FACTS:
A BIC designates Broker A to represent a seller-client, and Broker B to represent a buyer-client after both principals provide written authorization for designated dual agency. Prior to being designated dual agents, neither Broker A nor Broker B had prior confidential information about the principals. Further, the BIC reminds Broker A and Broker B not to share any confidential information about their clients without the clients’ permission.
The next day, Broker A and Broker B have a conversation while in the office. Broker A tells Broker B that their seller-client will accept any amount over asking price because they are going through a tumultuous divorce.
Broker B shares the information about the seller with their buyer-client. Later that evening, the buyer-client submits an offer that is $5k over the asking price to the seller. The seller accepts the offer, and the parties go under contract.
ISSUE: Did Broker A comply with Rule 58A .0104?
ANALYSIS: No. Rule 58A .0104(k) and (l) state the broker acting as a designated dual agent for one party shall not, without their client’s permission, disclose to the other party or the broker designated to represent the other party: “(1) that a party may agree to a price, terms, or any conditions of sale other than those offered; (2) the motivation of a party for engaging in the transaction, unless disclosure is otherwise required by statute or rule; and (3) any information about a party that the party has identified as confidential, unless disclosure is otherwise required by statute or rule”.
The advantage of designated dual agency over standard dual agency is that each of the firm’s clients (seller and buyer) receive representation more like single agency than dual agency. Designated dual agency allows agents to fully represent the interests of their respective clients, allowing agents to advise their clients during the transaction. This is different than the typical dual agency situation where client advocacy is lost because the dual agent may not advocate for one client to the detriment of the other client.
Moreover, a designated dual agent is required to act only in the best interests of their client, and this includes ensuring confidential information is not shared with anyone, including the opposing designated party, without permission, unless otherwise required by law.
The Commission recommends a BIC develop written office procedures and policies to maintain the confidentiality of client information by preventing improper disclosure in designated dual agency transactions.
In this scenario, Broker A was designated to represent the exclusive interest of the seller-client and should not have disclosed any confidential information to Broker B without the seller’s permission pursuant to Rule 58A .0104(k).
If, as here, a designated agent learns confidential information after becoming designated, they have an obligation to represent their clients’ interest to the best of their ability and disclose the information. However, Broker A and the brokerage may be liable due to the disclosure of confidential information by Broker A. Moreover, as a result of Broker A disclosing confidential information, i.e., that the seller-client would accept any price over asking due to their pending divorce, they may be subject to disciplinary action by the Commission for failing to adhere to Rule 58A .0104.
RESOURCES:
N.C.G.S. § 93A-6(a)(8), and 93A-6(a)(10)
License Law and Commission Rules: Rule 58A .0104(k)(l)
Articles: 2022-2023 General Update Course
Dual Agency – Authorization, Disclosure and Safeguarding Confidential Information