New Requirements Under the 1997 Brokerage Relationship Disclosure Act

Former Law: In 1994, the Florida Legislature made significant changes in the real estate brokerage rules by authorizing new categories of representation. For the first time, it created clear authority for buyers’ brokers — a category that was becoming more popular — and created a class of dual agency and transaction brokers (the “1994 Act”).

In many ways, the 1994 Act followed the lawyer model, where each real estate agent or broker represented a party and had a duty to clearly identify which party he or she represented. The 1994 Act perpetuated the belief that common law agency applied, codified, and expanded certain duties that were owed by real estate brokers and agents to their clients.

The 1994 Act also required agents and brokers to give specific notice of representation on rule-defined forms — even to other real estate agents in order to reduce the risk of confusion and misunderstanding. In practice, however, the time and manner of giving the required notice was not clearly understood.

Current Law: After unsuccessful attempts to improve the 1994 law, Chapter 97-42 (CS SC 82) was passed and took effect October 1, 1997 (the “1997 Act”). The 1997 Act significantly changes the manner of real estate agent representation in four ways:

1. It creates new categories of authorized representation for a real estate licensee that apply to all representations, residential and otherwise. The Single Agent represents either the buyer or seller, acting in a fiduciary relationship. The Transaction Broker provides limited representation of a buyer, seller, or both, but does not represent either party in a fiduciary capacity. This method of representation replaces the prior dual agent status, which was eliminated by this statute. As a result, dual agency representation was eliminated altogether by the 1997 Act.

Another category implied in the 1997 Act is one of no representation, which occurs when the agent or broker owes only the duties of honesty and fair dealing, a duty to disclose all known facts that materially affect the property’s value that are not readily apparent to the buyer, and a duty to account for funds entrusted to the agent. This category was intended to outline duties owed to the other party in a transaction where the agent was in a defined relationship with his own client.

2. It outlines specific duties of each type of representation in the areas of honesty and fair dealing; loyalty; confidentiality; obedience; full disclosure; accounting for funds; skill, care and diligence in the transaction; presenting all offers and counteroffers in a timely manner; disclosing all known facts that materially affect the value that are not readily observable; and, added duties as the parties agree.

3. It requires that a non-representation disclosure be given to the parties with whom the agent or broker might be dealing at “first contact.” The new rules now include material exceptions to the duty to give notice. The duty to give notice applies only to residential transactions (as defined in the law) and does not apply where the other party is already represented by an agent or broker.

4. It requires that specific notice language be given to the client or customer when he or she enters into a listing or representation agreement of any type. This language must enumerate the duties owed by the agent or broker in that class of representation. These disclosures apply only to residential transactions.

Details of the Current Law: The 1997 Act introduces a new definition for “fiduciary” and the new concept of “first contact,” which triggers the obligation of disclosure. It also defines “notice of nonrepresentation,” outlines when and how it must be given, and specifies exceptions when no notice is required, such as when the other party has representation and when the property will be rented or leased.

The 1997 Act carefully defines the relationship of transaction broker and, in contrast with prior rules where the transaction broker did not represent either party, acknowledges that the transaction broker now provides a “limited form of representation” to one or both parties to the transaction. It specifically outlines the transaction broker’s duties and disclosure requirements.

The 1997 Act also defines the relationship of a single agent, which is analogous to the old Buyer’s and Seller’s Agency. The law requires a fiduciary relationship and spells out the agent’s or broker’s duties and disclosure requirements.

The 1997 Act allows a single agent to convert to a transition broker by giving statutorily defined notice and getting the client’s permission. This is the replacement for the disclosed dual agency that allows a broker to show a client another property listed by his or her firm.

Potential Problem Areas: Real estate agents and brokers should beware of terms that have common-law and generally accepted definitions in practice but have different defined meanings within the statute. These include “fiduciary,” “agent” and “agency.”

Other problem areas include the duty to disclose. The 1997 Act imposes a duty of disclosure on the broker that is greater than the duty imposed on the principal and may lead to circumstances under which the duty of disclosure conflicts with a single agent’s duty of confidentiality.

Also, questions may arise over what the “duty of diligence” includes. The ambiguity in the 1994 Act carried over into the 1997 Act. Does the real estate agency have a duty to conduct independent due diligence? Does he or she have a duty to search out and discover problems? Is the agent liable for not discovering problems even beyond the scope of his or her expertise, such as those dealing with the environment, wetlands, hazardous wastes, survey encroachments and so forth?

The 1997 Act is untested. Any real estate agents or brokers who don’t fully understand the 1997 Act could place themselves in jeopardy. Make sure you consult with your legal counsel to discuss alternatives to the way you do business in light of this new law.



Provided as an educational service by John Raymond Dunham, III, Esq..

This publication is intended to serve you. If you would like certain topics covered, or have any questions or comments, you are invited to contact Mr. Dunham at: 941.951.1800, Ext. 250, Facsimile: 941.366.1603, E-Mail: jrd@jrdlaw.com, Web site: www.jrdlaw.com or write him at LUTZ, BOBO, TELFAIR, DUNHAM & GABEL, Two North Tamiami Trail, Sarasota, FL 34236.

This publication is designed to provide accurate and authoritative information in regard to the subject matter covered and report on issues and developments in the law. It is not intended as legal advice, and should not be relied upon without consulting an attorney.