A Philosophical Analysis and Broker’s Opinion – Not a Legal Opinion. 

By Vince Mooney

    After a philosophical analysis of the language in the new Brokerage Relationships Act, I have found no material difference between a Single Party broker and an agent under the common law of agency. Therefore the possibility exists that, at a later date, there will be a class action suit claiming that in all transactions in which a company acted as a Single Party broker, they were really undisclosed agents, that they violated the law by acting as agents; and, as such, did not use reasonable care. As a result, they are not entitled to any commissions earned while acting as a Single Party broker. The plaintiffs ask that such brokers be ordered to return all commissions earned. No damages are claimed or requested. Only the agency remedy of forfeiture of commissions is asked which is appropriate when an agent violates a fiduciary duty owed to a principal.

(1) Do not function as a Single Party Broker unless your company lawyer has reviewed this article and assured you that it is safe to act as a Single Party broker. Have your attorney show how there is a material difference between a Single Party broker and an agent under the common law of agency. Get the attorney’s opinion in writing and keep it on file just in case there is a stockholders suit at a later date.

(2) A duly authorized government entity should immediately request an official Attorney General’s ruling on whether a Single Party broker is an agent under the common law of agency. There is no need to wait for the first test case in court.

(3) Get the Legislature to really abrogate the law of agency for licensees and make it legally impossible to be an agent, accidentally or intentionally. (This is probably politically impossible, however.)

The Argument:

What is an agent? Barron’s Real Estate Guide states it this way: "AGENT: one who undertakes to transact some business or to manage some affair for another, with the authority of the latter." Black’s Law Dictionary has this to say: "Agent. A person authorized by another to act for him, one entrusted with another’s business."

A Single Party broker, who has a written agreement giving him authority to act for the employing party, has a duty of obedience and may place his employing party in a position of vicarious liability for his actions. A single party broker has a right in the law to accept delivery of purchase offers made to the seller. All these functions could help qualify a Single Party broker as an agent. That is, under the most basic definition of an agent.

The legislature did not abrogate the common law of agency regarding real estate agents in Oklahoma. It only abrogated a small part of the entire agency matrix. To whit:

"SECTION 10. The duties and responsibilities of a broker specified in Sections 1 through 13 of this act shall replace and abrogate the fiduciary or other duties of a broker to a party based on common law principles of agency. "

And in the very next sentence, the Legislature seemed intent on keeping agency remedies:

"The remedies at law and equity supplement the provisions of Sections 1 through 13 of this act."

Thus, agency was not abrogated and agency remedies for the violation of Single Party duties may still be available.

If agency were not abrogated in toto, wouldn’t it then be possible to act as an agent: either intentionally or accidentally? Yes, it would seem so. Therefore the Legislature acted to make it illegal to act as an agent.

"Section 5: D. A broker may cooperate with other brokers in a transaction. Under Sections 1 through 13 of this act, a broker shall not be an agent, subagent, or dual agent and an offer of subagency shall not be made to other brokers.

Some brokers I’ve talked to advance the argument that since the law of agency was abrogated, it is impossible to become an agent either intentionally or accidentally. However, the law of agency was not abrogated; only a small part of it was. Also, one does not pass a law to make it illegal to do something that is logically impossible to do. For example, there is no law on the books to prevent a man from turning himself into an eagle. (You don’t pass a law to prevent an impossibility.)

There is a law that says a broker may not act as an agent; so logic would dictate that it is possible for a broker to be an agent and so doing would be illegal.

What Are The Fiduciary Duties an agent owes a principal?

Loyalty

Duty to put principal’s interest first; work for principal’s benefit

Duty to avoid unjust enrichment

Duty not to steal your client’s bargain

Obedience

Confidentiality

Accountability

Disclosure

Reasonable care

What are the Duties a Single Party broker owes his Employing Party?

SECTION 4:

Duty to work for the benefit of employing party

Honesty

Obedience

Confidentiality

Accountability

Disclosure

Reasonable Care

Comply with all requirements of the Oklahoma Real Estate License Code and all applicable statutes and rules

    The Single Party broker does not have a statutory duty of loyalty. Since loyalty is the sine qua non (that without which a thing cannot exist) of agency, it would seem loyalty would be the best fiduciary duty to eliminate to create a material difference between the Single Party Broker and the common law agent. Indeed, it could be said that loyalty is so encompassing, that all the other fiduciary duties could be derived from it:

If you are loyal, you will keep information confidential.

If you are loyal, you will disclose all material facts relevant to the agency.

If you are loyal, you will use reasonable care.

If you are loyal, you will account for all money and property that comes into your possession.

If you are loyal, you will not unjustly enrich yourself thru unauthorized use of the agency.

If you are loyal, you will not steal your client’s bargain.

Loyalty is, by far, the most important element of agency. The duty of loyalty was abrogated by the legislature in the new law and not replaced in the black law. However, has anyone really considered what it would mean not to have a duty of loyalty?

Could you then be disloyal?

(For example, give away your Party’s negotiation strategy? No)

Could you then unjustly enrich yourself?

(For example, charge a fee to buyers who tour the house of a famous person you have listed, keeping the money for yourself without the seller’s knowledge, No)

Could you steal your party’s bargain?

(For example,  if a buyer, with a Single Party agreement, asks you to check into a FSBO property and you find it to be a very good deal , could you buy it for yourself? Could you tell the buyer: "Too bad, I no longer have a duty of loyalty!" No.)

(For example, same as above, except that you tell a better Single Party buyer about the property first because the second Party gives you so much more business. No.)

Why Not? Why Can't You Be Disloyal? If You Don't Have a Duty of Loyalty?

At first it would seem you could act disloyally. After all, NOT having a duty of loyalty must mean something. But what could not having a duty of loyalty enable you to do? What is it exactly a Single Party broker can do because he does not have a duty of loyalty that an agent cannot do because he does have a duty of loyalty? This is the question that must be answered to protect the non-agency status of the Single Party broker.

Remember: a Single Party has a duty, in the law, to: comply with all requirements of the Oklahoma Real Estate License Code and all applicable statutes and rules

Compare Section 14: (The broker must avoid:) 8. Any other conduct, which constitutes untrustworthy, improper, fraudulent, or dishonest dealings;

I content that this provision of the law, effectively, restores the duty of Loyalty in that the Oklahoma Real Estate Commission would most likely declare any disloyal behavior "improper" or "untrustworthy".

     Again: Just what is it a Single Party broker can do that an agent is not allowed to do by the singular virtue on not having a duty of loyalty?

  A Question to the Lawyers:

     How would you prove that a Single Party broker is materially different from an agent under the common law?

     There are general agents, special agents, and universal agents; what is there to say a Single Party broker is not just another class of agent? Also, are you prepared to bet the "company" on your opinion? What do you think the odds are of wining this case?

A Question about the Courts:

The courts do not look kindly upon an attempt to get around a law by changing the name of something.

For example, do you think the courts would allow an apartment complex to discriminate against "minority non-believers" simply because it changed its name from The Garden Valley Apartments to The Garden Valley Church of the Lord?

The new "church" would be asked to demonstrate how it was now materially different from what it was as an apartment complex. If there were no material changes, and only the name changed, then the apartment would be guilty of discrimination; the claim to be a church would be no defense. It would be called a sham.

      Is a Single Party Broker in reality an agent under the common law of agency? I would say that all the evidence suggests a Single Party broker is an agent. Also, there does not seem to be any material difference between a Single Party broker and an agent. There may be a difference; I just cannot find it. 

     Show this article to your attorney. Ask for a legal opinion regarding the safety of performing services as a Single Party broker. Also, ask your attorney this: if acting as a Single Party broker is declared to be also acting as an agent, would the company have broken the law which is a misdemeanor? And would breaking the law in the performance of your duty be an exclusion in your Errors and Omissions policy?

There is a chance that brokers who engage in performing services as Single Party brokers may be "betting the company"?