Law of Agency Duties
September 18, 2019
Client Level Duties
Let's discuss the law of agency duties, specifically client level duties versus customer level duties. First off, what does a licensee owe to a client?
There are six duties owed to a client. They are as follows:
- Number one is a duty of care. Care means a licensee should be knowledgeable and skillful.
- Number two is obedience, which means a licensee must follow the instructions of the client assuming they are legal instructions.
- The third client level duty is accounting. The licensee does owe accounting to the client for their actions, earnest money received and any documents.
- Number four is loyalty, which is the term fiduciary. A licensee always owes a fiduciary obligation to the client, meaning the licensee must do what is always in the best interest of the client.
- The fifth duty owed to a client is disclosure, and here we mean full disclosure. Anything that the licensee is aware of that would affect their client's decision must be disclosed. So, if the licensee represents the seller, anything that would benefit the seller or affect the seller's decision would need to be disclosed. Likewise, if a licensee represents a buyer, then the full disclosure would be owed to the buyer client.
- The sixth client level duty is confidentiality. A licensee must keep all information received from a client confidential.
Customer Level Duties
Now let’s contrast that with customer level duties and there are just three. Our acronym is FHA, which stands for fair, honest and accurate. A licensee must be fair with the customer, must be honest and must be accurate, specifically regarding disclosing material defects about their property such as roof leaks or basement leaks or underground storage tanks. Even if the defect is a latent defect, that is a hidden defect, those defects must be disclosed to any possible customers.
Environmental Issues and Disclosures
Several environmental issues need to be addressed here.
- Let's first talk about lead-based paint. For any residential property built prior to 1978, licensees must give a lead-based paint disclosure to the buyer. This would include any reports of lead-based paint, or if the seller has knowledge of lead-based paint, those type of items. Those disclosures that the buyers are given must be kept for three years by the licensee or the brokerage firm.
- Radon gas is also another environmental issue that must be disclosed to buyers. Radon gas are natural gases in the ground that could possibly cause cancer, which is why it is a required disclosure.
- Mold is also an issue that must be disclosed to customers. Mold occurs when there are air-tight windows and the house or the property cannot breathe. The best way to avoid mold is to make sure we have nice air flow throughout the house.
- Asbestos is also a type of product that was used years ago to insulate pipes. Asbestos was shown to be cancer causing, so the best way to deal with older homes that have asbestos insulation is to simply encapsulate the asbestos pipes and seal it as opposed to removing it.
There's also a law called CERCLA, which stands for the Comprehensive Environmental Response, Compensation, and Liability Act. This law is basically there to prevent environmental illegal dumping on property. The Environmental Protection Agency, or the EPA, is the one in charge of supervising this law and trying to prevent illegal environmental dumping on property. Finally, a stigmatized property is a property where an adverse event has taken place, such as a murder or a suicide.
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