seller.
ORS 696.805 establishes the statutory obligations of a seller’s agent. According to the statute, “[a] real estate licensee who acts under a listing agreement with a seller acts as the seller’s agent only.” This manner of defining “seller’s agent” links agency to a particular type of service contract called a “listing agreement.” Although signing a listing agreement is by far the most common way of establishing an agency relationship between a broker and a seller, it is certainly not the only way. A broker could, for instance, agree to advise a seller on listing price or offer to negotiate or provide other services without ever “listing” the property itself for sale. In such a case, the broker would certainly be the seller’s agent even though the relationship would be outside the definition of “seller’s agent.”
Whatever the wisdom of defining agency relationships on the listing side in terms of a listing, the main purpose of ORS 696.805 is to set out the duties of the agent when representing the seller. In all, the statute imposes ten (10) separate “obligations” or duties on the seller’s agent. These obligations, as well as the common law fiduciary duties, are discussed in depth in the Understanding Agency Duties section of this topic.
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Oregon Revised Statute 696.815 Representation of Both Buyer and Seller; obligations. ORS 696.815 controls the establishment of dual agency relationships and the duties imposed on an agent who represents both buyer and seller. It is in ORS 696.815 that disclosed limited and designated agency relationships are authorized and controlled.
ORS 696.815 establishes the statutory obligations of a licensee who represents both the buyer and the seller in a single transaction. According to the statute, a licensee can represent both the buyer and seller in a real estate transaction “under a disclosed limited agency agreement, with full disclosure of the relationship under the agreement.” What this somewhat clumsily worded statute says is that dual representation requires a specific agreement (the disclosed limited agency agreement) and that the agreement must contain a full disclosure of dual agency relationships. Such agreements are discussed in detail in the Disclosed Limited Agency section of this topic.
The duties of a disclosed limited agent are found in ORS 696.815(2)-(5). According to the statute, a disclosed limited agent owes the seller all the duties of a single agent under ORS 696.805 and owes the buyer all the duties of single agent under ORS 696.810. These duties are discussed in detail in the Understanding Agency Duties section of this topic.
In addition to the duties owed each client, a disclosed limited agent also has duties to both buyer and seller under ORS 696.815((2)(c). Additional duties are imposed on the agent and their principal broker under ORS 696.815(5). These special duties are discussed in detail in the Disclosed Limited Agency section of this topic.
In addition to defining disclosed limited agency and setting out the obligations of licensees in such relationships, ORS 696.815 also creates what is called “designated agency.” Designated agency is just the industry name for an agency relationship allowed by law. Nowhere in statute or rule will you find anything called “designated agency.” Under ORS 696.815(4) different agents supervised by the same principal broker can “continue to represent only the party with whom the broker has an agency relationship.”
In designated agency situations, the principal broker is the designated agent. The individual agents representing the buyer and seller continue to represent only the buyer and seller. They are not, however, single agents. That is the case because ORS 696.815(5) imposes additional duties on the designated agents. Under that provision, the agents representing the buyer and seller must disclose any conflict of interest to all parties, take no action adverse or detrimental to either party’s interests and obey the lawful instructions of both parties. These additional designated agency duties are discussed in detail in the Understanding Agency Duties section of this topic.
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