The following letter was published in the Speaker's Special Project on Real Estate Agency Law report prepared for the meeting of the Committee on Real Property & Probate and the Committee on Business Regulation & Consumer Affairs held on April 12, 2000, in Tallahassee, Fl.

Cover page: TIME TO END (picture of) BAND-AID REAL ESTATE LICENSEE LEGISLATION!

TO WHOM IT MAY CONCERN:

The Florida Association of Realtors is requesting that the Legislature perform an interim study on re-writing legislation to provide a presumption of Transaction Brokerage for all residential real estate transactions. To that end, it will be helpful to look at the considerations involved in that recommendation.

HISTORY:

Prior to 1991, Real Estate Licensees in this State functioned as Seller's Agents or Seller's Subagents. Those relationships, previously thought to have been etched by the hand of G-d, came under scrutiny in Florida. Study revealed that an Agency relationship requires that the Agent be the fiduciary of the person he represents (buyer or seller). That is, an Agent has a paramount responsibility to support the best interest of the principal, even though those considerations were contrary to the Agent's own personal interests. Since the Licensee (Broker) only gets paid if he produces a transaction, it is difficult, if not impossible, for the Agent to represent his principal, while at the same time earning a living and looking out for the Agent's own best interests.

If Agency is flawed, Dual Agency is doubly flawed. It is almost universally accepted that Dual Agency, with conflicting fiduciary obligations to two adverse commercial interests, lacks moral substance. Indeed, how does one Broker get the highest price and best terms for the seller and the lowest price and best terms for the buyer? Yet, until quite recently, Dual Agency was permitted and practiced in this State.

SubAgency is a system where a seller authorizes a Listing Broker to appoint other "then unknown" Licensees to act for him in the marketing of his property. Aside from the obvious disadvantage of being represented by people you don't know, the liability legal exposure to the seller from multiple unknown Agents was unacceptable and unjustified.

Agency, SubAgency and Dual Agency were the only ways in which real estate Licensees did business in Florida through 1991.

TRANSACTION BROKERAGE:

In 1992, Florida, at the prompting of its real estate professionals, and with inspiration from other States, created "Transaction Brokerage" as an authorized Licensee relationship. Transaction Brokerage creates a relationship between a real estate Licensee and the public wherein the Licensee acts as an independent contractor in order to accomplish the sale or purchase of a parcel of real property. The Transaction Broker crafts a transaction by bringing a willing buyer and a willing seller together and assists with the closing of details. The Transaction Broker is not a fiduciary of any party, but must abide by law as well as professional and ethical standards.

In creating the Transaction Broker, the Legislature made it one of several ways in which the Licensee could relate to the general public. Others, at that time, included Seller's Agent, Buyer's Agent and Dual Agent.

RECENT FLORIDA REAL ESTATE RELATIONSHIP LAWS:

With the advent of the Transaction Broker, and out of fear of change, some elements of the real estate industry pressured the Legislature to preserve the old, flawed system. As a result, we have seen:

  1. The total legalization and then the ultimate outlawing of Dual Agency.
  2. The effort to create multiple varieties of Agent, i.e. Seller's Agent, Buyer's Agent, Dual Agent and Limited Agent.
  3. The attempt to create legislation to outlaw Common Law Agency only as relates to real estate Brokers. This would have taken fiduciary responsibilities out of Agency and make Agency a mere shell.
  4. The effort to create "Designated Brokerage," a thinly veiled form of Dual Agency.
  5. The modification of the definition of Transaction Brokerage to allow for "limited representation" (an Agency function), a virtual fox in sheep's clothing.
  6. The creation of a "No Broker Relationship" relationship under Chapter 475.278(4), a legislative form of "guess what."
  7. Multiple "creative" legislative definitions often more confusing than helpful.

All of the foregoing have left a critical Florida industry floundering and in extremis, e.g.

  1. Every legislative session brings Band-Aid provisions with no real unified workable plan. Often the Band-Aids themselves are infected with confusion and distortion.
  2. Real estate professionals are so confused that they are simply printing reams of disclosure material and stapling them to their contracts without the ability of offering rational explanation to buyers or sellers. Indeed, the public has become fearful and apprehensive of all of that incomprehensible documentation.
  3. State agencies like the Florida Real Estate Commission and the Department of Business and Professional Regulation are often in disagreement about the effect of different Legislative bells and whistles.
  4. Even more confused by the super abundance of conflicting provisions and obligations is the general public whose rights rarely find full expression at legislative sessions on real estate brokerage law.

A SIMPLE SOLUTION:

The curious irony is that there is a simple tried and proven solution to this minefield of confusion and legal exposure. Transaction Brokerage has been a functioning professional real estate relationship in Florida for almost ten years. Many of the larger and smaller real estate firms in this State have adopted it as their standard operating procedure.
Its advantages are obvious:

  1. Transaction Brokerage (a simple independent contractor relationship) doesn't promise fiduciary responsibilities that cannot be delivered by the Licensee.
  2. Transaction Brokerage, as a standard in this State, will do away with the vast majority of disclosures that are now required to explain the existing flawed system.
  3. Transaction Brokerage can be easily understood by both Licensees and the consuming public.
  4. Transaction Brokerage is an honest form of delivering a needed professional service.
  5. Transaction Brokerage will help protect Licensees from exposure borne of confusion and allow Brokers to lawfully collect commission without resort to Dual Agency clones [Designated Agents].

CONCLUSION:

The concept of Transaction Brokerage was born and nurtured in this State with a special assist from the South Broward Board of Realtors, Inc. It works well in Florida. The Florida Legislature can make a millennial gift to the people of the State of Florida and to the real estate professionals of this State by making "Transaction Brokerage" the presumed [default] legal relationship for all residential real estate transactions, and by authorizing "Agency" relationships when requested in writing and consented to by interested parties.

Respectfully submitted,

South Broward Board of Realtors, Inc.


BY: ___________________________
Douglas C. Kaplan, Esq.
Board Counsel

BY: ____________________________
William "Bill" Valdez, President
of the Board of Directors