Agency, Brokerage Relationships and Fiduciary Duties
Agency
Agency fundamentals
Agency is a fiduciary relationship in which a broker or salesperson acts for a client with the client's consent and subject to the client's control. An agency relationship can be created by express agreement, implication from conduct, ratification of unauthorized acts, or estoppel. Rhode Island brokerage practice distinguishes single agency, dual agency, designated agency, and transaction brokerage or facilitation. A salesperson is licensed through and acts under the employing broker; the salesperson's agency relationship runs to the broker, not directly to the public. Before services are provided, the brokerage must disclose the type of relationship in writing and obtain consent; dual agency requires informed written consent from all parties. Clients are owed fiduciary duties; customers are owed honesty, fair dealing, and disclosure of material facts. Common traps: assuming that showing a property or answering questions creates buyer agency; treating a facilitator or transaction broker as a fiduciary; forgetting that subagency is not the same as buyer representation; and failing to recognize that a listing agent speaking with a buyer still represents the seller. Worked example: a buyer calls the listing agent and says, 'I would pay full price.' Unless the buyer has signed a buyer-broker agreement, the agent represents the seller and may relay that information. Rule of thumb: agency follows a written agreement and disclosure, not casual conversation.
Brokerage Relationships and Fiduciary Duties
Fiduciary duties in brokerage
The core fiduciary duties are care, obedience, loyalty, disclosure, accounting, and confidentiality (often remembered as COLDAC). Care means using reasonable skill and diligence; obedience means following lawful client instructions; loyalty means putting the client's interests first and avoiding self-dealing or secret profit; disclosure means revealing material facts that could affect the client's decision; accounting means safeguarding and documenting money and property; confidentiality means not revealing the client's negotiating position or private information. Confidentiality generally survives termination, but it never authorizes fraud or concealment of known material property defects. In dual agency, the broker must remain neutral and cannot advocate for one side over the other; designated agency assigns different agents within the same brokerage to represent each side. Traps: thinking confidentiality covers known structural defects; assuming a dual agent can negotiate hard for one party; confusing the duty to disclose material facts with gossip; and forgetting that fiduciary duties are owed to the client, not the customer. Worked example: an agent representing the seller learns the seller will accept $10,000 less. The agent must not tell the buyer, because that would breach loyalty and confidentiality; the agent may advise the seller on strategy. Rule of thumb: when information would help the other side, keep it confidential unless it is a material property fact or the client authorizes disclosure.