When buying or selling real estate, a person usually retains a real estate agent or broker, someone with expertise in real estate law and practices, in order to assist them and protect their interests.
In most circumstances, the buyer and seller will each have their own real estate agent who represents each of their respective interests. But what happens when one real estate agent represents both the buyer and the seller in a real estate transaction?
Such an agent is known as a “dual agent.” Although it is illegal in some states for a real estate agent to act as a dual agent, it is legal in California, so long as the agent obtains informed consent from both the buyer and seller.
What are the legal requirements for an agent to serve as a dual agent in California?
California Civil Code Section 2079.16 requires a written disclosure to be made by a real estate agent, outlining the duties and responsibilities of that agent to the party or parties he or she represents.
This disclosure includes a particular section on the duties of a dual agent. Specifically, a dual agent owes both buyer and seller “(a) fiduciary duty of utmost care, integrity, honesty, and loyalty in the deals with either the Seller or the Buyer.”
This is in addition to duties of good faith, honest dealing, and disclosure to disclose any facts which would materially affect the value or desirability of the property in question, if such facts are known to the agent and are not readily discoverable to either party.
In addition to the fiduciary duties owed to both parties, a dual agent also owes both buyer and seller a duty of confidentiality, and cannot disclose confidential information obtained from one party to the other.
The dual agent is required, under Section 2079.17, to give a written disclosure to each party that he or she is representing both the buyer and the seller.
The agent may do so either as part of the real estate purchase contract, or in a separate writing signed by the buyer, seller, and agent, either before executing the purchase contract, or as part of the execution of that contract.
However, disclosing merely the fact of dual agency is insufficient. The dual agent is also required to disclose “all facts which would reasonably affect the judgement of each party in permitting the dual representation.”
Huijers v. DeMarrais, 11 Cal.App.4th 676 (1992), 686.
It should be noted that the California Civil Code distinguishes a dual agency situation from a circumstance in which one party has retained a real estate agent but the other has not.
Section 2079.22 makes clear that a real estate agent representing one party does not automatically become a dual agent if the other party elects not to retain representation.
Should a dual agent fail to disclose the dual agency to one or both parties, the dual agent will face loss of commission, and the sales transaction will be voidable at the election of the party to whom the dual agency was not properly disclosed.
McConnell v. Cowen, 44 Cal.2d 805 (1955), 809.