The Agency Relationship in California: Agency and Fiduciary Relationships

The agency relationship plays a fundamental role in the dynamics between the parties involved. In this article, we will explore the concept of agency and fiduciary relationships as set forth in agency law in California.

Agency Relationship

In an Agency Relationship, the Principal delegates to the Agent the right to act on his or her behalf and to exercise a degree of discretion while acting in that manner. This relationship is governed by laws and regulations that govern the rights and duties of principals and agents toward each other, as well as the obligations of both principals and agents toward third parties.

Fiduciary Duty in the Agency Relationship

An agency relationship creates a fiduciary duty that the agent owes to the principal within the course and scope of the agency and authority granted by the principal. This duty implies that the agent must act in the best interests of the principal and be loyal to his interests.

Fiduciary duty includes the obligation to provide the principal with complete and accurate information about all transactions and activities related to the property, as well as to advise the principal in a professional and ethical manner.

Regulation of Agency Relationships in California

The existence of an agency relationship in the real estate context invokes rules and regulations that govern the rights and duties of principals and agents toward each other, as well as the obligations of both principals and agents toward third parties. These regulations are designed to ensure that all parties are treated fairly and ethically in all real estate transactions.

In summary, agency law in California establishes a legal framework that regulates the relationships between principals and agents in the real estate industry. This relationship is critical to successful and fair transactions, and fiduciary duties are essential to ensuring that the best interests of the principals are acted upon at all times. It is crucial that both agents and principals understand their rights and obligations in these relationships to ensure a sound and ethical real estate process in California.

Definitions and Responsibilities of Principals in California: Agency and Fiduciary Relationships

In the California real estate industry, it is essential to understand the definitions and responsibilities of principals in agency and fiduciary relationships. In this article, we will explore these concepts and the associated responsibilities, as set forth in California real estate laws and regulations.

Key Definitions

Agent: Refers to a person acting under the provisions of Title 9 in a real estate transaction, including a person licensed as a real estate broker and under whose license a listing is executed or an offer to purchase is obtained.

Associate Licensee: This term applies to a broker or salesperson licensed under a broker or contracted with a broker to act as the broker's agent. The broker for whom the associate licensee works is responsible for the actions of the associate and owes the same duties that the associate licensee owes to a party to the transaction.

Dual Agent: A dual agent is one who acts, either directly or through an associated licensee, as an agent for both the seller and the buyer in a real estate transaction.


Principal to Third Parties

The principal is liable for the agent's negligence and wrongdoing committed as part of the transaction, as well as for the agent's deliberate failure to perform the principal's obligations, unless the law specifically requires employing that particular agent. The principal is not responsible for any wrongful acts committed by the principal's agent unrelated to the above, unless the principal has authorized or ratified the actions.

Broker to Principal

When a broker acts on behalf of a principal, he or she generally operates as a Special Agency, which typically limits the broker to soliciting and trading on behalf of the principal. Generally, real estate brokers cannot act in place of or contractually obligate their principals. However, the broker's agent owes a fiduciary duty to the principal within the course and scope of the authority granted by the principal.

These definitions and responsibilities are critical to ensuring fair and ethical relationships in California real estate transactions. Understanding the role of the principal and his or her rights and obligations is essential for everyone involved in the real estate process in this state.

Types of Agency and Agency Relationships in California

It is essential to understand the various types of agency and agency relationships that can arise in real estate transactions. These concepts play a fundamental role in protecting the interests of the parties involved in a real estate transaction. We are going to discuss the types of agency and agency relationships, as set forth in California real estate laws and regulations.

Individual Agency (Single Agency)

In an individual agency, an agent represents one of the parties in a transaction. This can take several forms:

  • Listing Agent: A person who has obtained a listing to act as an agent in a transaction and receive compensation.
  • Sales Agent (Selling Agent): A listing agent who acts alone or in conjunction with another listing agent to sell a property, find a buyer, locate a property for a buyer, or find a buyer for an unlisted property, and present an offer to purchase to the seller.
  • Buyer's Agent: Represents exclusively the buyer or lessee in a transaction.


Subagency is an important concept in agency relationships in California. A “subagent” is a person to whom an agent delegates agency. However, an associate licensee working under the supervision of an agent on a transaction is not considered a subagent.

An agent can delegate powers to another person only in certain circumstances, such as when the task is purely mechanical, the agent cannot legally carry it out but the subagent can, it is common practice to delegate such powers and the principal expressly authorizes it. A legally appointed subagent represents the principal in the same manner as the original agent. The original agent is not responsible to third parties for the acts of the subagent; The subagent is the agent of the principal.

If an agent employs a subagent without authorization, the agent becomes the principal and the subagent is his agent. The original principal of the original agent has no relationship with the subagent; the subagent is the agent's agent.

Express Agency vs. Implicit (Express vs. Implied Agency)

The determination of agency is not necessarily based on the payment of compensation or the obligation to pay compensation between an agent and a seller or buyer. A listing agent and a selling agent may agree to share any compensation or commission paid, and the terms of their agreement do not necessarily determine a particular relationship.

An agency may be actual (when the agent is actually employed by the principal) or ostensible (when the principal causes a third person to believe that another person is his agent, even though he is not actually employed by him). Agency duties may arise even when compensation is not expected.

An agency can be created through prior authorization or subsequent ratification. An oral authorization is sufficient for any purpose, except to authorize a contract that the law requires to be in writing.

Buyer Agency

A cooperative broker may choose to exclusively represent the buyer, even if it shares the compensation paid by the seller. The payment of compensation does not necessarily determine the nature of the agency relationship between the parties.

Dual Agency

A listing broker who is also a sales broker is considered a dual agent and cannot act as an exclusive agent for a buyer. When a broker is operating as a dual agent, it may not disclose to the seller that the buyer is willing to pay more than the buyer's written offer or to the buyer that the seller will accept less than the listing price without the express written consent of the party. authorizes disclosure.

The industry typically avoids subagency, and in a dual agency, licensees must disclose and obtain consent from both parties. Additionally, any change in the agency relationship must be in writing and have the consent of all principals.

MLS (Multiple Listing Service)

Under the rules of the National Association of Realtors® Multiple Listing Service Plus, a listing broker may choose to offer subagency to a cooperating broker or share the commission without agency or subagency on behalf of the seller or listing broker. The cooperating broker may choose to exclusively represent the buyer, even if it shares the compensation paid by the seller.

These concepts are fundamental to agency relationships in California and are important to ensure fair and ethical transactions in the real estate market. Understanding the different types of agency and the associated obligations is essential for all parties involved in a real estate transaction in this state.

Creation and Termination of Agency in California

In the California real estate industry, the creation and termination of agencies is a fundamental process that regulates the relationships between agents, principals and third parties in real estate transactions. Below, we will explore these concepts according to the English nomenclature used in the United States real estate industry.

Creating a Listing Agreement

A listing agreement is essential in creating an agency in real estate transactions. This agreement sets forth the terms and conditions under which an agent represents a seller or owner of a property. The essential elements of a listing agreement are:

  • Names of the Parties: Identification of the parties involved in the agreement.
  • Property Identification: Clear description of the property to be sold, rented or financed.
  • Terms and Conditions of Sale, Rental or Loan: Details about how the transaction will be carried out, including the price, terms and any special conditions.
  • Amount of Commission or Other Type of Compensation Payable: Specification of the compensation that the agent will receive for his services.
  • Agency Expiration Date: Date on which the agency agreement will expire.
  • Signatures of All Parties Involved: Confirmation that all parties have agreed to the terms of the agreement.
  • Agency Agreements for Residential Owner-Occupant Properties: For owner-occupied residential properties, the agency agreement must contain a statement in at least ten-point bold type that the commission amounts are negotiable and not set by law.

Termination of an Agency

An agency may be terminated for several reasons, including:

  • Expiration of your Term: When the agency agreement reaches its expiration date.
  • Termination of the Matter: When the object of the agency no longer exists or is impracticable.
  • Death or Incapacity of Agent or Principal: If the agent or principal dies or becomes incapacitated, the agency automatically terminates.
  • Resignation by Agent: When the agent voluntarily renounces his role as representative.
  • Revocation by the Principal: When the principal decides to revoke the agent's authority.

Creation of a Dual Agency

A dual agency arises when the listing broker, who is the actual agent of the seller, becomes the actual or ostensible agent of the buyer in the same transaction. This commonly occurs when two licensees associated with the same broker represent two or more parties in a transaction.

The real estate broker becomes the dual agent of the principals, and the sales licensees and broker associates are the real estate broker's agents. However, a broker can only act as a dual agent with the knowledge and consent of all principals involved in the real estate transaction.

Importantly, failure to disclose and obtain principal consent for dual agency may result in revocation of broker compensation and termination of the transaction.

Understanding agency creation and termination in California is critical to ensuring fair and ethical transactions in this state's real estate industry. These concepts help protect the interests of all parties involved in a real estate transaction.

Agent Responsibilities in California

In the California real estate industry, agents play a critical role in real estate transactions, and their responsibilities are clearly defined by law. Here, we will explore these responsibilities using the English nomenclature used in the United States real estate sector.

Duties to Principals

Real estate agents have a number of duties and responsibilities toward their principals, who are the sellers, buyers or other parties represented in a transaction. These duties include:

  • Exercise Utmost Care, Integrity, Honesty and Loyalty: Agents must act with the highest level of integrity and loyalty in all interactions with principals.
  • Exercise Skill and Care in the Provision of Services: Agents must show skill and care in the execution of the services they provide.
  • Act Honestly and without Fraud or Deception: Agents must carry out their activities honestly and without resorting to fraud or deception.
  • Act Fairly and in Good Faith: Agents are expected to act fairly and in good faith in all transactions.
  • Disclose All Relevant Facts: Agents must disclose all material facts that they know or should know and that are not known or readily observable by the parties to the transaction.

In addition to these fundamental duties, agents must:

  • Comply with the agency agreement and the principal's written instructions.
  • Operate in the interest of the principal.
  • Maintain loyalty and confidentiality.
  • Be reasonably competent and diligent when inspecting residential property listed for sale.
  • Obey the employer's instructions.
  • Provide complete accounting.
  • Exercise reasonable care and skill.

Importantly, the “reasonable care and skill” standard applies to the agent's non-principal party, meaning that the agent must act with the same level of care and skill when dealing with third parties.

Duties to Third Parties

Agents also have duties towards third parties who may be involved in a real estate transaction. These duties include:

  • Fair and Honest Treatment: Agents must treat third parties fairly and honestly in all interactions related to the transaction.
  • Full Disclosure of Relevant Facts: They must make full and detailed disclosure of all material facts that may affect the transaction.

Duties of Dual Agents

When an agent acts as a dual agent, meaning he or she represents both the seller and the buyer in the same transaction, additional duties and responsibilities arise. These duties include:

  • Do Not Reveal Trading Price Without Written Consent: A dual agent cannot disclose to the buyer that the seller is willing to sell the property for less than the list price without the seller's written consent.
  • Do Not Disclose Higher Offer Without Written Consent: You also cannot disclose to the seller that the buyer is willing to pay a price higher than the offer price without the buyer's written consent.
  • Fiduciary Duties to Both Principals: A dual agent must fulfill fiduciary duties toward both principals of the transaction.
  • Mandatory Disclosure and Consent: The law requires disclosure and consent of principals to be obtained in transactions involving 1 to 4 residential units.

Failure to comply with dual agency disclosure requirements can have serious consequences, including revocation or suspension of the agent's real estate license. Therefore, it is crucial that agents diligently and ethically fulfill these duties and responsibilities in all transactions in which they act as dual agents.


Agency Disclosure in California

Agency disclosures are a fundamental aspect of real estate transactions in California. Real estate agents and brokers are required to provide this disclosure to parties involved in a transaction to ensure transparency and compliance with real estate laws in the state. Here, we explore the details of agency disclosures in the California real estate market.

Agency Disclosure Guidelines

Agency disclosure guidelines are clear and designed to ensure that both sellers and buyers are adequately informed about agent representation in a real estate transaction. Here are the key guidelines:

  • Listing Agents and Selling Agents: Both listing agents and selling agents must provide sellers and buyers in a real estate transaction with a copy of the disclosure form specified by law (CC 2079.16) and obtain a signed acknowledgment of receipt from that seller or buyer.
  • Moment of disclosure:
    • The listing agent must provide the disclosure form to the seller before signing the listing contract.
    • The selling agent must provide the disclosure form to the seller as soon as possible before submitting a purchase offer.
    • If the purchase offer is not prepared by the selling agent, the selling agent must deliver the disclosure form to the buyer no later than the next business day after receiving the buyer's purchase offer.
    • If the listing agent does not meet with the seller in person, the listing agent can deliver the selling agent's disclosure to the seller and obtain acknowledgment of receipt, or the selling agent can send the disclosure form by certified mail to the seller, in in which case a signed acknowledgment of receipt is not required (CC 2079.14).
  • Refusal to Sign: If the seller or buyer refuses to sign an acknowledgment, the agent or an associate agent acting on the agent's behalf must sign and date a written statement of the facts of the refusal (CC 2079.15).
  • Commercial Real Estate Agents and Loan Transactions: Commercial real estate brokers and agents involved in loan transactions must also prepare and deliver agency disclosure statements and obtain informed consent from the principals in the transaction. Failure to obtain informed consent may result in forfeiture of the right to receive a commission and the transaction may be subject to termination action.
  • Written Consent: Agency disclosure must be consented to in writing by the seller and the buyer. The acknowledgment and consent may be in a separate document and may be confirmed no later than in the purchase contract.

Acting as Principal or Other Interest

If a broker negotiates a mortgage loan for a borrower and expects the loan to come from funds controlled by the broker, it must include a statement to this effect in its required written disclosure statement (BPC 10240(j)). A licensee acting as principal in a real estate transaction must disclosure the fact of its license to the other principal of the transaction (BPC 10177(o)).

Compensation Disclosure

Claiming or receiving a secret profit or any form of undisclosed compensation is grounds for discipline (BPC 10176(g)).

He disclosure agency It is an essential part of transparency in the California real estate market. Agents and brokers must adhere to these guidelines to ensure that all parties are properly informed and that transactions are conducted fairly and ethically.

Principal and Agent Responsibilities in California

Legal responsibilities and responsibilities are crucial elements in any California real estate transaction. Both the principal and agent have specific roles and obligations that they must fulfill to ensure that transactions are carried out fairly and ethically. Here, we explore key guidelines related to real estate liability in California.

Essential Responsibility Guidelines

In the context of a real estate transaction, there are certain essential liability guidelines that govern the actions and obligations of both the principal and the agent. These are some of the guidelines clue:

  • Responsibility of the Associate licensee: The agent in a real estate transaction is responsible for the actions of associate licensees who act as agents of the principal agent. When an associated broker owes a duty to any party to a transaction, the broker for which the associated agent works owes the same duty.
  • Principal's Responsibility: A principal is liable to third parties for the negligence of his agent, including wrongful acts and deliberate omissions, unless the principal has been required by law to employ that agent. The principal is only liable for other wrongful acts committed by his agent if he has authorized or ratified them.
  • Reasonable Reliance in Apparent Authority: The principal is responsible for persons who have suffered harm due to reasonable reliance on the apparent authority of an agent. The agent's mere action cannot establish apparent authority alone, but silence on the part of the principal, who knows that an agent is acting as if he has authority, can create liability for the principal.
  • Scope of Authority: The principal does not incur liability for acts of the agent beyond the scope of the agent's actual or apparent authority. If a third party deals with an agent and knows of the existence of the agency, he or she has a duty to find out its purpose and scope. If the agent exceeds actual authority and the principal has not acted in a way that creates apparent authority, the third party cannot hold the principal responsible for acts outside the scope.
  • Name of Principal in the Contract: To avoid the possibility of the agent's personal liability for performance, the name of the principal for whom the agent is acting must appear on the contract.

These essential liability guidelines apply to all real estate transactions in California. Both the principal and agent must operate with integrity and transparency, complying with legal obligations and ensuring that all parties are adequately protected and informed during the transaction.

Legal and Tax Disclaimer

Please be advised that the content presented in this blog is for informational purposes only and should not be construed as legal or tax advice. The articles and information provided here are written from the perspective of a real estate agent affiliated with Keller Williams, and do not represent legal or tax counsel.

As the author, I am a licensed real estate professional under Keller Williams, holding Brokerage DRE License Number: #02197031. However, it is important to note that my expertise is in the field of real estate, and not in legal or tax matters. The insights and opinions shared on this blog are based on my experiences and knowledge in the real estate industry and should be treated as general guidance rather than definitive legal or tax advice.

For specific legal or tax concerns relating to any real estate transactions or investments, readers are strongly encouraged to consult with a qualified attorney or tax advisor who can provide tailored advice based on your individual circumstances and the latest legal and regulatory requirements.

The information on this blog is provided "as is" without warranty of any kind, and I, along with Keller Williams and its affiliates, disclaim all liability for any loss, damage, or misunderstanding arising from reliance on the information contained herein.

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