1. The Property Management Webinar Series Presents The Law of Agency & Intermediary Presented by KINSKI LEUFFER Associate Counsel May 16, 2012

2. Webinar Outline Agency, Generally  Definitions  Authority  Duties Special Agency Types: Intermediary Termination of Agency Liability Issues Questions

3. Definitions What is agency?

4. Definitions Agency is the legal relationship between an agent and a principal.

5. Definitions What is an agent?

6. Definitions What is an agent? –An agent is a person who has the legal authority to act for another.

7. Definitions What is a principal?

8. Definitions What is a principal? –A principal is a person who authorizes another to act

9. Definitions What is the difference between a client and a customer?

10. Definitions What is the difference between a real estate agent’s client and a customer? –A client is a person whom the licensee has agreed to represent. Ex. Has a listing agreement or property management agreement.

11. Definitions What is the difference between a real estate agent’s client and a customer? –A client is a person whom the licensee has agreed to represent. Ex. Has a listing agreement or property management agreement. –A customer is a person who is not represented, but can receive information and assistance from a licensee. Ex. A listing agent assists an unrepresented tenant.

12. Definitions What is the difference between a real estate agent’s client and a customer? –A client is a person whom the licensee has agreed to represent. Ex. Has a listing agreement or property management agreement. –A customer is a person who is not represented, but can receive information and assistance from a licensee. Ex. A listing agent assists an unrepresented tenant. –When we talk about a “principal”, we are referring to a client.

13. Agent’s Authority An agent’s authority can either be: 1.Actual authority (express or implied), 2.Apparent authority, or 3.Other types of authority.

14. Agent’s Authority: Where does it come from? Actual authority –An agent’s actual authority can come from one of three places: A written agreement

15. Agent’s Authority: Where does it come from? A written agreement could include things like: 1.A listing agreement (TAR 1102), 2.A tenant’s representation agreement (TAR 1501), 3.A property management agreement (TAR 2201), or 4.Any other written agreement in which the agent is given the authority to act on behalf of the principal and agrees to do so.

16. Agent’s Authority: Where does it come from? Question : If I am going to act as a tenant's agent, must I have a written tenant's representation agreement?

17. Agent’s Authority: Where does it come from? Answer 1: While the agency relationship can exist without a written agreement, there are many reasons why it should be in writing: 1.TRELA section 1101.806(c) provides that a broker may not sue for the recovery of a commission unless there is a written agreement signed by the person agreeing to pay that commission. 2.If a broker's practice or office policy permits the broker to act as an intermediary, then TRELA requires that the broker obtain the written consent of each party and that written consent must also state who will pay the broker. 3.It is just good business to reduce to writing the rights and obligations of the broker and his client to insure a meeting of the minds of the parties as to all the essential terms of those rights and obligations. Furthermore, Article 9 of the Code of Ethics requires that REALTORS® shall assure whenever possible that agreements shall be in writing for the protection of all parties.

18. Agent’s Authority: Where does it come from? An agent’s actual authority can come from one of three places: –A written agreement, –An oral agreement, or –Through implied authority created by industry custom, common usage, or the conduct of the parties.

19. Agent’s Authority: Where does it come from? An agent’s actual authority can come from one of three places: –A written agreement, –An oral agreement, or –Through implied authority created by industry custom, common usage, or the conduct of the parties. Example: The listing agent may have the authority to advertise the rental property in a specific newspaper, but the listing agreement may not actually say this.

20. Agent’s Authority: Where does it come from? An agent’s apparent authority arises when the principal gives a 3 rd party reason to believe another person is his or her agent. –Note: The principal may be bound by the acts of the agent, even if the agent and principal had no agreement.

21. Agent’s Authority: Where does it come from? An agent’s apparent authority arises when the principal gives a 3 rd party reason to believe another person is his or her agent. The principal may be bound by the acts of the agent, even if the agent and principal had no agreement. Example: An owner asks a friend, who is an agent, to show her home to a potential tenant. The owner tells the potential tenant that the friend is her agent. Even though there is no listing agreement or property management agreement, the owner gives the impression that the friend represents the owner.

22. Agent’s Authority: Where does it come from? Other types of authority include: –Agency by ratification, and –Agency coupled with an interest.

23. Agent’s Authority: Where does it come from? Agency by ratification arises when the agent acts on behalf of the principal initially without authority, but the principal later agrees to the agent’s act. The agent is considered by the court to have had the authority originally. Example: An agent negotiates a deal for a lease without ever speaking to the owner. The agent arrives at the owner’s door with a completed lease simply awaiting the owner’s signature. If the owner signs, it is likely an agency by ratification has been created.

24. Agent’s Authority: Where does it come from? Agency coupled with an interest is created when an agent has some kind of interest in the property that is being sold.

25. Agent’s Duties: What are the duties of an agent to the principal? A real estate agent’s duties to his or her principal (client) come from two places: 1.Common law (the court system)

26. Agent’s Duties: What are the duties of an agent to the principal? A real estate agent’s duties to his or her principal come from two places: 1.Common law (the court system) 2.Statutes and rules (i.e. The Real Estate License Act, TREC Rules, Code of Ethics etc.)

27. Agent’s Duties: What are an agent’s duties to the principal? Under the common law, when a real estate agent represents a landlord or tenant, that agent is considered a fiduciary. A fiduciary is a person who holds a position of special confidence and trust by agreeing to act primarily for the benefit of another. Because of this confidence and trust, the fiduciary owes several duties to the person he or she is representing.

28. Agent’s Duties: What are an agent’s duties to the principal? What are these duties? –These duties include the duty of reasonable care, loyalty, obedience, accounting, confidentiality, and disclosure.

29. Agent’s Duties: What are an agent’s duties to the principal? Additionally, Texas law, as well as the Code of Ethics, impose many duties on real estate agents. Many of these duties overlap with the common law fiduciary duties imposed on agents.

30. Agent’s Duties: What are an agent’s duties to the principal? Duty of reasonable care: –An agent is required to act with the prudence and care that a reasonable licensee would in the same or similar circumstances.

31. Agent’s Duties: What are an agent’s duties to the principal? Duty of reasonable care: –An agent is required to act with the prudence and care that a reasonable licensee would in the same or similar circumstances. Example: A property manager leaves a window open after showing the property to a potential buyer while the tenant is gone. A break-in occurs and many items are stolen. The property manager could be found to have breached the duty of reasonable care for failing to close the window if the court found it was something a reasonable licensee would not do.

32. Agent’s Duties: What are an agent’s duties to the principal? Texas law also requires agents act with reasonable care. Here are some examples: 1.TREC may discipline a licensee who acts negligently or incompetently. 2.Providing legal advice or a legal interpretation of a document is strictly prohibited. This would be beyond the expertise of the agent. Articles 1 & 11 of the Code of Ethics also require reasonable care.

33. Agent’s Duties: What are an agent’s duties to the principal? Duty of loyalty: –An agent is required to promote and protect the principal’s interests ahead of his or her own interests and to keep the principal fully informed as to all matters affecting the property.

34. Agent’s Duties: What are an agent’s duties to the principal? Duty of loyalty: –An agent is required to promote and protect the principal’s interests ahead of his or her own interests and to keep the principal fully informed as to all matters affecting the property. Example: An agent is representing the owner of a rental property. A potential tenant is interested in the property and the owner thinks she’s a good fit. The agent’s son is also interested in the property, so the agent tells the potential tenant the property is not available. This could be considered a breach of the duty of loyalty.

35. Agent’s Duties: What are an agent’s duties to the principal? Texas law also requires agents act with loyalty. Here are some examples: 1.TREC may discipline a licensee who engages in conduct that is dishonest. 2.TREC may discipline a licensee who offers to lease a property without the knowledge and consent of the owner. 3.TREC may discipline a licensee who accepts, receives, or charges an undisclosed commission rebate or making a direct profit on expenditures made for the principal. Articles 1, 6, & 7 of the Code of Ethics also requires loyalty to the client.

36. Agent’s Duties: What are an agent’s duties to the principal? Duty of obedience: –The agent is to obey all lawful instructions given by the principal and to apply best efforts and diligence to carry out those objectives.

37. Agent’s Duties: What are an agent’s duties to the principal? Duty of obedience: –An agent is to obey instructions given by the principal and to use his or her best efforts and diligence to carry out those instructions. Example: Anything the agent promises to do under the listing agreement or property management agreement and fails to do, aside from a breach of contract issue, could also be a breach of the duty of obedience.

38. Agent’s Duties: What are an agent’s duties to the principal? Texas law also requires agents act obediently. Here are some examples: 1.TREC may discipline a licensee who fails to surrender to the owner, without just cause, a document or instrument that is requested by the owner and that is in the licensee’s possession. 2.TREC may discipline a licensee who offers to lease real property on terms other than those authorized by the owner of the real property. Article 1 of the Code of Ethics also requires obedience.

39. Agent’s Duties: What are an agent’s duties to the principal? Duty to account: –An agent has a duty to account for funds received by the agent, which belong to another, and to keep such funds separate from the agent’s own funds.

40. Agent’s Duties: What are an agent’s duties to the principal? Duty to account: –An agent has a duty to account for funds received by the agent, which belong to another, and to keep such funds separate from the agent’s own funds. Example: The property manager receives the security deposit from a tenant. That agent must deposit that money in a trust account within a reasonable time and not the property manager’s operating account.

41. Agent’s Duties: What are an agent’s duties to the principal? Texas law also requires agents to account for any funds received by the agent that belong to the principal. Here are some examples: 1.TREC may discipline a licensee who fails within a reasonable time to properly account for or remit money that is received by the license holder and that belongs to another person; 2.TREC may discipline a licensee who commingles money that belongs to another person with the license holder’s own money. Article 8 of the Code of Ethics requires accounting.

42. Agent’s Duties: What are an agent’s duties to the principal? Duty of confidentiality: –An agent is obligated to safeguard the principal’s lawful confidences and secrets, but does not include an obligation to withhold known material facts about the condition of the seller’s property from the buyer, or to misrepresent the property’s condition.

43. Agent’s Duties: What are an agent’s duties to the principal? Duty of confidentiality: –An agent is obligated to safeguard the principal’s lawful confidences and secrets, but does not include an obligation to withhold known material facts about the condition of the seller’s property from the buyer, or to misrepresent the property’s condition. Example: The duty of confidentiality precludes an agent who represents an owner from disclosing to a potential tenant that the owner will rent the property at a lower rate than what the tenant is willing to pay per month for rent.

44. Agent’s Duties: What are an agent’s duties to the principal? Texas law also requires agents to maintain confidentiality. Here are some examples: 1.TREC may discipline an intermediary who discloses any confidential information or any information a party specifically instructs the intermediary in writing not to disclose, unless: (A) the broker or salesperson is otherwise instructed in a separate writing by the respective party; (B) the broker or salesperson is required to disclose the information by this chapter or a court order; or (C) the information materially relates to the condition of the property. Standard of Practice 1.9 of the Code of Ethics also requires confidentiality.

45. Agent’s Duties: What are an agent’s duties to the principal? Duty to disclose: –An agent must disclose to the principal all known relevant and material information that pertains to the scope of the agency.

46. Agent’s Duties: What are an agent’s duties to the principal? Duty to disclose: –An agent must disclose to the principal all known relevant and material information that pertains to the scope of the agency. Example: One day, while the tenant’s agent is driving by the property her client is considering renting, she sees that it is being treated for mold—something not disclosed to the tenant earlier. The agent must disclose this fact to her client.

47. Agent’s Duties: What are an agent’s duties to the principal? Texas law also requires agents to disclose certain information, not only to his or her client, but many times to third parties as well. Here are some examples: 1.A licensee is NOT required to disclose that a death occurred on a property by natural causes, suicide, or accident unrelated to the condition of the property. 2.TREC may discipline a licensee who accepts, receives, or charges an undisclosed commission, rebate or direct profit on an expenditure made for a principal. 3.A licensee must disclose who they represent to the other party in the transaction. 4.A licensee must provide the statutory language (found in the Information About Brokerage Services form) to the party you are working with at the first substantive discussion about a specific piece of real property. Articles 1, 2, 4, 6, & 7 of the Code of Ethics also require disclosure on some level.

48. Agent’s Duties: What are an agent’s duties to the principal? Here are the rules regarding representation disclosure: –A license holder who represents a party in a proposed real estate transaction shall disclose orally or in writing, that representation at the time of the licensee’s first contact with: (1) another party to the transaction; or (2) another license holder who represents another party to the transaction. TRELA § 1101.558(b). –The license holder shall provide to a party to a real estate transaction at the time of the first substantive dialogue with the party the written statement prescribed by Subsection (d) of this section…TRELA § 1101.558(c).

49. Agent’s Duties: What are an agent’s duties to the principal? Question: Does TREC recommend that licensees provide a written disclosure of representation?

50. Agent’s Duties: What are an agent’s duties to the principal? Answer: It is the licensee’s choice whether disclosure is in writing or oral. Proof of disclosure will be easier when the disclosure is in writing.

51. Agent’s Duties: What are an agent’s duties to the principal? Question: Does the Real Estate License Act requirement to provide the Information About Brokerage Services form or statement apply to transactions other than residential sales?

52. Agent’s Duties: What are an agent’s duties to the principal? Answer: Yes. This statutory requirement is applicable to all real estate transactions unless: (1) the proposed transaction is for a residential lease of not more than one year with no sale being considered as part of that transaction; or (2) a licensee meets a party who is represented by another licensee.

53. Agent’s Duties: What are an agent’s duties to the principal? Question: I am an agent and it is a policy in our office to include the Information About Brokerage Services Form with our listing agreement packet. Is this okay?

54. Agent’s Duties: What are an agent’s duties to the principal? Answer: No. Generally speaking, this will hardly ever be the time to hand over the IABS form because you would, of course, have already had your first substantive discussion about a specific piece of real property with your client. However, if you do have your first substantive discussion while signing the listing or buyer’s rep agreement, this would be an appropriate time.

55. Agent’s Duties: What are an agent’s duties to the principal? Question: As an agent, I place a link to the IABS form in my email signature, so all email correspondence between myself and my client contain that link. Does this meet the requirements of the statute?

56. Agent’s Duties: What are an agent’s duties to the principal? Answer: No. For the same reasons that you cannot simply place the IABS form behind the listing agreement and consider the requirement met, you cannot passively include a link in your email signature. This is something that needs to be discussed, brought to the attention of your client at the first substantive dialogue, and should be signed.

57. Agent’s Duties: What are an agent’s duties to the principal? Any other duties Texas law requires of an agent? –Minimum Services: A broker: 1) may not instruct another broker to directly or indirectly violate the License Act by contacting a broker’s principal either directly or indirectly; 2) must inform his principal if a broker received material information related to the transaction to list, buy, sell, or lease the party’s real estate, including the receipt of an offer by the broker; and 3) shall at a minimum, answer their principal’s questions and present any offer to or from that principal.

58. Agent’s Duties: What are an agent’s duties to the principal? Question: Where can I find the minimum-services requirements concerning presenting and negotiating offers? I represent sellers and buyers and want to be sure that I am complying with the law.

59. Agent’s Duties: What are an agent’s duties to the principal? Answer: The Real Estate License Act contains provisions that impose requirements on buyer's agents as well as seller's agents concerning the presentation of offers and negotiating transactions. For example, in most cases the buyer's agent must send a copy of any offer to the listing broker, even if the listing broker consents to the delivery of an offer directly to the seller. In turn, the listing broker must answer a seller's questions regarding any offer made to the seller and present any counteroffer from the seller to the buyer.

60. Agent’s Duties: What are an agent’s duties to others? In addition to the duties owed to a principal, an agent also owes some duties to 3 rd parties. An agent owes a duty of honesty and fairness to all parties in a transaction. Additionally, an agent has a duty to disclose: –Who he or she represents to an unrepresented party or to the other agent upon first contact –Any interest in the property or if the property is being acquired on behalf of the agent or a relation. –Any latent structural defect that would be a significant factor to a reasonable purchaser in making a decision to purchase.

61. Special Agency Types: Intermediary What is an intermediary?

62. Special Agency Types: Intermediary What is an intermediary? –An intermediary is a broker who is employed to negotiate a transaction between the parties to a transaction and for that purpose may act as an agent of the parties.

63. Special Agency Types: Intermediary What are the rules?

64. Special Agency Types: Intermediary 1.A broker may act as an intermediary between the parties to a real estate transaction if: (1)the broker obtains written consent from each party for the broker to act as an intermediary in the transaction; and (2) the written consent of the parties states the source of any expected compensation to the broker.

65. Special Agency Types: Intermediary 2. A broker and any broker or salesperson appointed who acts as an intermediary may not disclose to the buyer or tenant that the seller or landlord will accept a price less than the rental price, unless otherwise instructed in a separate writing by the seller or landlord.

66. Special Agency Types: Intermediary 3. A broker and any broker or salesperson appointed who acts as an intermediary may not disclose to the seller or landlord that the buyer or tenant will pay a price greater than the price submitted in a written offer to the seller or landlord, unless otherwise instructed in a separate writing by the buyer or tenant.

67. Special Agency Types: Intermediary 4. A broker and any broker or salesperson appointed who acts as an intermediary may not disclose any confidential information or any information a party specifically instructs the broker or salesperson in writing not to disclose, unless: (A) the broker or salesperson is otherwise instructed in a separate writing by the respective party; (B) the broker or salesperson is required to disclose the information by this chapter or a court order; or (C) the information materially relates to the condition of the property.

68. Special Agency Types: Intermediary 5. A broker and any broker or salesperson appointed who acts as an intermediary may not treat a party to a transaction dishonestly.

69. Special Agency Types: Intermediary 6.A broker and any broker or salesperson appointed who acts as an intermediary may not violate this chapter of the Real Estate License Act.

70. Special Agency Types: Intermediary 7. A broker who complies with the written consent requirements may appoint: (1) a license holder associated with the broker to communicate with and carry out instructions of one party to a real estate transaction; and (2) another license holder associated with the broker to communicate with and carry out instructions of any other party to the transaction.

71. Special Agency Types: Intermediary 8. A license holder may be appointed only if: (1) the written consent of the parties authorizes the broker to make the appointment; and (2) the broker provides written notice of the appointment to all parties involved in the real estate transaction. The Intermediary Relationship Notice (TAR 1409) can be used for this. –A license holder appointed under this section may provide opinions and advice during negotiations to the party to whom the license holder is appointed.

72. Special Agency Types: Intermediary What does written consent look like?

73. Special Agency Types: Intermediary Written consent could be a written listing agreement or tenant’s rep agreement that authorizes a broker to act as an intermediary, if the written agreement specifies in conspicuous bold or underlined print, the conduct that is prohibited under Section 1101.651 (d).

74. Special Agency Types: Intermediary What can an intermediary relationship look like?

75. Special Agency Types: Intermediary Broker Associate 2 Tenant Associate 1 Landlord Because the Broker has made appointments, the associates will provide opinions and advice to the parties during negotiations.

76. Special Agency Types: Intermediary Broker TenantLandlord Associate 1Associate 2 Because the Broker has not made appointments, the associates will NOT be able to provide opinions and advice to the parties during negotiations.

77. Special Agency Types: Intermediary Associate 1 Associate 3 Tenant Associate 2 Landlord What about this?

78. Special Agency Types: Intermediary Associate 1 Associate 3 Tenant Associate 2 Landlord An agent CANNOT act as an intermediary! An intermediary must be a broker.

79. Special Agency Types: Intermediary Broker Associate 1 TenantLandlord

80. Special Agency Types: Intermediary Broker Associate 2 Tenant Associate 1 Landlord

81. Special Agency Types: Intermediary Broker Associate 3 Tenant Associate 2 Landlord

82. Special Agency Types: Intermediary Sole Practitioner TenantLandlord What about this?

83. Special Agency Types: Intermediary Broker (Firm) Associate 3 Tenant Broker/Owner Landlord What about this?

84. Special Agency Types: Intermediary This is most likely how an intermediary relationship would be created and what it would look like… 1.At the time of the first substantive dialogue with a client, the agent would provide the landlord and/or potential tenant with a copy of the Information About Brokerage Services form, which includes an explanation of intermediary. 2.The brokerage firm would negotiate a written listing contract with a landlord and a written tenant representation agreement with a tenant. In those documents, they would authorize the broker to act as an intermediary and would contain the broker’s obligations set forth in Section 1101.651(d) of TRELA. At this point, the broker and associated licensees would be functioning still as exclusive agents of the individual parties. 3.When it becomes evident that the tenant represented by the firm wishes to rent the property listed with the firm, the intermediary status would come into play, and the intermediary may appoint different associates to work with the parties. The intermediary would notify both parties in writing of the appointments of licensees to work with the parties. The associates would provide advice and opinions to their respective parties during negotiations, and the intermediary broker would be careful not to favor one party over the other in any action taken by the intermediary. This is most likely how an intermediary relationship would be created and what it would look like… 1.At the time of the first substantive dialogue with a client, the agent would provide the landlord and/or potential tenant with a copy of the Information About Brokerage Services form, which includes an explanation of intermediary. 2.The brokerage firm would negotiate a written listing contract with a landlord and a written tenant representation agreement with a tenant. In those documents, they would authorize the broker to act as an intermediary and would contain the broker’s obligations set forth in Section 1101.651(d) of TRELA. At this point, the broker and associated licensees would be functioning still as exclusive agents of the individual parties. 3.When it becomes evident that the tenant represented by the firm wishes to rent the property listed with the firm, the intermediary status would come into play, and the intermediary may appoint different associates to work with the parties. The intermediary would notify both parties in writing of the appointments of licensees to work with the parties. The associates would provide advice and opinions to their respective parties during negotiations, and the intermediary broker would be careful not to favor one party over the other in any action taken by the intermediary.

85. Special Agency Types: Intermediary Question: As the broker in my firm, can I appoint myself as an agent to represent one of the parties in an intermediary situation?

86. Special Agency Types: Intermediary Answer: No. TRELA sec.1101.559(a) requires that the intermediary in the transaction be a broker. Section 1101.559(c) of TRELA requires that the intermediary act fairly and impartially in appointing associates to represent parties in intermediary situations. The appointment of a sales associate to represent one party and the appointment of the firm’s broker to represent the other party might not be a fair and impartial appointment.

87. Special Agency Types: Intermediary Question: I'm the listing agent for an out-of state owner who is renting out his single-family residence. The owner and I have signed a Residential Real Estate Listing Agreement, Exclusive Right to Lease (TAR 1102). A prospective tenant who drove by the property saw a for-lease sign with my phone number. He contacted me to inquire about the property and to request a rental application. Will this trigger an intermediary relationship?

88. Special Agency Types: Intermediary Answer: A mere discussion with the prospective tenant concerning the property and the rental application will not trigger an intermediary relationship. On the other hand, if the prospective tenant requests that you represent him throughout the lease negotiation process, you will need to obtain the prospective tenant’s written consent for your broker to act as an intermediary.

89. Special Agency Types: Intermediary Question: The same prospective tenant was approved and is now three months into his lease. He just contacted me because he's interested in purchasing the property. The tenant requested that I represent him in the purchase of the property. How do I represent the tenant if I already represent the owner? Can my broker be appointed to represent the tenant?

90. Special Agency Types: Intermediary Answer: These facts will trigger an intermediary relationship. Since you represent the seller, you need to verify that the listing agreement permits your broker to act as an intermediary. If so, the tenant will also need to give written consent for an intermediary relationship. The Residential Buyer/Tenant Representation Agreement (TAR 1501) is sufficient for obtaining written consent. Next, you will need to determine whether it's the policy of the brokerage firm to appoint licensees to each side. If so, the broker is prohibited from appointing himself to represent the tenant. The broker will need to appoint another agent within the brokerage firm to represent the tenant. If appointments are made, the owner and the tenant will need to be provided with written notice of the appointment. The Intermediary Relationship Notice (TAR 1409) serves this purpose. Appointments are not mandatory, but they allow licensees to provide advice and opinions to the parties.

91. Special Agency Types: Intermediary Question: May the same salesperson be appointed by the intermediary to work with both parties in the same transaction?

92. Special Agency Types: Intermediary Answer: No. The law requires the intermediary to appoint different associated licensees to work with each party. However, more than one associated licensee can be appointed by the intermediary to work with the same party.

93. Termination of Agency How can agency be terminated?

94. Termination of Agency Agency is highly personal, so it may be terminated at any time by either party. However, terminating early may subject one to contractual liability. This means that the obligation to pay may not necessarily be terminated. If the principal terminates the agency relationship, the agent should stop acting as an agent for that owner or tenant and should attempt to resolve any compensation that may be due with the principal.

95. Termination of Agency An agency relationship can be terminated several ways: 1) Mutual consent of principal and agent; Example: By written agreement, the owner and the agent agree to terminate their relationship. This could be done with TAR form 1410 (listing) or TAR form 1503 (tenant rep).

96. Termination of Agency An agency relationship can be terminated several ways: 1) Mutual consent of principal and agent; 2) Expiration of a term (or in the absence of a specified term, a reasonable time); Example: The term specified in the tenant’s rep agreement expires.

97. Termination of Agency An agency relationship can be terminated several ways: 1) Mutual consent of principal and agent; 2) Expiration of a term (or in the absence of a specified term, a reasonable time); 3) Purpose of the agency is completed by the agent (or another upon notice to agent) or there has been an occurrence of a specified event; Example: The tenant has found a home to rent and has signed a lease with the landlord.

98. Termination of Agency An agency relationship can be terminated several ways: 1) Mutual consent of principal and agent; 2) Expiration of a term (or in the absence of a specified term, a reasonable time); 3) Purpose of the agency is completed by the agent (or another upon notice to agent) or there has been an occurrence of a specified event; 4) Revocation by principal or renunciation by agent (power always exists, regardless of right); Example: The owner feels the agent has not been doing his job, so the owner “terminates” the agency relationship. Of course, this does not mean that the agreement is actually terminated as both parties need to agree to it as it is a binding contract.

99. Termination of Agency An agency relationship can be terminated several ways: 1) Mutual consent of principal and agent; 2) Expiration of a term (or in the absence of a specified term, a reasonable time); 3) Purpose of the agency is completed by the agent (or another upon notice to agent) or there has been an occurrence of a specified event; 4) Revocation by principal or renunciation by agent (power always exists, regardless of right); 5) Death or mental incompetency of principal or agent (sometimes statutory exception, i.e., durable power of attorney); or Example: The tenant dies before she is able to find a home to rent. The agency relationship is terminated.

100. Termination of Agency An agency relationship can be terminated several ways: 1) Mutual consent of principal and agent; 2) Expiration of a term (or in the absence of a specified term, a reasonable time); 3) Purpose of the agency is completed by the agent (or another upon notice to agent) or there has been an occurrence of a specified event; 4) Revocation by principal or renunciation by agent (power always exists, regardless of right); 5) Death or mental incompetency of principal or agent (sometimes statutory exception, i.e., durable power of attorney); or 6) Destruction of subject of the agency or other change in circumstances from which agent would reasonably infer that principal no longer consents to exercise of the agent’s authority. Example: The owner’s home is destroyed by a hurricane. The agency relationship is terminated because there is no home to lease.

101. Agency Liability Issues What are some potential liability issues to watch out for? 1) Misrepresentation –Misrepresentation occurs when the agent makes a false statement to a potential tenant or when a licensee fails to disclose to the tenant important facts about the property. –Example: An agent fails to disclose to a potential tenant that the property is prone to flooding, a material defect she knew about.

102. Agency Liability Issues What are some potential liability issues to watch out for? 1)Misrepresentation 2)Breach of contract –The listing agreement and/or tenant’s rep agreement, as well as the property management agreement and the lease agreement are BINDING contracts. Once executed by both parties, the terms become legally binding. –To terminate such an agreement, the right must be provided for in the agreement itself, by agreement of both parties, or by a court.

103. Agency Liability Issues What are some potential liability issues to watch out for? 1)Misrepresentation 2)Breach of contract 3)Breach of fiduciary duty –Any breach of a fiduciary duty can lead to TREC violations, ethical violations, and even charges of negligence and/or misrepresentation. –Example: The agent was found to be negligent by a jury because she failed to read the inspection report which she was given a copy. The inspection report stated that the foundation needed major repairs. The agent was also found to have misrepresented the property because she should have known about this material defect.

104. Agency Liability Issues What are some potential liability issues to watch out for? 1)Misrepresentation 2)Breach of contract 3)Breach of fiduciary duty 4)Prior Agency relationship –Closely related to breach of contract, an agent cannot interfere with an existing agency relationship. –This is true because of the requirements of the written agreement between the agent and principal, Texas law, and the Code of Ethics Article 16. –If a potential client tells an agent that they have an agent already, the agent should not perform services until a) they have confirmed there is not a signed representation agreement or b) if there is a signed agreement, that it has been terminated.

105. Agency/Intermediary Questions?

106. Conclusion Thanks for your participation in our webinar! Future Webinar Dates: –August 15, October 17, & December 19 Questions? –Contact the Legal Hotline 512-480-8200 Give us your feedback! –Complete the survey in the follow up email