Legal Line Question: Advanced Informed Consent to Dual Agency
Is advanced informed consent to dual agency permitted in New York?
Dual agency, which is a situation where a real estate broker is representing both parties in the same transaction (i.e. buyer and seller or landlord and tenant), is permissible in New York State provided that the real estate broker meets certain disclosure obligations. Similarly, it is permissible for a real estate broker to obtain a party’s advanced informed consent to the possibility of dual agency in the future (i.e. the real estate broker does not know if dual agency will be created or not).
What are the real estate broker’s disclosure obligations when obtaining a party’s advanced informed consent to dual agency?
In order to obtain a party’s advanced informed consent to dual agency, the real estate broker must disclose to the party what dual agency is and the implications of entering into a dual agency relationship with the real estate broker. More particularly, the parties should be advised that: (i) in a dual agency situation, the real estate broker will be working for both parties, (ii) they are each free to engage their own real estate broker, (iii) they are giving up their right to the real estate broker’s undivided loyalty and (iv) they should carefully considered the possible consequences of a dual agency relationship.
If the dual agency relationship is created in the future, the real estate broker must inform the parties of such fact and the parties must acknowledge such dual agency relationship. The acknowledgment must be in writing and should reiterate the disclosures set forth above.
If the real estate broker provides the New York State Agency Disclosure Form (the “ADF”) to a party and the party checks the “Advanced Informed Consent to Dual Agency” box and signs the ADF, do the actions of the party evidence the party’s advanced informed consent to dual agency?
No, simply providing the ADF to the party (even if the correct boxes are checked and the party signs the ADF) does not satisfy the advanced informed consent to dual agency requirement. The real estate broker must carefully explain the potential ramifications of the dual agency relationship, as enumerated above, and ensure that the party understands the consequences of entering into a dual agency relationship.
What are the consequences if: (i) the real estate broker does not meet its disclosure obligations concerning dual agency, (ii) a party does not provide advanced informed consent to dual agency, or (iii) the parties are not informed and do not acknowledge the creation of the dual agency relationship?
If a party files a complaint with the New York State Department of State (“DOS”) concerning an undisclosed dual agency relationship, the DOS could fine the real estate broker, suspend the real estate broker’s license and/or revoke the real estate broker’s license. Additionally, in any transaction involving undisclosed dual agency, the real estate broker risks the forfeiture of the commission earned in connection with such transaction.
|Neil B. Garfinkel,
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP