Understanding Fiduciary Duties — Part 2
Today we finish our look at the fiduciary obligations owed to clients. Real estate professionals owe a great duty of care and loyalty to their clients. They hold a position of trust and the law sets forth how this position of trust should be maintained.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation related to estate planning, please contact me to setup a date and time.
Understanding Fiduciary Duties – Part 2
By: D. Keith B. Dunnagan, Esq.
In part one of our look at fiduciary duty in December 2018, we examined how the duty was broken down and examined the role that an agent holds in a transaction. The agent acts in a fiduciary capacity for their client and a breach of that duty exposes the agent up to law suits where they may have to pay damages. While a breach in fiduciary duty will give rise to a lawsuit, it may also be grounds for the DRE to pursue a disciplinary matter against the breaching agent or broker.
In this segment, the responsibilities of an agent and how to avoid breaching their duty to their client is examined.
Fiduciary duty encompasses more than just an overall obligation to their client; real estate agents owe several duties, including the duty of loyalty, obedience, confidentiality, reasonable care and diligence, and record keeping.
With loyalty, agents must always act with their client’s interests in mind. An agent must act in the best interests of their clients, even if that means not acting in the best interest of the agent. For example, buying a client’s property and then immediately re-selling the property for a profit does not act upon the client’s best interests; this kind of transaction is self-dealing and will open the agent up for a breach in their fiduciary duty.
Agents must be obedient with regards to obeying all lawful instructions that conform to the purpose of the relationship. Obedience includes speed and efficiency in carrying out instructions from their clients, however it does not include obeying unlawful instructions, ie. the seller who does not want to disclose the leaky roof. Agents may not go against the instructions from the clients because agents play a helping role in the transaction and are not the owners of the transaction.
Confidentiality in the fiduciary setting means that any information that a client gives an agent must be kept confidential unless the agent is obligated to disclose. Any personal information should never be disclosed unless the client has given permission.
An agent must always act with reasonable care and diligence. This is not a standard that is set by each individual agent, but rather an industry standard related to how a reasonable and prudent agent should act. Reasonable care and diligence require an agent to stay on top of their work load, communicate with their clients and take the steps necessary to provide the professional advice the client needs, including advice related to inspections, defects to examine that are known in the community (ie. Kitec plubming issues in homes built from the late 90s – the early 2000s) and directing the client to the proper professionals when issues arise outside of the agent’s expertise.
Another significant aspect of an agent’s fiduciary duty is record keeping. Real estate agents must keep their records for at least three years, however it is recommended to keep these records longer than the minimum. Agents often find that they have troubles when it comes to record keeping because they are unsure how to store the records or what to keep. We discussed in depth records retention in October 2018, but the quick recap is that all agents must keep all documents that pertain to any real estate transaction, including emails. Agents may have claims brought against them and good records retention will protect the agent from these claims.
Real estate agents owe a fiduciary duty to each client in every transaction. Agents must be thoughtful in their representation and always act in accordance with the client’s interests. Be mindful of the position within which you act as an agent and continue to treat that relationship with the care and respect it deserves.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal or tax advice. Every person’s situation is different. If you are facing a legal or tax issue of any kind, get competent legal and accounting advice in your State immediately so that you can determine your best options.
Today we finish our look at the fiduciary obligations owed to clients. Real estate professionals owe a great duty of care and loyalty to their clients. They hold a position of trust and the law sets forth how this position of trust should be maintained.
As always, if you have any questions about your real estate, business, estate planning, or any other legal issue, please let us know by e-mailing me at kbdunnagan@bpelaw.com.
Also, remember that we do legal presentations for business and community organizations. If your group would like to schedule a presentation related to estate planning, please contact me to setup a date and time.
Understanding Fiduciary Duties – Part 2
By: D. Keith B. Dunnagan, Esq.
In part one of our look at fiduciary duty in December 2018, we examined how the duty was broken down and examined the role that an agent holds in a transaction. The agent acts in a fiduciary capacity for their client and a breach of that duty exposes the agent up to law suits where they may have to pay damages. While a breach in fiduciary duty will give rise to a lawsuit, it may also be grounds for the DRE to pursue a disciplinary matter against the breaching agent or broker.
In this segment, the responsibilities of an agent and how to avoid breaching their duty to their client is examined.
Fiduciary duty encompasses more than just an overall obligation to their client; real estate agents owe several duties, including the duty of loyalty, obedience, confidentiality, reasonable care and diligence, and record keeping.
With loyalty, agents must always act with their client’s interests in mind. An agent must act in the best interests of their clients, even if that means not acting in the best interest of the agent. For example, buying a client’s property and then immediately re-selling the property for a profit does not act upon the client’s best interests; this kind of transaction is self-dealing and will open the agent up for a breach in their fiduciary duty.
Agents must be obedient with regards to obeying all lawful instructions that conform to the purpose of the relationship. Obedience includes speed and efficiency in carrying out instructions from their clients, however it does not include obeying unlawful instructions, ie. the seller who does not want to disclose the leaky roof. Agents may not go against the instructions from the clients because agents play a helping role in the transaction and are not the owners of the transaction.
Confidentiality in the fiduciary setting means that any information that a client gives an agent must be kept confidential unless the agent is obligated to disclose. Any personal information should never be disclosed unless the client has given permission.
An agent must always act with reasonable care and diligence. This is not a standard that is set by each individual agent, but rather an industry standard related to how a reasonable and prudent agent should act. Reasonable care and diligence require an agent to stay on top of their work load, communicate with their clients and take the steps necessary to provide the professional advice the client needs, including advice related to inspections, defects to examine that are known in the community (ie. Kitec plubming issues in homes built from the late 90s – the early 2000s) and directing the client to the proper professionals when issues arise outside of the agent’s expertise.
Another significant aspect of an agent’s fiduciary duty is record keeping. Real estate agents must keep their records for at least three years, however it is recommended to keep these records longer than the minimum. Agents often find that they have troubles when it comes to record keeping because they are unsure how to store the records or what to keep. We discussed in depth records retention in October 2018, but the quick recap is that all agents must keep all documents that pertain to any real estate transaction, including emails. Agents may have claims brought against them and good records retention will protect the agent from these claims.
Real estate agents owe a fiduciary duty to each client in every transaction. Agents must be thoughtful in their representation and always act in accordance with the client’s interests. Be mindful of the position within which you act as an agent and continue to treat that relationship with the care and respect it deserves.
——————————————————————————————————————
The attorneys of BPE Law Group, PC. have been advising our clients on real estate, business and estate planning issues for over 20 years and have assisted numerous clients in business and real estate matters and have represented and advised brokers on their professional obligations as well as consumers on their rights. If you have questions concerning legal matters, give us a call at (916) 966-2260 or e-mail Keith at kbdunnagan@bpelaw.com. Our flat fee consult for new clients may get you the answers you need for the questions you have.
The information presented in this Article is not to be taken as legal or tax advice. Every person’s situation is different. If you are facing a legal or tax issue of any kind, get competent legal and accounting advice in your State immediately so that you can determine your best options.