Agency, client relationships and representation
This domain tests how representation is created, what duties attach to it, and how a brokerage handles two clients in one trade. Questions target written representation agreements, fiduciary duties, designated representation, self-represented parties, commission entitlement and holdover clauses.
Creating the relationship
TRESA requires representation to be in writing - a seller representation agreement or a buyer representation agreement. Agency is not implied by showing a property, answering questions or sending listings. The agreement identifies the client, the term, the services, the remuneration and any holdover clause.
Duties owed
Fiduciary duties to a client: loyalty, confidentiality, full disclosure, obedience to lawful instructions, accounting for money, and reasonable care and skill. To a self-represented party (formerly called a customer), a brokerage owes honesty, fairness, disclosure of material facts and no misrepresentation, plus whatever services are agreed in writing - but not loyalty or confidentiality in the fiduciary sense.
Multiple and designated representation
A brokerage may represent more than one client in the same trade only with the written consent of all clients after explaining the risks. Under TRESA the mechanism is designated representation: a different registrant is designated for each client, and those registrants must not share one client's confidential information with the other side. The brokerage itself must still manage the conflict.
Commission and holdover
Commission is payable as set out in the agreement. A holdover clause entitles the brokerage to commission if the client buys or sells with a party introduced during the term, within a stated period after expiry.
Worked example
A buyer tours a house alone at an open house, then signs a buyer representation agreement two weeks later and asks her salesperson to show the same house. The listing brokerage has the open-house record, so the buyer's brokerage should disclose the earlier visit and negotiate with the listing side, which may claim it was the procuring cause. The buyer's agreement should have asked about prior viewings at signing.
Traps
- Assuming a self-represented party is a client.
- Showing a buyer client a listing the same brokerage represents without documented consent.
- Holdover periods that run unreasonably long after the term.
- Treating an oral promise of representation as agency.