BIC’s and Designated Dual Agency Transactions – Room for Conflicts!

Robert A. Patchett, Associate Legal Counsel II

Brokers have a fiduciary duty to act in the best interests of their clients while also acting within the confines of the Real Estate License Law and Commission rules. In a handful of transactions there are instances when brokers’ fiduciary duties to their clients could appear to conflict with the Law and rules. One of those situations is a designated dual agency transaction involving the broker-in-charge and a broker or provisional broker supervised by that broker-in-charge.

According to Rule 58A .0104(i) – (l), in a dual each designated broker is required to act only in the interest of the client they represent and is prohibited from disclosing their client’s purchase price, terms, motivation, or confidential information to the other party. To prevent disclosure of confidential information in designated dual agency transactions, a broker-in-charge should have office procedures and policies in place to maintain the confidentiality of client information. But what happens when the broker-in-charge is one of the designated dual agents?

A broker-in-charge is responsible for maintaining all of the firm’s records required to be kept under Rule 58A .0108. The record retention rule requires brokers to provide a copy of, among other things, agency agreements, offers, and any other related transaction documents to the firm within three days of receipt. This means that at any given time a broker-in-charge has access to all of the firm’s records, including documents in an active transaction. If a broker-in-charge has access to the entire firm’s records and confidential information how can the broker-in-charge also be a designated dual agent in a transaction?

The best practice is for a broker-in-charge to not represent a party in a designated dual agency situation. This would reduce the chance that a broker-in-charge will violate the Commission rules for either failing to maintain and review transaction records or for learning confidential information about  the other party and using (or failing to use) that confidential information to the advantage of their client in a designated dual agency situation.

If a broker-in-charge decides to represent a party in a designated dual agency transaction, the broker-in-charge must establish policies and procedures to ensure compliance with the Commission’s rules. The broker-in-charge should designate another broker in the office to collect and review records from the transaction. This will prevent the broker-in-charge who is a designated dual agent from having access to confidential information about the other party in the transaction. It will also provide comfort to the other designated dual agent that they can provide records in compliance with Rule 58A .0108(d) and not have their client’s confidential information shared with the other party in a designated dual agency transaction.

Remember also that a broker-in-charge can never be a designated dual agent in a transaction where the other party’s designated agent is a provisional broker under the broker-in-charge’s supervision. A broker-in-charge is expected to fully supervise a provisional broker including reviewing all transaction records. The broker-in-charge must have access to the same information as the provisional broker in order to successfully mentor and train the provisional broker. This duty to supervise the provisional broker cannot be delegated to another.