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Dear Virginia Licensee, The attached material covers the “Agency Law” approved by the Commonwealth of Virginia for one hour mandated of continuing education for the correspondence course. After you read through it, complete the test, fill out the answer sheet and test certificate sheet and return to us. We will then grade the test and if you received a 70% or better overall score, we will notify the Virginia Real Estate Board that you have satisfied the education requirements for license renewal. If you do not get 70%, we will notify you of the need to re-test. The booklet contains: 1. a review of agency law 2. agency case studies and answers 3. agency quiz 4. answer/test certification sheet If you have any questions as you review the materials, you may request to speak to an instructor by calling 703-560-9044 (Northern Virginia), 757-473-1500 (Hampton Roads), 804-346-2234(Richmond) or 800-543-3365 (Roanoke). Return to us ONLY the answer sheet and test certification sheet along with your notarized affidavit with your payment of $10.50 by check, Visa, Master Card or Discover. We will send your name and your Virginia license number to the Real Estate Board via email at least semi-monthly. Please do not wait until the last minute to return the information to us. We will also send you a certificate stating that you have completed the required hours. Be sure to retain the certificate because the Real Estate Board could request a certified copy. If you have any questions, please call one of the numbers listed above. Good luck in your studies! Sincerely, Jill Malloy Northern VA Training Director

07/07

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Agency Law

Virginia real estate licensees are released from the concepts of common law agency. Virginia’s agency law specifically abrogates the common law of agency and implied fiduciary duties. In its place, the law defines a brokerage relationship and sets out the parameters for agency representation. This legislation paved the way for effective dual representation and eliminated the implied fiduciary duties. It defines the exact relationship and duties a real estate licensee owes to clients and customers without fiduciary standards. Background on agency law: A true agent is one who has the power to bind the person he represents (called the principal). An example would be a trustee or executor of a last will and testament. With the power to bind the principal comes a duty to unselfishly represent and defend that principal, to the exclusion of all others, including yourself. Those duties include care, obedience, accounting, loyalty and disclosure. However, a real estate agent is not a true agent with power to bind either the buyer or seller. Unfortunately, the real estate agent was held to the fiduciary duties without the powers. An agency relationship may also arise from a parties’ actions, not his words. You can be an unintentional agent if the party has come to rely upon you. Implied fiduciary duties are what gave real estate agents problems with dual agency representation. Common law agency principles suggest one party cannot represent two different and opposing sides of the transaction unless the two parties agree to the dual representation. This creates a distinction between disclosed and undisclosed dual agency. Undisclosed dual agency is treated as fraud. Fraud means that one of the parties may rescind the contract. The buyer sues the agent for fraud and the seller sues the agent because the transaction failed. The agent is liable for damages to both parties and may also lose a license. Even in disclosed dual agency, courts struggle with the concept of representing more than one party in the transaction. What degree of disclosure is adequate? Did the parties really understand the implications? In all cases, any doubt will be resolved against the licensed professional whose duty it was to protect the client.

Fiduciary Responsibilities The law specifically abrogates common law agency and sets out specific duties. Those are an agent’s only duties unless he has agreed to do more in the contract establishing the brokerage relationship. Real Estate Board Regulations The law requires Real Estate Board Regulations be consistent with the statute.

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Disclosure of Brokerage Relationships Requires disclosure only to those who are not clients. Verbal disclosure must be made “upon having substantive discussions about a specific property or properties.” Written disclosure is made “at the earliest practical time, but not later than when specific real estate assistance is first provided.” For lease transactions, disclosure can be in the application or lease, whichever first occurs. Disclosure of Property Condition Licensees must treat customers honestly and not give them false information but need only

disclose that which is actually known. Vicarious Liability The agent may rely on what the client says unless he has knowledge the information is false. No knowledge or information is imputed. Vicarious liability for the actions or statements of others is eliminated.

Dual Agency The law specifically allows dual agency, provides a disclosure form and establishes the “Designated Representative.” The Broker has the option to assign Designated Representatives to represent each side of the transaction without either of them being considered dual agents. Withdrawal of Representation You can withdraw from dual agency and continue to represent the other side to the transaction. Ministerial Acts The law specifically allows one to perform ministerial acts for the other party without becoming their agent. Ministerial acts are routine acts that do not require discretion or judgment by the licensee. Examples might be meeting the termite inspector or appraiser, or picking up and delivering papers. An example of a non-ministerial act: If the practice in your area is for the buyer to select the termite inspector, an agent representing the seller would not do it for him because it involves discretion and judgment. FAIR HOUSING The law requires an agent to obey all applicable fair housing laws. AGENCY

1. Expressed Agency a) Parties formally state their intention to create agency

2. Implied Agency a) Parties act as if there is a representation agreement

3. Roles & Responsibilities of Agents a) Care – the agent must exercise a reasonable degree of care b) Obedience – the agent must act in good faith and must obey the principal’s lawful

instructions c) Accounting – the broker must account for all pertinent funds and documents

placed in his or her care d) Loyalty – the principal’s interests must come before the agent’s e) Disclosure – the agent must keep the principal fully informed of all facts f)

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4. Terminating Agency a) Performance by the parties b) Expiration of the terms of the agency c) Mutual agreement by all parties to the contract d) Death or incapacity of either party e) Destruction or condemnation of the property f) Cancellation by broker; revocation by principal g) By operation of law (bankruptcy of owner or broker, eminent domain, etc.) h) Breach by one of the parties (in which case the breaching party might be held

liable for damages) AGENT DUTIES The Virginia law defines twelve basic duties expected of all agents. These duties may be expanded by the contractual terms of the brokerage relationship. All Licensees whether representing buyers, sellers, tenants or landlords shall:

1. Disclose their brokerage relationships to persons who are not their clients.

2. Perform according to the terms of their brokerage relationship. A brokerage relationship is a contractual relationship between a client and a real estate licensee, engaged by the client, to procure a seller, buyer, option, optionee, tenant or landlord.

3. Seek a property sale or lease at a price and with terms acceptable to the client.

However, the licensee is not obligated to seek other properties or offers to purchase or lease while the property or client is subject to a contract of sale or lease, unless agreed to as part of the brokerage relationship or otherwise provided.

4. Present in a timely manner all written offers or counteroffers to and from the client,

even when the property or client is already a party to another contract or lease.

5. Disclose to the client all material facts related to the property or concerning the transaction of which the licensee has actual knowledge.

6. Account for, in a timely manner, all money and property received in which the client

has or may have an interest.

7. Keep confidential all personal and financial information received from the client and any other information that the client requests be maintained confidential unless otherwise provided by law.

8. Exercise ordinary care, as opposed to the fiduciary standard of care.

9. Comply with all provisions of Virginia Law, all applicable fair housing statutes and

regulations, and all other applicable statutes and regulations that are not in conflict with Virginia Law.

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10. A licensee engaged by a client may, unless prohibited by law or brokerage relationship, assist the other party or prospective other party by performing ministerial acts. Ministerial acts means those routine acts that do not involve discretion or the exercise of the licensee’s judgment. They do not violate the licensee’s brokerage relationship with the client unless expressly prohibited by the terms of the brokerage relationship. They also do not form a brokerage relationship with a customer.

11. Treat all non-clients honestly and do not give them information you know to be false.

12. A licensee engaged in a brokerage relationship with a client does not breach any duty

or obligation to the client by showing properties in which the client is interested to other prospective clients or customers, showing alternative properties to customers or clients, representing other clients looking at the same or other properties, or by representing other parties who have properties for sale or lease.

In addition, licensees engaged by a seller shall disclose to prospective buyers all material adverse facts pertaining to the physical condition of the property that are actually known by the licensee. A licensee shall not be liable to a buyer for providing false information to the buyer if the false information was provided to the licensee by the seller and the licensee did not (i) have actual knowledge that the information was false or (ii) act in reckless disregard of the truth. Licensees engaged by a buyer, in a residential transaction, shall disclose to a seller the buyer’s intent to occupy the property as a principal residence. Licensees engaged by a landlord shall disclose to prospective tenants all material adverse facts pertaining to the physical condition of the property that are actually known by the licensee. A licensee shall not be liable to a tenant for providing false information to the tenant if the false information was provided to the licensee by the landlord and the licensee did not (i) have actual knowledge that the information was false or (ii) act in reckless disregard of the truth. This disclosure shall not limit the right of a prospective tenant to inspect the physical condition of the property.

DUTIES OF REAL ESTATE BROKERS AND SALESPERSONS

§ 54.1-2130. Definitions. As used in this article: “Agency” means every relationship in which a real estate licensee acts for or represents a person by such person’s express authority in a real estate transaction, unless a different legal relationship is intended and is agreed to as part of the brokerage relationship. Nothing in this article shall prohibit a licensee and a client from agreeing in writing to a brokerage relationship under which the licensee acts as an independent contractor or which imposes on a licensee obligations in addition to those provided in this article. If a licensee agrees to additional obligations, however, the licensee shall be responsible for the additional obligations agreed to with the client in the brokerage relationship.

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A real estate licensee who enters into a brokerage relationship based upon a written contract which specifically states that the real estate licensee is acting as an independent contractor and not as an agent shall have the obligations agreed to by the parties in the contract, and such real estate licensee and its employees shall have no obligations under 54.1-21315 of this article. “Brokerage relationship” means the contractual relationship between a client and a real estate licensee who has been engaged by such client for the purpose of procuring a seller, buyer, option, optionee, tenant, or landlord ready, able, and willing to sell, buy, option, exchange or rent real estate on behalf of a client. “Client” means a person who has entered into a brokerage relationship with a licensee. “Common Source information company” means any person, firm, or corporation that is a source, compiler, or supplier of information regarding real estate for sale or lease and other data and includes, but is not limited to, multiple listing services. “Customer” means a person who has not entered into a brokerage relationship with a licensee but for whom a licensee performs ministerial acts in a real estate transaction. Unless a licensee enters into a brokerage relationship with such person, it shall be presumed that such person is a customer of the licensee rather than a client. “Designated agent” or “designated representative” means a licensee who has been assigned by a principal or supervising broker to represent a client when a different client is also represented by such principal or broker in the same transaction. “Dual agent” or “dual representative” means a licensee who has a brokerage relationship with both seller and buyer, or both landlord and tenant, in the same real estate transaction. “Licensee” means a real estate broker or salesperson as defined in Article 1 (54.1-2100 et seq.) of Chapter 21 of this title.

“Ministerial acts” means those routine acts which a licensee can perform for a person which do not involve discretion or the exercise of the licensee’s own judgment. “Standard agent” means a licensee who acts for or represents a client in an agency relationship. A standard agent shall have the obligations as provided in this article. (1995, cc. 741, 813.) § 54.1-2131. Licensees engaged by sellers-- A. A licensee engaged by a seller shall:

1. Perform in accordance with the terms of the brokerage relationship; 2. Promote the interests of the seller by:

a. Seeking a sale at the price and terms agreed upon in the brokerage relationship or at a price and terms acceptable to the seller; however, the licensee shall not be obligated to seek additional offers to purchase the property agreed to as part of the brokerage relationship or as the contract of sale so provides;

b. Presenting in a timely manner all written offers or counteroffers to and from the seller, even when the property is already subject to a contract of sale;

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c. Disclosing to the seller material facts related to the property received in

which the seller has or may have an interest;

d. Accounting for in a timely manner all money and property received in which the seller has or may have an interest;

3. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential, unless otherwise provided by law or the seller consents in writing to the release of such information;

4. Exercise ordinary care; and 5. Comply with all requirements of this article, all applicable fair housing statutes and

regulations, and all other applicable fair housing statutes and regulations, and all other applicable statutes and regulations which are not in conflict with this article.

B. Licensees shall treat all prospective sellers honestly and shall not knowingly give them false

information. No cause of action shall arise against any licensee for revealing information as required by this article or applicable law. In the case of a residential transaction, a licensee engaged by a buyer shall disclose to a seller the buyer’s intent to occupy the property as a principal residence.

C. Licensee engaged by a buyer in a real estate transaction may, unless prohibited by law or the

brokerage relationship, provide assistance to the seller, or prospective seller, by performing ministerial acts. Performing such ministerial acts that are not inconsistent with Subsection A shall not be construed to violate the licensee’s brokerage relationship with the buyer unless expressly prohibited by the terms of the brokerage relationship, nor shall performing such ministerial acts be construed to form a brokerage relationship with the seller.

D. A licensee engaged by a buyer does not breach any duty or obligation to the buyer by

showing properties in which the buyer is interested to other prospective buyers looking at the same or other properties, or by representing sellers relative to other properties.

E. Licensees shall disclose brokerage relationships pursuant to the provisions of this article.

(1995, cc. 741, 813.)

§ 54.1-2132. Licensees engaged by buyers-- A. A licensee engaged by a buyer shall:

1. Perform in accordance with the terms of the brokerage relationship; 2. Promote the interests of the buyer by:

a. Seeking a property at a price and with terms acceptable to the buyer; however, the licensee shall not be obligated to seek other properties for the buyer while the buyer is a party to a contract to purchase property unless agreed to as part of the brokerage relationship;

b. Presenting in a timely manner all written offers or counteroffers to and from the buyer, even when the buyer is already a party to a contract to purchase property;

c. Disclosing to the buyer material facts related to the property or concerning the transaction of which the licensee has actual knowledge; and

d. Accounting for in a timely manner all money and property received in which the buyer has or may have an interest;

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3. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential unless otherwise provided by law or the buyer consents in writing to the release of such information;

4. Exercise ordinary care; and 5. Comply with all requirements of this article, all applicable fair housing statutes and

regulations, and all other applicable fair housing statutes and regulations, and all other applicable statutes and regulations which are not in conflict with this article.

B. Licensees shall treat all prospective sellers honestly and shall not knowingly give them false

information. No cause of action shall arise against any licensee for revealing information as required by this article or applicable law. In the case of a residential transaction, a licensee engaged by a buyer shall disclose to a seller the buyer’s intent to occupy the property as a principal residence.

C. A licensee engaged by a buyer in a real estate transaction may, unless prohibited by law or

the brokerage relationship, provide assistance to the seller, or prospective seller, by performing ministerial acts. Performing such ministerial acts that are not inconsistent with subsection A shall not be construed to violate the licensee’s brokerage relationship with the buyer unless expressly prohibited by the terms of the brokerage relationship, nor shall performing such ministerial acts be construed to form a brokerage relationship with such seller.

D. A licensee engaged by a buyer does not breach any duty or obligation to the buyer by

showing properties in which the buyer is interested to other prospective buyers, whether as clients or customers, by representing other buyers looking at the same or other properties, or by representing sellers relative to other properties.

E. Licensees shall disclose brokerage relationships pursuant to the provisions of this article. § 54.1-2133. Licensees engaged by landlords to lease property.-- A. A licensee engaged by a landlord shall:

1. Perform in accordance with the terms of the brokerage relationship; 2. Promote the interests of the landlord by:

a. Seeking a tenant at the price and terms agreed in the brokerage relationship or at a price and terms acceptable to the landlord; however, the licensee shall not be obligated to seek additional offers to lease the property while the property is subject to a lease or a letter of intent to lease under which the tenant has not yet taken possession, unless agreed as part of the brokerage relationship, or unless the lease or the letter of intent to lease so provides;

b. Presenting in a timely manner all written offers or counteroffers to and from the landlord, even when the property is already subject to a lease or a letter of intent to lease;

c. Disclosing to the landlord material facts related to the property or concerning the transaction of which the licensee has actual knowledge; and

d. Accounting for in a timely manner all money and property received in which the landlord has or may have an interest;

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3. Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential, unless otherwise provided by law or the landlord consents in writing to the release of such information;

4. Exercise ordinary care; and 5. Comply with all requirements of this article, fair housing statutes and regulations,

and all other applicable statutes and regulations which are not in conflict with this article.

B. Licensees shall treat all prospective tenants honestly and shall not knowingly give them false

information. A licensee engaged by a landlord shall disclose to prospective tenants all material adverse facts pertaining to the physical condition of the property which are actually known by the licensee. A licensee shall not be liable to a tenant for providing false information to the tenant if the false information was provided to the licensee by the landlord and the licensee did not (i) have actual knowledge that the information was false or (ii) act in reckless disregard of the truth. No cause of action shall arise against any licensee for revealing information as required by this article or applicable law. Nothing in this subsection shall limit the right of a prospective tenant to inspect the physical condition of the property.

C. A licensee engaged by a landlord in a real estate transaction may, unless prohibited by law or

the brokerage relationship, provide assistance to a tenant, or potential tenant, by performing ministerial acts. Performing such ministerial acts that are not inconsistent with subsection A shall not be construed to violate the licensee’s brokerage relationship with the landlord unless expressly prohibited by the terms of the brokerage relationship, nor shall performing such ministerial acts be construed to form a brokerage relationship with such tenant or potential tenant.

D. A licensee engaged by a landlord does not breach any duty or obligation owed to the landlord

by showing alternative properties to prospective tenants, whether as clients or customers, or by representing other landlords who have other properties for lease.

E. Licensees shall disclose brokerage relationships pursuant to the provisions of this article.

(1995, cc. 741, 813.) § 54.1-2134. Licensees engaged by tenants. -- A. A licensee engaged by a tenant shall:

1. Perform in accordance with the terms of the brokerage relationship; 2. Promote the interests of the tenant by:

a. Seeking a lease at a price and with terms acceptable to the tenant; however, the licensee shall not be obligated to seek other properties for the tenant while the tenant is a party to a lease or a letter of intent to lease exists under which the tenant has not yet taken possession, unless agreed to as part of the brokerage relationship, or unless the lease or the letter of intent to lease so provides;

b. Presenting in a timely fashion all written offers or counteroffers to and from the tenant, even when the tenant is already a party to a lease or a letter of intent to lease;

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c. Disclosing to the tenant material facts related to the property or concerning

the transaction of which the licensee has actual knowledge; and d. Accounting for in a timely manner all money and property received in which

the tenant has or may have an interest; 3. Maintain confidentiality of all personal and financial information received from the

client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential unless otherwise provided by law or the tenant consents in writing to the release of such information;

4. Exercise ordinary care; and 5. Comply with all requirements of this article, fair housing statutes and regulations,

and all other applicable statutes and regulations which are not in conflict with this article.

B. Licensees shall treat all prospective landlords honestly and shall not knowingly give them

false information. No cause of action shall arise against any licensee for revealing information as required by this article or applicable law.

C. A licensee engaged by a tenant in a real estate transaction may provide assistance to the

landlord or prospective landlord by performing ministerial acts. Performing such ministerial acts that are not inconsistent with Subsection A shall not be construed to violate the licensee’s brokerage relationship with the tenant unless expressly prohibited by the terms of the brokerage relationship, nor shall performing such ministerial acts be construed to form a brokerage relationship with the landlord or prospective landlord.

D. A licensee engaged by a tenant does not breach any duty or obligation to the tenant by

showing properties in which the tenant is interested to other prospective tenants, whether as clients or customers, by representing other tenants looking for the same or other properties to lease, or by representing landlords relative to other properties.

E. Licensees shall disclose brokerage relationships pursuant to the provisions of this article.

(1995, cc. 741, 813.) § 54.1-2135. Licensees engaged to manage real estate.-- A. A licensee engaged to manage real estate shall:

1. Perform in accordance with the terms of the property management agreement; 2. Exercise ordinary care; 3. Disclose in a timely manner to the owner material facts of which the licensee has

actual knowledge concerning the property; 4. Maintain confidentiality of all personal and financial information received from the

client during the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential unless otherwise provided by law or the owner consents in writing to the release of such information;

5. Account for, in a timely manner, all money and property received in which the owner has or may have an interest; and

6. Comply with all requirements of this article, fair housing statutes and regulations, and all other applicable statutes and regulations which are not in conflict with this article.

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B. Except as provided in the property management agreement, a licensee engaged to manage real estate does not breach any duty or obligation to the owner by representing other owners in the management of other properties.

C. A licensee may also represent the owner as seller or landlord if they enter into a brokerage

relationship that so provides; in which case, the licensee shall disclose such brokerage relationships pursuant to the provisions of this article. (1995, cc 741, 813.)

§ 54.1-2136. Preconditions to brokerage relationship. -- Prior to entering into any brokerage relationship provided for in this article, a licensee shall advise the prospective client of (i) the type of brokerage relationship proposed by the broker and (ii) the broker’s compensation and whether the broker will share such salary or compensation with another broker who may have a brokerage relationship with another party to the transaction. (1955, cc. 741, 813.) § 54.1-2137. Commencement and termination of brokerage relationships. -- A. The brokerage relationships set forth in this article shall commence at the time that a client

engages a licensee and shall continue until (i) completion of performance in accordance with the brokerage relationship or (ii) the earlier of (a) any date of expiration agreed upon by the amendments thereto, (b) any mutually agreed upon termination of the relationship, (c) a default by any party under terms of the brokerage relationship, or (d) a termination as set forth in subsection D of 54.1-2139.

B. Brokerage relationships shall have a definite termination date; however, if a brokerage

relationship does not specify a definite termination date, the brokerage relationship shall terminate ninety days after the date the brokerage relationship was entered into.

C. Except as otherwise agreed to in writing, a licensee owes no further duties to a client after

termination, expiration, or completion of performance of the brokerage relationship, except to (i) account for all monies and property relating to the brokerage relationship and (ii) keep confidential all personal and financial information received from the client during the course of the brokerage relationship and any other information that the client requests during the brokerage relationship be maintained confidential, unless otherwise provided by law or the client consents in writing to the release of such information.

§ 54.1-2138. Disclosure of brokerage relationship. A. Upon having a substantive discussion about a specific property or properties with an actual or

prospective buyer or seller who is not the client or the licensee, a licensee shall disclose any brokerage relationship the licensee has with another party to the transaction. Further, except as provided in 54.1-2139, such disclosure may be given in combination with other disclosures and must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following shall be deemed in compliance with this disclosure requirement:

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DISCLOSURE OF BROKERAGE RELATIONSHIP

The undersigned do hereby acknowledge disclosure that: The licensee .................................................................

Name of Firm represents the following party in a real estate transaction:

. .................Seller(s)) or .................Buyer(s) ..................Landlord(s) or .................Tenant(s) ................................ ................................. Date Name ................................ .................................. Date Name

B. A licensee shall disclose to an actual or prospective landlord or tenant, who is not the client

of the licensee, that the licensee has a brokerage relationship with another party or parties to the transaction. Such disclosure shall be in writing and included in all applications for lease or in the lease itself, whichever occurs first. If the terms of the lease do not provide for such disclosure, disclosure shall be made in writing no later than the signing of the lease. Such disclosure requirement shall not apply to lessors or lessees in single or multifamily residential units for lease terms of less than two months.

C. If a licensee’s relationship to a client or customer changes, the licensee shall disclose that fact

in writing to all clients and customers already involved in the specific contemplated transaction.

D. Copies of any disclosures relative to fully executed purchase contracts shall be kept by the

licensee for a period of three years as proof of having made such disclosure, whether or not such disclosure is acknowledged in writing by the party to whom such disclosure was shown or given. (1995, cc. 741, 813.)

§ 54.1-2139. Disclosed dual or designated representation authorized. -- A. A licensee may act as a dual representative only with the written consent of all clients to the

transaction. Such written consent and disclosure of the brokerage relationship as required by this article shall be presumed to have been given against any client who signs a disclosure as provided in this section.

B. Such disclosure may be given in combination with other disclosures or provided with other

information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following shall be deemed in compliance with this disclosure requirement:

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DISCLOSURE OF DUAL REPRESENTATION

The undersigned do hereby acknowledge disclosure that: The Licensee ........................................................................

(Name of Broker, Firm or Salesperson as applicable) represents more than one party in this real estate transaction as indicated below:

. ........….......Seller(s) and Buyer(s) ..................Landlord(s) and Tenant(s)

The undersigned understands that the foregoing dual representative may not disclose to either client or such client’s designated representative any information that has been given to the dual representative by the other client within the confidence and trust of the brokerage relationship except for that information which is otherwise required or permitted by Article 3 (54.1-2130 et seq.) of Chapter 21 of Title 54.1 of the Code of Virginia to be disclosed. The undersigned by signing this notice do hereby acknowledge their informed consent to the disclosed dual representation by the licensee.

............................... .................................................. Date Name (One Party)

............................... .................................................. Date Name (One Party)

............................... ................................................... Date Name (One Party)

................................ .................................................... Date Name (One Party)

C. No cause of action shall arise against a dual representative for making disclosures of brokerage relationships as provided by this article. A dual representative does not terminate any brokerage relationship by the making of any such allowed or required disclosures of dual representation.

D. In any real estate transaction, a licensee may withdraw, without liability, from representing a

client who refuses to consent to a disclosed dual representation thereby terminating the brokerage relationship with such client. Such withdrawal shall not prejudice the ability of the licensee to continue to represent the other client in the transaction nor to limit the licensee from representing the client who refused the dual representation in other transactions not involving dual representation.

E. A principal or supervising broker may assign different licensees affiliated with the broker as

designated representatives to represent different clients in the same transaction to the exclusion of all other licensees in the firm. Use of such designated representatives shall not constitute dual representation if a designated representative is not representing more than one client in a particular real estate transaction; however, the principal or broker who is supervising the transaction shall be considered a dual representative as provided in this

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F. article. Designated representatives may not disclose, except to the affiliated licensee’s

broker, personal or financial information received from the clients during the brokerage relationship and any other information that the client requests during the brokerage relationship be kept confidential, unless otherwise provided for by law or the client consents in writing to the release of such information.

G. Use of designated representatives in a real estate transaction shall be disclosed in accordance

with the provisions of this article. Such disclosure may be given in combination with other disclosures or provided with other information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following shall be deemed in compliance with such disclosure requirement:

DISCLOSURE OF THE USE OF DESIGNATED REPRESENTATIVES

The undersigned do hereby acknowledge disclosure that: The licensee........................................................................

(Name of Broker and Firm) represents more than one party in this real estate transaction as indicated below: ...............Seller(s) and Buyer(s) ...............Landlord(s) and Tenant(s) The undersigned understands that the foregoing dual representative may not disclose to either client or such client’s designated representative any information that has been given to the dual representative by the other client within the confidence and trust of the brokerage relationship except for that information which is otherwise required or permitted by Article 3 (54.1-2130 et seq.) of Chapter 21 of Title 54.1 of the Code of Virginia to be disclosed. The undersigned by signing this notice do hereby acknowledge their informed consent to the disclosed dual representation by the licensee. The principal or supervising broker has assigned................................................ ..........................................to act as Designated Representative (Licensee/Sales Associate) for the one party as indicated below: .....................Seller (s) or .........................Buyer (s) .....................Landlord (s) or .........................Tenant (s).

and .......................................to act as Designated Representative (Licensee/Sales Associate) for the other party as indicated below: ......................Seller (s) or ..........................Buyer (s) ......................Landlord (s) or ..........................Tenant (s) ................................ ..................................................... Date Name (One Party) ................................ ..................................................... Date Name (One Party) ................................ ..................................................... Date Name (One Party)

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§ 54.1-2140. Compensation shall not imply brokerage relationship.--

The payment or promise of payment or compensation to a real estate broker does not create a brokerage relationship between any broker, seller, landlord, buyer or tenant. (1995, cc. 741, 813.) § 54.1-2141. Brokerage relationship not created by using common source information

company. -- No licensee representing a buyer or tenant shall be deemed to have a brokerage relationship with a seller, landlord or other licensee solely by reason of using a common source information company. (1995, cc 741, 813.) § 54.1-2142. Liability; knowledge not to be imputed. -- A. A client is not liable for (i) a misrepresentation made by a licensee in connection with a

brokerage relationship, unless the client knew or should have known of the misrepresentation and failed to take reasonable steps to correct the misrepresentation in a timely manner, or (ii) the negligence, gross negligence or intentional acts of any broker or broker’s licensee.

B. A broker who has a brokerage relationship with a client and who engages another broker to

assist in providing brokerage services to such client shall not be liable for (i) a misrepresentation made by the other broker, unless the broker knew or should have known of the other broker’s misrepresentation and failed to take reasonable steps to correct the misrepresentation in a timely manner, or (ii) the negligence, gross negligence or intentional acts of the assisting broker or assisting broker’s licensee.

C. Clients and licensees shall be deemed to possess actual knowledge and information only.

Knowledge or information among or between clients and licensees shall not be imputed. D. Nothing in this article shall limit the liability between or among clients and licensees in all

matters involving unlawful discriminatory housing practices. E. Except as expressly set forth in this section, nothing in this article shall affect a person’s right

to rescind a real estate transaction, or limit the liability of (i) a client for the misrepresentation, negligence, gross negligence or intentional acts of such client in connection with a real estate transaction, or (ii) a licensee for the misrepresentation, negligence, gross negligence or intentional acts of such licensee in connection with a real estate transaction.

§ 54.1-2143. Real Estate board regulations to be consistent. -- Any regulations adopted by the Virginia Real Estate Board shall be consistent with this article, and any such regulations existing as of the effective date of this article shall be modified to comply with the provisions of this article. (1995, cc. 741, 813.) § 54.1-2144. Common Law abrogated. --The common law of agency relative to brokerage relationships in real estate transactions to the extent inconsistent with this article shall be expressly abrogated. (1995, cc. 741, 813.)

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Agency Case Studies

AGENCY CASE 1: Bill Williams is the broker/owner of a real estate firm in Metropolis, Virginia. In the 30 years he has been in business, he’s seen it all. And, while he understands the need for Board regulations to insure the “safety and welfare of the citizens of the commonwealth”, there are some regulations he feels are an impediment to his being able to do business. For instance, Mr. Williams does not particularly like the regulation which requires “disclosure of brokerage relationship”. While he believes the idea is sound, it causes more questions than are needed and there is the additional paperwork. Ever since this requirement was established, Mr. Williams has chosen to handle brokerage relationship in this manner: In those instances where a person calls to inquire about a house or parcel of land, and all they ask for is basic information such as dimensions or size of lot and cost, he does not get into the brokerage relationship question. It is his feeling that substantive discussions have not occurred. Mr. Williams will verbally inform a person of this brokerage relationship if discussions about a property begin to get into the negotiation stage. Specifically, if a buyer asks if the seller would be amenable to taking less money for the property. It is at this stage that Mr. Williams will inform the potential buyer of his brokerage duties and responsibility to the seller. Nothing would be put in writing until the contract is written, and at this stage Mr. Williams will insert language which states that he represents the seller. Do you think Mr. Williams is adhering to the Board Regulations? If not, why? AGENCY CASE 2: The SUN-CHIP COMPUTER COMPANY (SUN) was enjoying a very good year. As a result of some rapid corporate expansion, certain managers were being promoted at a quickened pace. One of these managers, Evan Smith, had worked for SUN for only a year, but in that space of time he had received three promotions. With the added responsibilities had also come a substantial increase in salary. The added income enabled Mr. Smith and his wife to sell their “starter” home and purchase a larger house. Mr. and Mrs. Smith signed a listing agreement with Franklin Jones, licensed real estate salesperson with the ABC Realty firm, to sell their home. While their home was being marketed with Mr. Jones, Mr. and Mrs. Smith were looking for another home. As luck would have it, Mr. Jones was able to sell the Smith’s home in only one week. While the Smiths were ecstatic about the speedy sale, they now found themselves in a bind to vacate their

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home and get into another. Consequently, they asked Mr. Jones to help them find a new home. And, while they asked him to help find their new home, they did not wish to enter into a buyer’s agency relationship with Mr. Jones. Ultimately, Mr. Jones was able to locate a home for the Smiths which they purchased. They were extremely happy with the new home, but Mr. Smith harbored a nagging feeling that he paid too much for the home. His initial offers were rejected causing him to have to counter for a much higher amount. In this regard, Mr. Smith learned several months later from a mutual acquaintance that Mr. Jones had shared information about Mr. Smith’s financial status with the sellers. That information included the fact that Mr. and Mrs. Smith desperately wanted the home and that they were financially able to pay the full asking price. Mr. Smith also had been told that in developing a strategy for selling Mr. Smith the home, the seller and Mr. Jones agreed to drop the price by approximately $2,000.00. That would be adequate inducement to get Mr. and Mrs. Smith to purchase, which they did. While Mr. and Mrs. Smith could not quite “put their finger on it” they felt they had not been treated fairly by Mr. Jones. Given the stated circumstances, does it sound as though there has been a regulatory violation? If not, is this an accepted and appropriate manner in which to do business? AGENCY CASE 3:

Mary Smith, a licensed salesperson, has been in the real estate business for twenty years. She has worked diligently, attended classes and seminars, and has joined every professional organization she could find to help her in her efforts to better serve her clients and ultimately became a financial success. Her hard work paid off. Ms. Smith became so successful, she had to hire two assistants to help her keep track of her work. One of her assistants is unlicensed and one is a licensed real estate salesperson. Both of these individuals are her employees. Bob works for Ms. Smith as the unlicensed assistant. His duties include: answering the phone and forwarding calls to Ms. Smith; following up on loan commitments after a contract has been negotiated; having keys made for Ms. Smith’s listings; typing contract forms for approval by Ms. Smith and the supervising broker; placing signs on properties; scheduling appointments; etc. Amy works for Ms. Smith and is the licensed assistant. Her duties include: holding open houses for Ms. Smith and answering questions about the property on her behalf; answering telephone calls about specific properties and providing information to the callers about the properties for sale; completing agency disclosure forms on these telephone calls and as a result of talks at the open houses; representing Ms. Smith at closing (where appropriate and directed by Ms. Smith); under the direct supervision of Ms. Smith, she negotiates commission splits and management fees; and performs other duties as directed by Ms. Smith.

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As a result of some heated words between Amy and a competing salesperson during the course of discussions about a commission split, a complaint was filed against Ms. Smith and her principal broker. It alleged that they were acting improperly by permitting Bob and Amy to perform the duties they were performing because they were not properly licensed and were not affiliated with Ms. Smith’s real estate company/broker. The question of what licensed and unlicensed assistants may or may not do is much debated as more and more licensees employ assistants. Does this situation describe any regulatory problems to you? Which regulations do you think are being violated? If you don’t detect violations, are there, however, some “gray” areas that may be borderline? AGENCY CASE 4: When Josie Jones signed her listing agreement with Fred Smith, principal broker of Swing Real Estate Co., she instructed him that she would not accept less than the asking price for her house. They agreed to list her home with Mr. Smith for four months and to market the home at $250,000. During the first month of the listing, there were many individuals who inspected the home, but no one offered a contract. Mr. Smith attributed this to, what he believed to be, the excessive price Ms. Jones had established for the home. He had several discussions with her about this, but she was unwilling to reduce the price. Over the course of the next two months there were only two other inquiries about the home. As it turned out, however, in the last month Mr. Smith took four couples on inspection tours. From these people, Mr. Smith was presented two offers to purchase. The first written offer Mr. Smith received was for $210,000. In view of Ms. Jones instructions, Mr. Smith informed the couple that the seller would not accept the contract. Within two days of this event, the second couple offered a written contract for $245,000, which Mr. Smith presented to Ms. Jones. After discussing the offer with Ms. Jones, she decided to accept the offer. This certainly sounds like a straight-forward scenario. How could there have been any regulations violated? Were there any violated, and if so which?

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AGENCY CASE STUDY ANSWERS

CASE 1: Mr. Williams is violating Real Estate Board Regulations. In a phone call, such matters as size of lot and cost are substantive and trigger the requirement for oral disclosure. This must be followed up by a written disclosure upon face to face meeting, or in mailing or faxing information to the person.

CASE 2: There has been a violation by Jones of statutory duties to Smith. Although Jones did not enter into a brokerage relationship with Smith in the purchase transaction, Jones had confidential information concerning the Smiths’ financial status obtained during the prior brokerage relationship. That information must be kept confidential forever. The Smiths’ motivation to purchase this particular house would not be protected. In this latter transaction, Jones’ duties to the seller would require him to disclose that he may have confidential information regarding the Smiths, and if so, that it is protected because of his previous relationship with the Smiths. There may have been an inadequate explanation to the Smiths by Jones as to what position Jones would be in regarding the purchase if they did not establish a brokerage relationship with him themselves.

CASE 3: Bob and Amy’s duties are correspondingly appropriate for an unlicensed and licensed assistant. If, in fact, Amy is not affiliated with Ms. Smith’s real estate company/broker or any other brokerage firm then Board regulations are being violated.

CASE 4: Board regulations require all written offers be presented to the seller. Upon taking the listing Mr. Smith should have explained to Josie Jones that he is required by license law to present all written offers.

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AGENCY TEST 1. Sue is an agent with Company X. Diane is an agent with the same company. Sue represents

a buyer on Diane’s listing. Which is true? A. Sue is a dual agent. B. Company X is a dual agent. C. Diane is the selling agent. D. None of the above.

2. If brokers attempted to impose uniform commission rates:

A. It would not matter, since commission rates do not have to be negotiable. B. It would be a violation of federal property law. C. That would be a violation of state and federal antitrust laws. D. It would be O.K. as long as there was no violation of custom.

3. Dual agency is also called limited service agency because

A. There are always 2 agents. B. One agent, representing both parties, is limited in representation that can be given to

each client. C. Both A and B D. None of the above

4. A broker decides that he wants to act for both the buyer and seller in a real estate transaction:

A. He can’t do this because it is illegal under state licensing laws. B. He can represent both with the full knowledge and consent of both. C. He cannot represent both under any circumstances because it is a clear conflict of

interest. D. He can do so with the specific written permission of the Board of Realtors

5. An arrangement of the type described above is known as:

A. Dual agency B. Multiple agency C. Multiple listing D. Single agency

6. In Virginia an agent has which type of duties to the client?

A. Fiduciary B. Common C. Implied D. Statutory

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7. A listing agent is required to tell a prospective buyer about material defects of the property when?

A. When the agent has actual knowledge of the defect B. When the agent does not have actual knowledge but should know C. A and B D. None of the above

8. A broker knowingly misstates the location of a property boundary line when asked about its

location by a prospective purchaser. This is an example of: A. Misrepresentation B. Puffery C. Poor business practice D. Loyalty to the seller

9. The amount of the broker’s commission is determined by:

A. The broker B. The real estate commission C. The broker and the principal D. Local Board of Realtors

10. An agent may perform which acts for a customer?

A. Fiduciary B. Ministerial C. A and B D. None of the above

11. Even when a broker has a single agency with a seller, he has a duty to:

A. Obtain the best possible deal for a buyer B. Disclose detrimental property facts to a buyer C. Disclose to a buyer why the seller is selling D. Disclose previous offers to the buyer

12. An unrepresented tenant approaches the broker about his listed rental properties. The prospective tenant is the brokers’:

A. Client B. Principal C. Customer D. Fiduciary

13. Which term BEST describes “law of agency”?

A. Rules & Regulations of VREB B. Principles that govern one’s conduct in business C. Rules of law that apply to the responsibilities of one who acts for another D. The selling of another’s property through an authorized agency

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AGENCY ANSWER SHEET Circle correct answer

1. A B C D 2. A B C D 3. A B C D 4. A B C D 5. A B C D

6. A B C D 7. A B C D 8. A B C D 9. A B C D

10. A B C D

11. A B C D 12. A B C D

13. A B C D

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TEST CERTIFICATION SHEET I certify that I have reviewed and studied the materials for Agency Law approved by the Commonwealth of Virginia Real Estate Continuing Education correspondence program presented by your school. I have completed the answer key and attached it to this certification sheet for your review. ______________________________________________________________________________ Print Name ______________________________________________________________________________ Address ______________________________________________________________________________ Date Phone My Virginia real estate license no. is ______________________________________; it is a Sales Associate Broker Broker (circle one) license. It expires on____________ Date I am affiliated with ______________________Broker at ________________________office. E-mail address: _________________________________________________________________.

Virginia Real Estate Commission Course Evaluation Instructions: For each of the questions below please evaluate the course on the basis of a 5 point scale: 5 = Excellent 4 – Good 3 – Average 2 – Fair 1 = Poor. The content of the course 1. Was the course material relevant to your day-to-day activities? 1 2 3 4 5 2. Overall, did you find the course informative? 1 2 3 4 5 The material 1. Did you find the material well organized? 1 2 3 4 5 2. Did you find the material easy to follow? 1 2 3 4 5 3. Did you find the material well written? 1 2 3 4 5 ___________________________________________ Student signature Payment I enclose a check (Payable to Long & Foster Institute of Real Estate) for $10.50 (includes tax). Please charge my ____Visa ____ Master Card ____ Discover.

____________________________________________________ Card Number ___________ exp. Date

Return this sheet with completed answer key and payment to:

Long & Foster Institute or Long & Foster Institute or Long & Foster Institute or Long & Foster Institute

3069 Nutley Street 1300 Diamond Springs Road 4435 Waterfront Drive #400 3912 Electric Road Sw, #200

Fairfax, VA 22031 Suite 102 Glen Allen, VA 23060 Roanoke, VA 24018

Fax: 703-560-9772 Virginia Beach, VA 23455 Fax: 804-346-2223 Fax: 540-772-1271

Fax: 757-460-3626

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STUDENT AFFIDAVIT / CORRESPONDENCE COURSE

I certify that I have personally completed each assigned module of instruction and that my

work in this course will be based on my own personal efforts, unassisted by any

unauthorized individual or resource. I understand that receiving unauthorized assistance or

tampering with course results will invalidate my course credit and may be a cause of action

under the real estate laws and regulations of my state.

_____________________________________________________ (Student Name - Please print as it appears on your license) _____________________________________________________ (License Number)

Agency Law (Course Name) Phone number: _______________________________________ E-Mail address: _______________________________________ Subscribed and sworn before me this _____ day of ____________________, ____________. Notary Signature: ____________________________________________________ County/City of _________________________ State of _________________________ My commission expires on ______________________________. Please mail test certificate/notarized affidavit and test answer sheets to:

Long & Foster Institute or Long & Foster Institute or Long & Foster Institute or Long & Foster Institute 3069 Nutley Street 1300 Diamond Springs Rd. 4435 Waterfront Drive #400 3912 Electric Road, SW

Fairfax, VA 22031 Suite 102 Glen Allen, VA 23060 Roanoke, VA 24019

FX: 703-560-9772 Virginia Beach, VA 23455 FX: 804-346-2223 Fax: 540-772-1271

FX: 757-460-3626

ALL OF THE ABOVE INFORMATION MUST BE ENTERED IN ORDER TO RECEIVE

CREDIT

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