Chapter 8
Agency
A. DEFINITIONS
AGENT
An agent is a person who acts or works on behalf of another person (the principal) under a contractual relationship. Generally, an agent is a business representative whose duties are to generate, to modify, and to accept performance of or to terminate contractual obligations between a principal and third persons. Under Georgia’s Brokerage Relationships in Real Estate Transactions Act (BRRETA) 10-6A-3 (1) ‘Agency’ means every relationship in which a real estate broker acts for or represents another as a client by the latter’s written authority in a real property transaction.
PRINCIPAL
A principal is a person who appoints another (the agent) to act on the principal’s behalf. In real estate transactions in past years, the principal has been most often the seller or lessor of real property, who for the sake of convenience and in order to expedite the sale or lease of his or her property, enters into an agency agreement with a broker who will actually procure a buyer or lessee. Since the 1990’s, more buyers have begun to enter into principal-agent relationships with real estate licensees.
FIDUCIARY RELATIONSHIP
The relationship of principal and agent is a fiduciary relationship necessitating confidence and trust on the part of the principal as well
as requiring a high degree of good faith on the part of the agent. The agent must act with loyalty and with care in performing required duties. Under Georgia’s BRRETA, 10-6A-4.
(a) A broker who performs brokerage services for a client or customer shall owe the client or customer only the duties and obligations set forth in this chapter, unless the parties expressly agree otherwise in a writing signed by the parties. A broker shall not be deemed
to have a fiduciary relationship with any party or fiduciary obligations to any party but shall only be responsible for exercising reasonable care in the discharge of its specified duties as provided in this chapter and, in the case of a client, as specified in the brokerage engagement.
B. AGENCY IN REAL ESTATE
BROKERS AND AGENCY
In the past in Georgia a real estate broker normally acted as an agent for a principal to facilitate the sale, purchase, or lease of property. As such, real estate brokers served a specific purpose with powers limited to that function. Although brokers had in the past usually represented a seller or lessor, it is becoming more common for them to act as agents for buyers or lessees. In Georgia, a real estate broker must have an active license in order to act as an agent. The compensation paid to the broker acting as agent is the commission earned upon the successful sale, exchange, or lease of property. A broker may even earn a commission for an incomplete transaction if the broker has performed the contractually required services.
Under BRRETA, the Brokerage Relationships in Real Estate Transactions Act (see Chapter 8), 10-6A-3 (2) ‘Broker’ means any individual or entity issued a broker’s real estate license by thGeorgia Real Estate Commission pursuant to Chapter 40 of Title 43. The term ‘broker’ includes the broker’s affiliated licensees except where the context would otherwise indicate. 10-6A-3 (5) ‘Brokerage relationship’ means the agency and nonagency relationships which may be formed between the broker and the broker’s clients and customers, as described in this chapter.
A broker may elect not to become an agent, but instead treat a prospective seller, buyer, landlord, or tenant as a customer. 10-6A-3 (8) ‘Customer’ means a person who is not being represented by a real estate broker in an agency capacity pursuant to a brokerage engagement but for whom a broker may perform ministerial acts in a real estate transaction pursuant to either a verbal or written agreement. 10-6A-3 (12) ‘Ministerial acts’ means those acts described in Code Section 10-6A-14 and such other acts which do not require the exercise of the broker’s or the broker’s affiliated licensee’s professional judgment or skill.
In such a case, the broker and the customer have a Brokerage Relationship that is a non-agency relationship. If the broker gives advice or opinions, he or she risks creating the impression of an agency relationship. An unintended agency relationship may develop, and a “customer” who suffers damages in a real estate transaction might sue, alleging that an agency relationship developed and that the broker owed client-level agency duties.
TRANSACTION BROKER
Per BRRETA 10-6A- 3 (14) ‘Transaction broker’ means a broker who has not entered into a client relationship with any of the parties to a particular real estate transaction and who performs only ministerial acts on behalf of one or more of the parties, but who is paid
valuable consideration by one or more parties to the transaction pursuant to a verbal or written agreement for performing brokerage services.
For example, the Listing Broker who engages the Seller as a Client may have a Buyer Customer. In this case, the Broker is the Seller’s Agent, not a Transaction Broker. Similarly, the Selling Broker who engages the Buyer as a Client will be the Buyer’s Agent, not a Transaction Broker. If a Broker is not representing either the Buyer or the Seller as a Client in the given transaction, he does not have an Agency Relationship with any party, and yet he may do ministerial acts and be called a Transaction Broker.
DUAL AGENCY
A dual agency arrangement is one in which an agent acts for more than one party in a particular transaction. BRRETA defines under
10-6A- 3 (10) ‘Dual agent’ means a broker who simultaneously has a client relationship with both seller and buyer or both landlord and tenant in the same real estate transaction.
Dual agency requires the knowledge and consent of all parties involved, and the agreement for such a relationship must be in writing. Without proper disclosure of a dual agency, the broker may not earn a commission. The broker may be liable to one or more parties for actual and/or punitive damages; and in some circumstances, one or more parties to the transaction may elect to rescind the transaction. BRRETA provides specific and stringent guidelines to follow for performing under Dual Agency. BRRETTA 10-6A-12 states:
(a) A broker may act as a dual agent only with the written consent of all clients. Such written consent shall contain the following:
(1) A description of the transactions or types of transactions in which the broker will serve as a dual agent;
(2) A statement that, in serving as a dual agent, the broker represents two clients whose interests are or at times could be different or even adverse;
(3) A statement that a dual agent will disclose all adverse material facts relevant to the transaction and actually known to the dual agent to all parties in the transaction except for information made confidential by request or instructions from another client which
is not allowed to be disclosed by this Code section or required to be disclosed by this Code section;
(4) A statement that the broker or the broker’s affiliated licensees will timely disclose to each client in a real estate transaction the nature of any material relationship the broker and the broker’s affiliated licensees have with the other clients in the transaction other
than that incidental to the transaction. For the purposes of this Code section, a material relationship shall mean any actually known personal, familial, or business relationship between the broker or the broker’s affiliated licensees and a client which would impair
the ability of the broker or affiliated licensees to exercise fair and independent judgment relative to another client;
(5) A statement that the client does not have to consent to the dual agency; and
(6) A statement that the consent of the client has been given voluntarily and that the engagement has been read and understood.
(b) Upon the client signing a written consent meeting the requirements of this Code section, the consent of the client to dual agency shall conclusively be deemed to have been given and informed.
(c) No cause of action shall arise on behalf of any person against a dual agent for making disclosures allowed or required by this chapter and the dual agent does not terminate any agency by making such allowed or required disclosures.
(d) In the case of dual agency, each client and broker and their respective licensees possess only actual knowledge and information. There shall be no imputation of knowledge or information among or between the clients, brokers, or their affiliated licensees.
(e) In any transaction, a broker may without liability withdraw from representing a client who has not consented to a disclosed dual agency at any time prior to the existence of the dual agency. Such withdrawal shall not prejudice the ability of the broker to continue to represent the other client in the transaction, nor limit the broker from representing the client in other transactions not involving a dual agency. When such withdrawal as contemplated in this subsection occurs, the broker may receive a referral fee for referring a client to a broker employed by a different real estate brokerage firm.
(f) Every broker shall develop and enforce an office brokerage relationship policy among affiliated licensees which either specifically permits or rejects the practice of disclosed dual agency, which office brokerage relationship policy shall be disclosed pursuant to Code Section 10-6A-10 and paragraph (1) of subsection (a) of this Code section. 10-6A-13.
DESIGNATED AGENCY
Designated Agency is an agency relationship under which two different Agents of the same Broker represent two different clients with opposing interests in the same transaction. This is distinct from Dual Agency, in which the same AGENT (same person) is representing two different clients with opposing interests in the same transaction.
BRRETA defines under 10-6A-3 (9) ‘Designated agent’ means one or more licensees affiliated with a broker who are assigned by the broker to represent solely one client to the exclusion of all other clients in the same transaction and to the exclusion of all other
licensees affiliated with the broker.
Under BRRETA 10-6A-13.
(a) A broker may assign directly or through the adoption of a company policy different licensees affiliated with the broker as designated agents to exclusively represent different clients in the same transaction. In addition, the broker may delegate such assignment
responsibility to other management level personnel acting under a company policy. Any company policy adopted to fulfill the requirements of this subsection shall contain provisions reasonably calculated to ensure each client is represented in accordance with the requirements of this chapter. A designated agent of a seller, landlord, buyer, or tenant shall owe his or her client the duties set forth in Code Section 10-6A-5, 10-6A-6, 10-6A-7, or 10-6A-8 of this chapter, respectively.
(b) If a broker appoints different designated agents in accordance with subsection (a) of this Code section, neither the broker, the broker’s licensees, nor the real estate brokerage firm shall be deemed to be dual agents.
(c) When designated agents are appointed in accordance with subsection (a) of this Code section, the broker, the clients, and the designated agents shall be considered to possess only actual knowledge and information; there shall be no imputation of knowledge or
information between and among the broker, the designated agents, and the clients. Designated agents shall not disclose, except to the designated agent’s broker, information made confidential by request or instruction of the client whom the designated agent is
representing, except information allowed to be disclosed by this Code section or required to be disclosed by this chapter. Unless required to be disclosed by law, the broker of a designated agent shall not reveal confidential information it receives from either the
designated agent or the client with whom the designated agent is working. For the purposes of this Code section, confidential information shall be deemed to be any information the disclosure of which has not been consented to by the client that could harm the negotiating position of the client.
(d) The designation of one or more of a broker’s affiliated licensees as designated agents shall not permit the disclosure by the broker or any of the broker’s affiliated licensees of any information made confidential by an express request or instruction by a party prior to
the creation of the designated agency. The broker and the broker’s affiliated licensees shall continue to maintain such confidential information unless the party from whom the confidential information was obtained permits such disclosure by subsequent word or
conduct, or such disclosure is required by law. No liability shall be created as a result of a broker and the broker’s affiliated licensee’s compliance with this subsection.
AGENCY COUPLED WITH AN INTEREST
An agency coupled with an interest exists when an agent possesses an interest in the subject of the agency such as the land for which the agent has agreed to find a buyer. A contract creates the agency, and it can be terminated with the consent of both parties but not by the principal alone. For example: Mr. Aaron and Mr. Blake are co‑owners of a tract of land through a limited partnership. Mr. Blake, who is a licensed broker, has agreed to act as agent for the sale of the land. Mr. Blake has an agency with an interest that cannot be terminated except by mutual consent.
LICENSING REQUIREMENTS
A broker or salesperson must be licensed and adhere to the requirements of Georgia’s real estate license law and to the rules and regulations of the Georgia Real Estate Commission. Violations of state law or regulations may result in disciplinary action and possible revocation of a license. The broker, as agent, must also act within the requirements of local municipal and county ordinances and federal law.
APPOINTMENT OF AGENT
Under common law, a principal‑agent relationship arises whenever one person authorizes another to act for him or her or subsequently ratifies the actions of another on his or her behalf. A principal’s authorization need only be as formal as that required for the principal to act alone. Under Georgia’s BRRETA, (4) ‘Brokerage engagement’ means a written contract wherein the seller, buyer, landlord,or tenant becomes the client of the broker and promises to pay the broker a valuable consideration or agrees that the broker may receive a valuable consideration from another in consideration of the broker producing a seller, buyer, tenant, or landlord ready, able, and willing to sell, buy, or rent the property or performing other brokerage services.
Brokerage engagement contracts establishing the principal‑agent relationship between a seller and a broker are listing contracts and are discussed more fully in a later chapter. Increasingly, buyers and tenants are appointing brokers as agents to assist them in locating property. When a buyer appoints a broker in this capacity, the parties create a contractual relationship and/or a principal‑agent relationship. BRRETA places emphasis on the point at which a brokerage engagement occurs because at that point, a prospect ceases to be a customer and becomes a client. The broker owes larger duties to a client, so it is important for all licensees to be thoroughly familiar with the “brokerage engagement” provisions of BRRETA.
SCOPE OF AUTHORITY
A broker as agent must act only within the authority granted by the principal. If an agent exceeds authority and the principal does not later ratify the unauthorized acts, the agent may be held personally liable for those actions. A broker as agent is specifically prohibited
from buying or selling for the broker’s own account without full disclosure to the principal and the principal’s express consent. A broker as agent may not obtain any advantage over a principal by misrepresentation, concealment, or any other means.
A broker as agent of a principal‑seller must proactively disclose Material Facts, and may not misrepresent facts or conceal defects from the buyer. For example, an agent with knowledge of latent (hidden) defects in property must reveal this information to a buyer. BRRETA defines 10-6A-3 (11) ‘Material facts’ means those facts that a party does not know, could not reasonably discover, and would reasonably want to know. A broker as agent must not under any circumstances commingle personal funds with those of the principal. Brokers must deposit in an escrow account, money accepted on behalf of a principal, and must also keep accurate escrow account records.
COOPERATION BETWEEN BROKERS
Agreements between brokers to cooperate in the sale of property for a division of the commission are common. Although Georgia law does not require that such agreements be in writing, it is beneficial for all parties concerned to have a written agreement. The brokers may incorporate any cooperative agreement in the real estate contract. However, it is better to have a separate cooperation agreement since that agreement will settle the commission split and other issues between the brokers before the parties begin negotiations.
Brokers in Georgia may also cooperate with licensed brokers in other states within certain limits. For example, out‑of‑state brokers may participate in real estate transactions in Georgia through referral of clients or prospects to Georgia licensees, by becoming nonresident licensees, or through written agreements with Georgia brokers. Out‑of‑state brokers must follow Georgia law.
AFFILIATION CONTRACTS BETWEEN LICENSEES
O.C.G.A. § 43‑40‑18(c)(9) and the Commission’s Rules require that a broker and each affiliating licensee enter into a written agreement at the time of their affiliation. The written agreement may create either an employer/employee or broker/independent-contractor relationship. Each type of relationship carries with it unique tax consequences under federal law. In 1982 Congress amended the Internal Revenue Code to provide for three specific requirements in order to establish an individual’s independent contractor status for federal tax purposes. These requirements are:
| (a) | a current real estate license; | |
| (b) | a written contract (the affiliation agreement) with the broker containing the following clause: The sales associate will not be treated as an employee with the respect to the services performed by such sales associate as a real estate agent for federal tax purposes; and |
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| (c) | ninety percent or more of the licensee’s remuneration must be based on sales production, not on the number of hours worked. | |
While these written agreements may contain any subject matter which the parties desire, state law requires that they include provisions on how the broker will compensate the affiliating licensee for his or her work during the affiliation including work begun but not completed before termination of that affiliation and what accounting is to take place when the affiliated licensee decides to leave the broker.
Rule 520‑1‑.07 (5) states that upon leaving a firm the affiliated licensee must account to the broker for prospects which the licensee received in writing during the time he or she was affiliated with the broker, for property the broker owns or for which the broker is responsible, for listings on which the affiliated licensee was working, and for various other records and property used in listing or selling real estate. Familiarity with the provisions of this rule is important to brokers and affiliated licensees when they are drafting or entering into contracts expressing the terms of their affiliation.
The Commission often hears of problems in the termination of relationships regarding compensation for an affiliated licensee for work begun but not completed prior to their leaving the broker. GREC Rules simply require that the broker and the sales associate enter into an agreement expressing the terms of that compensation. Since it imposes no standards, they may be whatever the parties agree to in the contract. As with any contract, if licensees do not fully understand it, they may wish to seek legal advice. The Commission suggests that licensees consider the following situations when drafting or signing this agreement:
| (a) | listings secured by the sales associate but not sold prior to leaving the broker; | |
| (b) | listings secured by the sales associate and under a sales contract but not closed prior to his or her departure; | |
| (c) | sales contracts secured by the affiliated licensee but not closed prior to leaving; | |
| (d) | sales contracts secured after leaving the broker but on property shown to a prospect while affiliated with the former broker; and | |
| (e) | prospects referred to a cooperating firm out of the city who purchase or list property after the affiliated licensee has left the broker. |
Paragraph (5) of Rule 520-1-.07 identifies another area that licensees may want this agreement to address. It provides that whenever a licensee decides to terminate an affiliation with a firm, the licensee may not have any contact with any of the firm’s clients that the licensee is serving under a listing, a management agreement, or other brokerage engagement until the expiration of the contract, unless the broker or qualifying broker has expressly approved such contact in writing. For example, suppose a licensee decides at the first of the month to transfer to a new firm. If that licensee had secured a listing for the firm that will expire at the end of the month, the licensee may have no contact with the seller about that licensee’s leaving the firm until after the listing has expired, unless the broker has given express written approval for such contact.
The licensees may cover other situations as needed in this agreement. The Commission requires that such written agreements exist, but it does not enforce the terms of those agreements. When a licensee does not believe that the other party is meeting the terms of the agreement, his or her proper recourse is to the courts or other arbitrating bodies. Thoughtful consideration in drafting and signing such agreements can eliminate many problems and headaches for licensees.
When an affiliated licensee presents a release form or change application, the broker must sign it immediately. The broker cannot refuse to sign the release form for any reason. [Rule 520-1-.07(5) (b) ] Disputes over whether the terms of the employment or affiliation agreement are met must be handled completely aside from the signing of the release.
TERMINATION OF AGENCY
Although the duration of an agency agreement depends on the particular circumstances surrounding the agreement between the principal and agent, generally:
| (a) | the typical principal‑agent relationship is revocable at will by either party; however, a party who terminates and agency relationship may be liable for damages in a lawsuit for breach of contract; | |
| (b) | an agency coupled with an interest is not revocable at will by the principal, and if the principal revokes in this manner, the agent may recover damages; | |
| (c) | an agency is terminated by operation of law in limited circumstances such as death or mental incapacity of the parties, the license revocation of the broker, dissolution of a corporate broker, or incorporation of a sole proprietorship; | |
| (d) | agency relationships are limited to a specific period of time in brokerage engagements; | |
| (e) | agency arrangements cease automatically upon the completion of the agent’s duties, such as the final sale of real property; and | |
| (f) | agency arrangements that do not specify a time for termination, end in one year (see BRRETA). |
C. LICENSEES ACTING AS PRINCIPALS
LICENSEES SELLING THEIR OWN PROPERTY
GREC Rule 520-1-,11 requires licensees who sell property that they own personally to make certain disclosures to the public, to follow certain advertising guidelines, and to account for trust funds properly.
| (a) | LICENSEES SELL REAL PROPERTY AND IT IS NOT LISTED WITH A REAL ESTATE FIRM – When a real estate licensee wishes to sell his or her real property and not list it for sale with a real estate company, the licensee must follow these guidelines: | ||
| (1) | an active licensee must notify his or her broker in writing that he or she intends to sell personally owned property; and the broker will determine whether to require the licensee to list the property with the firm or to allow the licensee to sale the property outside the firm, basing that decision upon company policy and the licensee’s affiliation agreement with the company; | ||
| (2) | if an active licensee plans any written advertising of the sale, he or she must notify the broker in writing and must obtain both the broker’s written consent to advertise in his or her own name as well as the broker’s approval of the wording of the advertisement; | ||
| (3) | active or inactive licensees must have in any advertisement done in their own names for property that they own the phrase, “(seller, buyer, landlord, or tenant) is a licensed real estate agent;” | ||
| (4) | if an active licensee is marketing the property individually with the broker’s consent, he or she must deposit any earnest money received from prospective buyers in a trust account approved by the broker and registered with the Commission or if the licensee is inactive and marketing the property individually, he or she must deposit any earnest money received from prospective buyers in a trust account designated by the bank and | ||
| (5) | all licensees whether active or inactive must insert a clause into any sales contract for his or her property disclosing their licensed status to the buyer. | ||
| When the licensee’s firm is not acting as a broker, he or she must not use the firm’s form contracts or represent in any way that the firm is acting as a broker in the sale or holding the earnest money. However, the active licensee’s broker retains responsibility for the licensee’s actions whether or not the broker is directly involved in the transaction. | |||
| (b) | LICENSEES SELL PROPERTY THEY OWN WHICH IS LISTED WITH A REAL ESTATE FIRM – When licensees sell property that they own personally by listing it for sale with a brokerage firm, the licensee must follow these guidelines: | ||
| (1) | active licensees must notify their broker in writing of their intention to sell the property through their firm, and the broker will determine what commissions, if any, the licensee must pay based on company policy and the affiliation agreement; | ||
| (2) | the licensee must advertise the property in the name of the brokerage firm; | ||
| (3) | the licensee must turn over to the broker any earnest money collected on any contracts; and | ||
| (4) | all licensees whether active or inactive must insert a clause into any sales contract for his or her property disclosing their licensed status to the buyer. | ||
| When an active licensee wishes to sell property that he or she owns personally by listing it for sale with another company, he or she must notify his or her broker in writing of the intention to sell the property and to list it with another brokerage firm. The broker will then decide how to handle the transaction based on company policy and the affiliation agreement. Of course any participation in the commission for the licensee must be paid through his or her broker. | |||
| (c) | A LICENSEE COLLECTING PAYMENTS DUE ON PROPERTY HE OR SHE OWNED AND SOLD – If the buyer is to pay the licensee installment payments and the licensee is obligated to pay a mortgage, taxes, insurance or some other charge against the property, the licensee must deposit into a trust account those parts of any payments received which are necessary to meet those obligations. The licensee may not claim or use any part of such payments until he or she has paid any obligation due on the property. For example, suppose a real estate licensee sells her property on a wraparound mortgage. The buyer pays her $500 monthly and she owes $400 monthly on the original mortgage. The licensee must deposit at least $400 into a trust account. She may not use any of the $500 payment she received until she pays the $400 first mortgage payment. | ||
LICENSEES WHO OWN RENTAL PROPERTY
As with buying and selling their own property, licensees who own rental property must follow guidelines concerning leasing of the property, handling trust funds, advertising, and disclosures.
| (a) | LICENSEE OWNING/ MANAGING RENTAL PROPERTY OUTSIDE OF A REAL ESTATE FIRM – If a licensee owns rental property and wishes to manage the property himself or herself, the licensee must follow these guidelines: | ||
| (1) | an active licensee must notify his or her broker in writing that he or she wishes to manage personally owned rental property; and the broker will determine whether to require the licensee to list the property with the firm or to allow the licensee to manage the property outside the firm, according to company policy and the licensee’s affiliation agreement with the company; | ||
| (2) | if an active licensee plans to advertise the property for rent, he or she must notify the broker in writing and must obtain both the broker’s written consent to advertise in his or her own name and the broker’s approval of the wording of the advertisement; | ||
| (3) | active and inactive licensees must include in any advertisement in their own names for property that they own the phrase, “(seller, buyer, landlord, or tenant) is a licensed real estate agent”; | ||
| (4) | if an active licensee is managing his or her property individually with the broker’s consent, he or she must deposit any security deposits received from tenants in a trust account approved by the broker and registered with the Commission. If the licensee is inactive and managing his or her property individually, he or she must deposit any security deposits received from tenants in a trust account so designated by the bank; and | ||
| (5) | all licensees, both active and inactive, must insert a clause into any lease contract when they are either landlord or tenant, disclosing their licensed status to the other party. | ||
| When the licensee’s firm is not acting as a broker, he or she must not use the firm’s form contracts or represent in any way that the firm is acting as a broker in managing the property or holding the security deposit. However, the active licensee’s broker is still responsible for the actions of the licensee even though the broker is not directly involved in the transaction. | |||
| (b) | A LICENSEE’S RENTAL PROPERTY IS MANAGED BY A REAL ESTATE FIRM – If a licensee owns rental property and wishes to have a real estate firm manage it, he or she must follow these guidelines: | ||
| (1) | active licensees must notify their broker in writing of their intention to rent the property, and the broker will determine what commissions, if any, the licensee must pay based on company policy and the affiliation agreement; | ||
| (2) | licensees will enter into a management agreement with the real estate company concerning the management of the property and covering such things as the rental amount, collection of rent, security deposits required, reporting on the property, and the fee charged for its management; | ||
| (3) | all advertising of the property must be in the name of the brokerage firm; | ||
| (4) | the broker must deposit all rent collections and security deposits into a trust account and disburse all rental proceeds according to the management agreement; and | ||
| (5) | all licensees whether active or inactive must insert a clause into any sales contract for his or her property disclosing their licensed status to the tenant. | ||
| If an active licensee wishes to have another company manage rental property that he or she owns, he or she must notify his or her broker in writing of the intention to rent the property and to have another brokerage firm manage it. The broker will then decide how to handle the transaction based on company policy and the affiliation agreement. | |||
INACTIVE LICENSEES ACTING AS PRINCIPALS
As noted above, when a license is on inactive status, the licensee must still follow certain guidelines.
| (a) | CONTRACTS – The licensee must disclose his or her licensed status in the contract if he or she is buying, selling, or leasing real property. The law requires the disclosure whether the licensee is handling the transaction through a real estate firm or on his or her own. | |
| (b) | ADVERTISING – When a licensee advertises property that he or she owns and the sale or lease of the property is not being handled by a real estate firm, the licensee must disclose his or her licensed status in the advertisement. The advertisement must include the phrase “(buyer, seller, landlord, or tenant) is a licensed real estate agent.” If a real estate firm is handling the sale or lease of the property, the advertisements must be approved by the firm and advertised in the name of the firm. | |
| (c) | EARNEST MONEY AND OTHER TRUST FUNDS – Obviously, an inactive licensee is not affiliated with a broker and therefore has no broker to approve and register a trust account. When an inactive licensee acting as a principal receives trust funds such as earnest money or security deposits, he or she must deposit those funds in a trust account designated at the bank as a trust or escrow account. Of course, if the licensee uses a real estate firm to buy, sell, or lease the property, he or she must give the trust funds to the appropriate firm for deposit in that firm’s trust account. |
LICENSEES ACTING IN A DUAL CAPACITY
Dual capacity may involve a broker acting as both broker and buyer or broker and seller in the same transaction. A broker must disclose his or her position in writing to the other party, thereby assuring the public with whom the broker deals of the protection afforded under the licensing law. In 1976 and 1977, the Attorney General issued opinions affirming that when a licensee is a principal in a real estate transaction, he or she is required to act as a regulated licensee. In the 1976 opinion stating that brokers have to deposit into a trust account security deposits collected on property owned by the broker, he wrote:
| Furthermore, it is extremely doubtful that there was an intent (by the General Assembly) to provide a loophole whereby a person could represent himself to the public as a broker and still claim immunity from the restrictions placed upon brokers. Status as a broker implies that the person holding such status is regulated by certain laws designed to protect the public; namely the provisions of Ga. Code Ch. [43-40]. Consequently, it was certainly not contemplated that a person could claim that status when it is to his benefit and disavow that same status when it operates to his detriment. (Opinion Attorney General 76-101) |
D. SPECIAL SITUATIONS
TRANSACTION BROKER
A transaction broker is a broker or affiliated licensee who acts as a real estate broker in a transaction but does not enter into an engagement agreement with any seller, buyer, landlord, or tenant. For information on engagement agreements, see Chapter 9 of this manual, “The Brokerage Engagement Agreement,” or see Section 10-6A-3 (a)(4) of BRRETA.
A transaction broker treats all parties to the transaction as customers not as clients. This means that the transaction broker is not representing any party to the transaction and is acting merely as a facilitator to the transaction. Since the transaction broker did not enter into an engagement agreement, presumably he or she would not owe any Client-level duties to any party. However, it is important that a licensee acting as a transaction broker be aware that if the broker does not enter into a brokerage engagement agreement with a customer, the customer may still get the impression that the broker “represents” them.
This can result in an agency relationship that is unintended by the broker. Courts may give more weight to the impressions of the customer/client than to the impressions of the broker. One situation in which the broker may act as a transaction broker would be in procuring a buyer in a FSBO (for sale by owner) transaction. Taking care not to create an unintended agency situation is important in any situation where the broker intends to act as a transaction broker.
(c) Copyright 2006 Georgia Real Estate Commission and Appraisers Board. All rights reserved.