- September 24, 2020
- Posted by: Editor
- Category: Uncategorized
What is a Fiduciary?
A Fiduciary is an agent for a Client. The legal or special relationship of trust, confidence, or responsibility between two or more parties, most commonly a “Fiduciary” and a “Principal/Client”, is called the Fiduciary Duty.
The fiduciary duty is established via written authorization in the form of an Exclusive Buyer Agency Agreement, between a Buyer-Agent and Buyer-Client, that may or may not include consideration in the form of a retainer. So what’s the difference between being a non-Client and a Client? Statutory common laws and regulations define certain duties that are owed to both; however, fiduciary duties to a Principal/Client require greater responsibility.
The basic duties of a fiduciary that are owed to any real estate buyer whether they are a Customer/non-Client or a Principal/Client are as follows:
The agent is prohibited from advancing any interests adverse to the principal’s interest or conducting the principal’s business in such a way as to benefit a customer, a subagent, the agent or any other party to the detriment of the principal’s interest.
The agent is required to act, following and abiding all lawful instructions, subject to the control of the principal, but not exceeding the scope of the authority conferred by the principal. That is, do not make decisions for the principal.
- Reasonable care and diligence:
The agent is required to protect the principal’s interest from foreseeable risks of harm, recommending that the principal obtain expert advice or assistance when the principal’s needs are outside the scope of the agent’s expertise.
This is an essential attribute of an agent. All laws and regulations pertaining to the transaction must be obeyed, including the disclosure of material facts. No statement or action should result in fraud or misrepresentation.
The agent is required to report to the principal promptly all money and property received and paid out, and upon request, to tender an account of these actions. This duty also requires the agent to safeguard money or property held on behalf of the principal.
The agent is prohibited from communicating personal information about the principal that was given to or acquired by the agent within the scope of employment as an agent to the principal. Personal information must be kept confidential unless the client releases the agent, or subagent, from this duty. However, the material facts and defects of a property are NOT confidential.
- Full Disclosure:
The agent is required to disclose affirmatively all information concerning the transaction (and property) which might affect the decisions a principal makes, informing the principal what the agent knows. Disclosure of agency relationships, including an explanation of the difference between a customer and principal/client relationship, must be made in a timely fashion so that customers can protect their own interests. (e.g. reveal any confidential information). Material facts about properties must also be disclosed.