Can two members of the same “team” be designated agents for a buyer and seller?

QUESTION: I am the Broker-in-Charge of my office. Two of my agents are a husband and wife who have formed an informal “team” for the purpose of sharing both marketing responsibilities and commissions. Several weeks ago, the husband entered into a listing agreement with a property owner. The agreement authorizes both dual and designated agency. The wife has found a buyer who is interested in making an offer on her husband’s listing. She would like to retain some advisory and advocacy responsibilities for her buyer client. Would it be permissible for her to have her client authorize designated agency in these circumstances?

ANSWER: While this practice might be permissible, we do not recommend it. Here is why.

Commission Rule A.0104(d) authorizes a real estate broker representing one party in a transaction to also represent the other party, as long as the dual agency is disclosed and agreed to by both parties before the time that one of the parties represented by the broker makes an offer to purchase, sell or lease real estate to another party. A broker acting as a dual agent owes the same fiduciary duties (i.e. loyalty, obedience, confidentiality, etc.) to both parties. Because of these identical, yet competing fiduciary obligations, the dual agent effectively loses his/her ability to advocate and negotiate on behalf of either client. Instead, his/her obligation is to treat both parties fairly, impartially, equally and honestly, and to not engage in conduct which would give either principal an advantage over the other.

Designated agency is a method of practicing dual agency that is intended to restore some of the advisory and negotiating functions lost to a standard dual agent. Commission Rule A.0104(j) sets forth the requirements for practicing designated agency: as with standard dual agency, the authority for designated agency must be reduced to writing in a timely fashion. However, there is a second requirement: “An individual broker shall not be so designated and shall not undertake to represent only the interests of one party if the broker has actually received confidential information concerning the other party in connection with the transaction.”

If agents in your office are truly acting as a team, then arguably all members of that team receive information from the team’s clients, including confidential information, at the same time. In the example you cite, the husband may well have received confidential information from the property owner at the time the listing was taken, such as the lowest price the seller might be willing to accept for his property. If another team member were to present an offer as a designated agent for a buyer, the property owner might reasonably suspect or believe that his confidential information had been shared. The entire “team” concept implies collaboration among team members, and shared access to the team’s file materials. These concepts of collaboration and sharing are inconsistent with the requirement for protection of confidential information that underlies the legal authority for designated agency.

Rather than permit the wife (or any other member of the husband’s team) to represent the prospective buyer as a designated agent, we suggest that your firm designate a non-team member to represent the buyer. Also, if you haven’t already done so, we suggest that your firm adopt appropriate written policies for the proper management of transaction files so that the possibility of confidential information being shared by designated agents is eliminated.