What is the Agency Law Disclosure?

The Agency Law Disclosure is handed to all participants when listing, selling, buying or leasing for a term greater than one year:

  • single family residential property;
  • multi-unit residential property with more than four dwelling units;
  • commercial property;
  • vacant land;
  • a ground lease coupled with improvements; or
  • manufactured homes. [Calif. Civil Code §§2079.13(j), 2079.14]

The Agency Law Disclosure form is a restatement of existing codes and case law on agency relationships of licensees acting on behalf of another person in real estate transactions. [See RPI Form 305]

The goal of the agency disclosure law is to better inform the public (and licensees) about the duties licensees owe to members of the public. The law was put in place in an effort to eliminate developed misconceptions about licensee duties held by members of the public, also known as principals.

The agency disclosure law addresses two separate sets of agency-related matters on real estate transactions:

  • an Agency Law Disclosure form, also known as the Disclosure Regarding Real Estate Agency Relationships, setting out the “rules of agency” which control the conduct of real estate licensees when dealing with the public in an agency capacity. [See RPI Form 305]; and
  • an agency confirmation provision, contained in documents signed by principals used to negotiate the purchase of real estate or the leasing of real estate and lease agreements with a term exceeding one year, declaring the agency relationships undertaken by each of the brokers with the participants in the transaction. [See RPI Form 150]

Uniform jargon and agency law

The Agency Law Disclosure was created for use by brokers and their agents to educate and familiarize principals with:

  • a uniform jargon for real estate transactions; and
  • the various agency roles licensees undertake on behalf of their principals and other parties in a real estate transaction.

This information is presented in a two-page form. The exact wording of its content is dictated by statute. [CC §2079.16; See RPI Form 305]

The Agency Law Disclosure defines and explains the words and phrases commonly used in the real estate industry.

These industry terms are used to express:

  • the agency relationship of brokers to the participants in the transaction;
  • broker-to-broker relationships; and
  • the employment relationship between brokers and their agents.

A buyer’s agent and seller’s agent are mentioned but not defined. Legally, an agent is a licensed real estate broker. Thus, the word agent “agent,” when used in the disclosure, is not a reference to the broker’s agents. Ironically, a broker rarely refers to themselves as an agent, which in law, they always are when using their license to earn a fee.

However, two sections on the face of the Agency Law Disclosure, entitled “seller’s agent” and “buyer’s agent,” address the duties owed to the seller and buyer in a real estate transaction by these otherwise undefined brokers.

The seller’s broker is correctly noted as being an agent for the seller, and is also known within the trade as a listing broker or listing office. The buyer’s broker is known as a buyer’s agent. However, peculiar to real estate brokerage, the buyer’s broker is also known as the selling agent, a term the Agency Law Disclosure used prior to 2019.The Agency Law Disclosure does not mention, much less define, the broker’s role as an exclusive agent for either the buyer or seller. Yet the separate agency confirmation provision included in all targeted transactions calls for the broker to make this distinction known to all the parties involved. The mandated provision requires the broker to characterize their conduct with the parties as the agent of the seller or buyer exclusively, or both as a dual agent.

These exclusive characterizations of agency conduct have no relationship to employment under exclusive listings to sell or buy property. The seller’s agent with an exclusive right-to-sell listing understands the prospective buyer may turn out to be one of their buyer clients. This representation of opposing parties makes the broker a “non-exclusive” dual agent.

The participants, their brokers and the duties owed to all

The Agency Law Disclosure states the generally accepted principles of law governing the conduct of brokers who are acting as agents solely for a seller or buyer.

Two categories of broker obligations arise in a transaction, including:

  • the special or primary agency duties of an agent which are owed by a broker and their agents to their principal, known as fiduciary duties; and
  • the general duties owed by each broker to all parties in the transaction, requiring them to be honest and avoid deceitful conduct, known as general duties.