The Dangers of Dual Agency
With breach of fiduciary duty claims continuing to top the list for legal risks facing real estate brokers and agents, dual agency and the risks and responsibilities associated with the same remain a critical issue for real estate agents. This is because fiduciary claims frequently arise in the context of dual agency—whether because of undisclosed dual agency or because of a dispute relating to specific duties owed. Late last year a California court ruled in a high-profile case that a seller’s agent owes certain fiduciary duties to the buyer of real estate when the buyer’s and seller’s agent are licensed under the same broker. The buyer signed dual agency disclosure forms, but the court nonetheless concluded that the seller’s agent had a duty to disclose information relating to the square footage of the home to the buyer. Although the seller’s agent may have had non-fiduciary duties of disclosure in any event, the California decision has firms nationwide again considering the risks associated with dual agency relationships.
In North Carolina, a licensed real estate agent is not permitted to act for more than one party in a transaction without disclosing to all parties the nature of the dual agency relationship. The North Carolina Real Estate Commission Rules likewise provide that a broker or brokerage firm representing more than one party in a transaction must obtain written consent to so act. In North Carolina, it is permissible for a firm representing the buyer and seller to designate an individual broker to represent only the interests of the seller and another individual broker to represent only the interests of the buyer, under certain conditions and as long as the buyer and seller expressly agree. From a practical standpoint, it is also important to document that understanding in writing.
Dual agency relationships have the potential to create resentment and lead to litigation. This risk can be avoided by fully discussing the concept of dual agency with your clients before obtaining their signatures on the dual agency addendum. Agents should always explain the limitations they will face in advising and negotiating as a result of the dual agency relationship, and obtain the client’s written consent before listing or showing a property on behalf of seller or buyer. When in doubt or if questions arise, call the Teague Campbell Real Estate team and we will help you avoid the risk before it occurs.
 Horiike v. Coldwell Banker Residential Brokerage Company et, al., 1 Cal. 5th 1024 (2016).