AN ACT Relating to real
estate brokerage relationships; amending RCW 18.85.230; adding a new chapter to
Title 18 RCW; creating a new section; and providing an effective date.
BE IT ENACTED BY THE
LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec.
1. DEFINITIONS. Unless the context
clearly requires otherwise, the definitions in this section apply throughout
this chapter.
(1) "Agency
relationship" means the agency relationship created under this chapter or
by written agreement between a licensee and a buyer and/or seller relating to
the performance of real estate brokerage services by the licensee.
(2) "Agent"
means a licensee who has entered into an agency relationship with a buyer or
seller.
(3) "Business
opportunity" means and includes a business, business opportunity, and
goodwill of an existing business, or any one or combination thereof.
(4) "Buyer"
means an actual or prospective purchaser in a real estate transaction, or an
actual or prospective tenant in a real estate rental or lease transaction, as
applicable.
(5) "Buyer's
agent" means a licensee who has entered into an agency relationship with
only the buyer in a real estate transaction, and includes subagents engaged by
a buyer's agent.
(6) "Confidential
information" means information from or concerning a principal of a
licensee that:
(a) Was acquired by the
licensee during the course of an agency relationship with the principal;
(b) The principal
reasonably expects to be kept confidential;
(c) The principal has
not disclosed or authorized to be disclosed to third parties;
(d) Would, if
disclosed, operate to the detriment of the principal; and
(e) The principal
personally would not be obligated to disclose to the other party.
(7) "Dual
agent" means a licensee who has entered into an agency relationship with
both the buyer and seller in the same transaction.
(8)
"Licensee" means a real estate broker, associate real estate broker,
or real estate salesperson, as those terms are defined in chapter 18.85 RCW.
(9) "Material
fact" means information that substantially adversely affects the value of
the property or a party's ability to perform its obligations in a real estate
transaction, or operates to materially impair or defeat the purpose of the
transaction. The fact or suspicion that the property, or any neighboring
property, is or was the site of a murder, suicide or other death, rape or other
sex crime, assault or other violent crime, robbery or burglary, illegal drug
activity, gang‑related activity, political or religious activity, or
other act, occurrence, or use not adversely affecting the physical condition of
or title to the property is not a material fact.
(10)
"Principal" means a buyer or a seller who has entered into an agency
relationship with a licensee.
(11) "Real estate
brokerage services" means the rendering of services for which a real
estate license is required under chapter 18.85 RCW.
(12) "Real estate
transaction" or "transaction" means an actual or prospective
transaction involving a purchase, sale, option, or exchange of any interest in
real property or a business opportunity, or a lease or rental of real
property. For purposes of this chapter, a prospective transaction does not
exist until a written offer has been signed by at least one of the parties.
(13) "Seller"
means an actual or prospective seller in a real estate transaction, or an
actual or prospective landlord in a real estate rental or lease transaction, as
applicable.
(14) "Seller's
agent" means a licensee who has entered into an agency relationship with
only the seller in a real estate transaction, and includes subagents engaged by
a seller's agent.
(15)
"Subagent" means a licensee who is engaged to act on behalf of a
principal by the principal's agent where the principal has authorized the agent
in writing to appoint subagents.
NEW SECTION. Sec.
2. RELATIONSHIPS BETWEEN
LICENSEES AND THE PUBLIC. (1) A licensee who performs real estate brokerage
services for a buyer is a buyer's agent unless the:
(a) Licensee has
entered into a written agency agreement with the seller;
(b) Licensee has
entered into a subagency agreement with the seller's agent;
(c) Licensee has
entered into a written agency agreement with both parties;
(d) Licensee is the
seller or one of the sellers; or
(e) Parties agree
otherwise in writing after the licensee has complied with section 3(1)(f) of
this act.
(2) In a transaction in
which different licensees affiliated with the same broker represent different
parties, the broker is a dual agent, and must obtain the written consent of
both parties as required under section 6 of this act. In such a case, each
licensee shall solely represent the party with whom the licensee has an agency
relationship, unless all parties agree in writing that both licensees are dual
agents.
(3) A licensee may work
with a party in separate transactions pursuant to different relationships,
including, but not limited to, representing a party in one transaction and at
the same time not representing that party in a different transaction involving
that party, if the licensee complies with this chapter in establishing the
relationships for each transaction.
NEW SECTION. Sec.
3. DUTIES OF A LICENSEE
GENERALLY. (1) Regardless of whether the licensee is an agent, a licensee owes
to all parties to whom the licensee renders real estate brokerage services the
following duties, which may not be waived:
(a) To exercise
reasonable skill and care;
(b) To deal honestly
and in good faith;
(c) To present all
written offers, written notices and other written communications to and from
either party in a timely manner, regardless of whether the property is subject
to an existing contract for sale or the buyer is already a party to an existing
contract to purchase;
(d) To disclose all
existing material facts known by the licensee and not apparent or readily
ascertainable to a party; provided that this subsection shall not be construed
to imply any duty to investigate matters that the licensee has not agreed to
investigate;
(e) To account in a
timely manner for all money and property received from or on behalf of either
party;
(f) To provide a
pamphlet on the law of real estate agency in the form prescribed in section 13
of this act to all parties to whom the licensee renders real estate brokerage
services, before the party signs an agency agreement with the licensee, signs
an offer in a real estate transaction handled by the licensee, consents to dual
agency, or waives any rights, under section 2(1)(e), 4(1)(e), 5(1)(e), or
6(2)(e) or (f) of this act, whichever occurs earliest; and
(g) To disclose in
writing to all parties to whom the licensee renders real estate brokerage
services, before the party signs an offer in a real estate transaction handled
by the licensee, whether the licensee represents the buyer, the seller, both
parties, or neither party. The disclosure shall be set forth in a separate
paragraph entitled "Agency Disclosure" in the agreement between the
buyer and seller or in a separate writing entitled "Agency
Disclosure."
(2) Unless otherwise
agreed, a licensee owes no duty to conduct an independent inspection of the
property or to conduct an independent investigation of either party's financial
condition, and owes no duty to independently verify the accuracy or
completeness of any statement made by either party or by any source reasonably
believed by the licensee to be reliable.
NEW SECTION. Sec.
4. DUTIES OF A SELLER'S
AGENT. (1) Unless additional duties are agreed to in writing signed by a
seller's agent, the duties of a seller's agent are limited to those set forth
in section 3 of this act and the following, which may not be waived except as
expressly set forth in (e) of this subsection:
(a) To be loyal to the
seller by taking no action that is adverse or detrimental to the seller's
interest in a transaction;
(b) To timely disclose
to the seller any conflicts of interest;
(c) To advise the
seller to seek expert advice on matters relating to the transaction that are
beyond the agent's expertise;
(d) Not to disclose any
confidential information from or about the seller, except under subpoena or
court order, even after termination of the agency relationship; and
(e) Unless otherwise
agreed to in writing after the seller's agent has complied with section 3(1)(f)
of this act, to make a good faith and continuous effort to find a buyer for the
property; except that a seller's agent is not obligated to seek additional
offers to purchase the property while the property is subject to an existing
contract for sale.
(2) A seller's agent
may show alternative properties not owned by the seller to prospective buyers
and may list competing properties for sale without breaching any duty to the
seller.
NEW SECTION. Sec.
5. DUTIES OF A BUYER'S AGENT.
(1) Unless additional duties are agreed to in writing signed by a buyer's
agent, the duties of a buyer's agent are limited to those set forth in section
3 of this act and the following, which may not be waived except as expressly
set forth in (e) of this subsection:
(a) To be loyal to the
buyer by taking no action that is adverse or detrimental to the buyer's
interest in a transaction;
(b) To timely disclose
to the buyer any conflicts of interest;
(c) To advise the buyer
to seek expert advice on matters relating to the transaction that are beyond
the agent's expertise;
(d) Not to disclose any
confidential information from or about the buyer, except under subpoena or
court order, even after termination of the agency relationship; and
(e) Unless otherwise
agreed to in writing after the buyer's agent has complied with section 3(1)(f)
of this act, to make a good faith and continuous effort to find a property for
the buyer; except that a buyer's agent is not obligated to: (i) Seek
additional properties to purchase while the buyer is a party to an existing
contract to purchase; or (ii) show properties as to which there is no written
agreement to pay compensation to the buyer's agent.
(2) A buyer's agent may
show properties in which the buyer is interested to other prospective buyers
without breaching any duty to the buyer.
NEW SECTION. Sec.
6. DUTIES OF A DUAL AGENT.
(1) A licensee may act as a dual agent only with the written consent of both
parties to the transaction after the dual agent has complied with section
3(1)(f) of this act, which consent must include a statement of the terms of
compensation.
(2) Unless additional
duties are agreed to in writing signed by a dual agent, the duties of a dual
agent are limited to those set forth in section 3 of this act and the
following, which may not be waived except as expressly set forth in (e) and (f)
of this subsection:
(a) To take no action
that is adverse or detrimental to either party's interest in a transaction;
(b) To timely disclose
to both parties any conflicts of interest;
(c) To advise both
parties to seek expert advice on matters relating to the transaction that are
beyond the dual agent's expertise;
(d) Not to disclose any
confidential information from or about either party, except under subpoena or
court order, even after termination of the agency relationship;
(e) Unless otherwise
agreed to in writing after the dual agent has complied with section 3(1)(f) of
this act, to make a good faith and continuous effort to find a buyer for the
property; except that a dual agent is not obligated to seek additional offers
to purchase the property while the property is subject to an existing contract
for sale; and
(f) Unless otherwise
agreed to in writing after the dual agent has complied with section 3(1)(f) of
this act, to make a good faith and continuous effort to find a property for the
buyer; except that a dual agent is not obligated to: (i) Seek additional
properties to purchase while the buyer is a party to an existing contract to
purchase; or (ii) show properties as to which there is no written agreement to
pay compensation to the dual agent.
(3) A dual agent may
show alternative properties not owned by the seller to prospective buyers and
may list competing properties for sale without breaching any duty to the
seller.
(4) A dual agent may
show properties in which the buyer is interested to other prospective buyers
without breaching any duty to the buyer.
NEW SECTION. Sec.
7. DURATION OF AGENCY
RELATIONSHIP. (1) The agency relationships set forth in this chapter commence
at the time that the licensee undertakes to provide real estate brokerage
services to a principal and continue until the earliest of the following:
(a) Completion of
performance by the licensee;
(b) Expiration of the
term agreed upon by the parties; or
(c) Termination of the
relationship by mutual agreement of the parties.
(2) Except as otherwise
agreed to in writing, a licensee owes no further duty after termination of the
agency relationship, other than the duties of:
(a) Accounting for all
moneys and property received during the relationship; and
(b) Not disclosing confidential
information.
NEW SECTION. Sec.
8. COMPENSATION. (1) In any
real estate transaction, the broker's compensation may be paid by the seller,
the buyer, a third party, or by sharing the compensation between brokers.
(2) An agreement to pay
or payment of compensation does not establish an agency relationship between
the party who paid the compensation and the licensee.
(3) A seller may agree
that a seller's agent may share with another broker the compensation paid by
the seller.
(4) A buyer may agree
that a buyer's agent may share with another broker the compensation paid by the
buyer.
(5) A broker may be
compensated by more than one party for real estate brokerage services in a real
estate transaction, if those parties consent in writing at or before the time
of signing an offer in the transaction.
(6) A buyer's agent or
dual agent may receive compensation based on the purchase price without
breaching any duty to the buyer.
(7) Nothing contained
in this chapter obligates a buyer or seller to pay compensation to a licensee,
unless the buyer or seller has entered into a written agreement with the
licensee specifying the terms of such compensation.
NEW SECTION. Sec.
9. VICARIOUS LIABILITY. (1)
A principal is not liable for an act, error, or omission by an agent or
subagent of the principal arising out of an agency relationship:
(a) Unless the
principal participated in or authorized the act, error, or omission; or
(b) Except to the
extent that: (i) The principal benefited from the act, error, or omission; and
(ii) the court determines that it is highly probable that the claimant would be
unable to enforce a judgment against the agent or subagent.
(2) A licensee is not
liable for an act, error, or omission of a subagent under this chapter, unless
the licensee participated in or authorized the act, error or omission. This
subsection does not limit the liability of a real estate broker for an act,
error, or omission by an associate real estate broker or real estate
salesperson licensed to that broker.
NEW SECTION. Sec.
10. IMPUTED KNOWLEDGE AND
NOTICE. (1) Unless otherwise agreed to in writing, a principal does not have
knowledge or notice of any facts known by an agent or subagent of the principal
that are not actually known by the principal.
(2) Unless otherwise
agreed to in writing, a licensee does not have knowledge or notice of any facts
known by a subagent that are not actually known by the licensee. This subsection
does not limit the knowledge imputed to a real estate broker of any facts known
by an associate real estate broker or real estate salesperson licensed to such
broker.
NEW SECTION. Sec.
11. INTERPRETATION. This
chapter supersedes only the duties of the parties under the common law,
including fiduciary duties of an agent to a principal, to the extent
inconsistent with this chapter. The common law continues to apply to the
parties in all other respects. This chapter does not affect the duties of a
licensee while engaging in the authorized or unauthorized practice of law as
determined by the courts of this state. This chapter shall be construed
broadly.
NEW SECTION. Sec.
12. EFFECTIVE DATE. This
chapter shall take effect on January 1, 1997. This chapter does not apply to
an agency relationship entered into before January 1, 1997, unless the
principal and agent agree in writing that this chapter will, as of January 1,
1997, apply to such agency relationship.
NEW SECTION. Sec.
13. PAMPHLET ON THE LAW OF
REAL ESTATE AGENCY. The pamphlet required under section 3(1)(f) of this act
shall consist of the entire text of sections 1 through 12 of this act with a
separate cover page. The pamphlet shall be 8 1/2 by 11 inches in size, the
text shall be in print no smaller than 10-point type, the cover page shall be
in print no smaller than 12-point type, and the title of the cover page
"The Law of Real Estate Agency" shall be in print no smaller than
18-point type. The cover page shall be in the following form:
|
The Law of Real
Estate Agency
This pamphlet describes
your legal rights in dealing with a real estate broker or salesperson.
Please read it carefully before signing any documents.
|
The
following is only a brief summary of the attached law:
Sec.
1. Definitions. Defines the specific terms used in the law.
Sec.
2. Relationships between Licensees and the Public. States that a licensee who
works with a buyer or tenant represents that buyer or tenant -- unless the
licensee is the listing agent, a seller's subagent, a dual agent, the seller
personally or the parties agree otherwise. Also states that in a transaction
involving two different licensees affiliated with the same broker, the broker
is a dual agent and each licensee solely represents his or her client -- unless
the parties agree in writing that both licensees are dual agents.
Sec.
3. Duties of a Licensee Generally. Prescribes the duties that are owed by all
licensees, regardless of who the licensee represents. Requires disclosure of
the licensee's agency relationship in a specific transaction.
Sec.
4. Duties of a Seller's Agent. Prescribes the additional duties of a licensee
representing the seller or landlord only.
Sec.
5. Duties of a Buyer's Agent. Prescribes the additional duties of a licensee
representing the buyer or tenant only.
Sec.
6. Duties of a Dual Agent. Prescribes the additional duties of a licensee
representing both parties in the same transaction, and requires the written
consent of both parties to the licensee acting as a dual agent.
Sec.
7. Duration of Agency Relationship. Describes when an agency relationship
begins and ends. Provides that the duties of accounting and confidentiality
continue after the termination of an agency relationship.
Sec.
8. Compensation. Allows brokers to share compensation with cooperating
brokers. States that payment of compensation does not necessarily establish an
agency relationship. Allows brokers to receive compensation from more than one
party in a transaction with the parties' consent.
Sec.
9. Vicarious Liability. Eliminates the common law liability of a party for the
conduct of the party's agent or subagent, unless the agent or subagent is
insolvent. Also limits the liability of a broker for the conduct of a subagent
associated with a different broker.
Sec.
10. Imputed Knowledge and Notice. Eliminates the common law rule that notice
to or knowledge of an agent constitutes notice to or knowledge of the
principal.
Sec.
11. Interpretation. This law replaces the fiduciary duties owed by an agent to
a principal under the common law, to the extent that it conflicts with the
common law.
Sec.
12. Effective Date. This law generally takes effect on January 1, 1997.
NEW SECTION. Sec.
14. VIOLATION OF LICENSING
LAW. A violation of section 3 of this act is a violation of RCW 18.85.230.
NEW SECTION. Sec.
15. CAPTIONS NOT PART OF
LAW. Captions used in this chapter do not constitute any part of the law.
NEW SECTION. Sec.
16. Sections 1 through 15 of
this act shall constitute a new chapter in Title 18 RCW.
NEW SECTION. Sec.
17. Chapter 18.-- RCW
(sections 1 through 15 of this act) is intended to supersede WAC 308-124D-040.
Sec. 18. RCW 18.85.230 and 1990 c
85 s 1 are each amended to read as follows:
The director may, upon
his or her own motion, and shall upon verified complaint in writing by any
person, investigate the actions of any person engaged in the business or acting
in the capacity of a real estate broker, associate real estate broker, or real
estate salesperson, regardless of whether the transaction was for his or her
own account or in his or her capacity as broker, associate real estate broker,
or real estate salesperson, and may impose any one or more of the following
sanctions: Suspend or revoke, levy a fine not to exceed one thousand dollars
for each offense, require the completion of a course in a selected area of real
estate practice relevant to the section of this chapter or rule violated, or
deny the license of any holder or applicant who is guilty of:
(1) Obtaining a license
by means of fraud, misrepresentation, concealment, or through the mistake or
inadvertence of the director;
(2) Violating any of
the provisions of this chapter or any lawful rules or regulations made by the
director pursuant thereto or violating a provision of chapter 64.36, 19.105, or
58.19 RCW or section 3 of this act or the rules adopted under those
chapters or section;
(3) Being convicted in
a court of competent jurisdiction of this or any other state, or federal court,
of forgery, embezzlement, obtaining money under false pretenses, bribery,
larceny, extortion, conspiracy to defraud, or any similar offense or offenses:
PROVIDED, That for the purposes of this section being convicted shall include
all instances in which a plea of guilty or nolo contendere is the basis for the
conviction, and all proceedings in which the sentence has been deferred or
suspended;
(4) Making, printing,
publishing, distributing, or causing, authorizing, or knowingly permitting the
making, printing, publication or distribution of false statements, descriptions
or promises of such character as to reasonably induce any person to act
thereon, if the statements, descriptions or promises purport to be made or to
be performed by either the licensee or his or her principal and the licensee
then knew or, by the exercise of reasonable care and inquiry, could have known,
of the falsity of the statements, descriptions or promises;
(5) Knowingly
committing, or being a party to, any material fraud, misrepresentation,
concealment, conspiracy, collusion, trick, scheme or device whereby any other
person lawfully relies upon the word, representation or conduct of the
licensee;
(6) Accepting the
services of, or continuing in a representative capacity, any associate broker
or salesperson who has not been granted a license, or after his or her license
has been revoked or during a suspension thereof;
(7) Conversion of any
money, contract, deed, note, mortgage, or abstract or other evidence of title,
to his or her own use or to the use of his or her principal or of any other
person, when delivered to him or her in trust or on condition, in violation of
the trust or before the happening of the condition; and failure to return any
money or contract, deed, note, mortgage, abstract or other evidence of title
within thirty days after the owner thereof is entitled thereto, and makes
demand therefor, shall be prima facie evidence of such conversion;
(8) Failing, upon
demand, to disclose any information within his or her knowledge to, or to
produce any document, book or record in his or her possession for inspection of
the director or his or her authorized representatives acting by authority of
law;
(9) Continuing to sell
any real estate, or operating according to a plan of selling, whereby the
interests of the public are endangered, after the director has, by order in
writing, stated objections thereto;
(10) Committing any act
of fraudulent or dishonest dealing or a crime involving moral turpitude, and a
certified copy of the final holding of any court of competent jurisdiction in
such matter shall be conclusive evidence in any hearing under this chapter;
(11) Advertising in any
manner without affixing the broker's name as licensed, and in the case of a
salesperson or associate broker, without affixing the name of the broker as
licensed for whom or under whom the salesperson or associate broker operates,
to the advertisement; except, that a real estate broker, associate real estate
broker, or real estate salesperson advertising their personally owned real
property must only disclose that they hold a real estate license;
(12) Accepting other
than cash or its equivalent as earnest money unless that fact is communicated
to the owner prior to his or her acceptance of the offer to purchase, and such
fact is shown in the earnest money receipt;
(13) Charging or
accepting compensation from more than one party in any one transaction without
first making full disclosure in writing of all the facts to all the parties
interested in the transaction;
(14) Accepting, taking
or charging any undisclosed commission, rebate or direct profit on expenditures
made for the principal;
(15) Accepting
employment or compensation for appraisal of real property contingent upon
reporting a predetermined value;
(16) Issuing an
appraisal report on any real property in which the broker, associate broker, or
salesperson has an interest unless his or her interest is clearly stated in the
appraisal report;
(17) Misrepresentation
of his or her membership in any state or national real estate association;
(18) Discrimination
against any person in hiring or in sales activity, on the basis of race, color,
creed or national origin, or violating any of the provisions of any state or
federal antidiscrimination law;
(19) Failing to keep an
escrow or trustee account of funds deposited with him or her relating to a real
estate transaction, for a period of three years, showing to whom paid, and such
other pertinent information as the director may require, such records to be
available to the director, or his or her representatives, on demand, or upon
written notice given to the bank;
(20) Failing to
preserve for three years following its consummation records relating to any
real estate transaction;
(21) Failing to furnish
a copy of any listing, sale, lease or other contract relevant to a real estate
transaction to all signatories thereof at the time of execution;
(22) Acceptance by a
branch manager, associate broker, or salesperson of a commission or any
valuable consideration for the performance of any acts specified in this
chapter, from any person, except the licensed real estate broker with whom he
or she is licensed;
(23) To direct any
transaction involving his or her principal, to any lending institution for
financing or to any escrow company, in expectation of receiving a kickback or
rebate therefrom, without first disclosing such expectation to his or her
principal;
(24) Buying, selling,
or leasing directly, or through a third party, any interest in real property
without disclosing in writing that he or she holds a real estate license;
(25) In the case of a
broker licensee, failing to exercise adequate supervision over the activities
of his or her licensed associate brokers and salespersons within the scope of
this chapter;
(26) Any conduct in a
real estate transaction which demonstrates bad faith, dishonesty,
untrustworthiness or incompetency;
(27) Acting as a mobile
home and travel trailer dealer or salesperson, as defined in RCW 46.70.011 as
now or hereafter amended, without having a license to do so;
(28) Failing to assure
that the title is transferred under chapter 46.12 RCW when engaging in a
transaction involving a mobile home as a broker, associate broker, or
salesperson; or
(29) Violation of an
order to cease and desist which is issued by the director under this chapter.
NEW SECTION. Sec.
19. This act shall take
effect January 1, 1997.
