In New Jersey, real estate licensees are required to disclose how they intend to work with tenants and landlords in a real estate transaction. (In rental transactions, the terms "tenants" and "landlords" should be read as "tenants" and "landlords," respectively).
1) AS A LANDLORD'S AGENT OR SUB-AGENT, I, AS A LICENSEE, REPRESENT THE LANDLORD AND ALL MATERIAL INFORMATION SUPPLIED TO ME BY THE TENANT WILL BE TOLD TO THE LANDLORD.
2) AS A TENANT'S AGENT, I, AS A LICENSEE, REPRESENT THE TENANT AND ALL MATERIAL INFORMATION SUPPLIED TO ME BY THE LANDLORD WILL BE TOLD TO THE TENANT.
3) AS A DISCLOSED DUAL AGENT, I, AS A LICENSEE, REPRESENT BOTH PARTIES. HOWEVER, I MAY NOT, WITHOUT EXPRESS PERMISSION, DISCLOSE THAT THE LANDLORD WILL ACCEPT A PRICE LESS THAN THE LISTING PRICE OR THAT THE TENANT WILL PAY A GREATER THAN THE OFFERED PRICE.
4) AS A TRANSACTION BROKER, I, AS A LICENSEE, DO NOT REPRESENT EITHER THE TENANT OR THE LANDLORD. ALL INFORMATION I ACQUIRE FROM ONE PARTY MAY BE TOLD TO THE OTHER PARTY.
Before you disclose confidential information to a real estate licensee regarding a real estate transaction, you should understand what type of business relationship you have with that licensee. There are four types of business relationships: (1) LANDLORD's AGENT; (2) TENANT's AGENT; (3) DISCLOSED DUAL AGENT; and (4) TRANSACTION BROKER. Each of these relationships imposes certain legal duties and responsibilities on the licensee as well as on the landlord or tenant represented. These four relationships are defined in greater detail below. Please read carefully before making your choice.
A landlord's agent WORKS ONLY FOR THE LANDLORD and has legal obligations, called fiduciary duties, to the landlord. These include reasonable care, undivided loyalty, confidentiality and full disclosure. Landlord's agents often work with tenants, but do not represent the tenants. However, in working with tenants a landlord's agent must act honestly. In dealing with both parties, a landlord's agent may not make any misrepresentations to either party on matters material to the transaction, such as the tenant's financial ability to pay, and must disclose defects of a material nature affecting the physical condition of the property which a reasonable inspection by the licensee would disclose. Landlord's agents include all persons licensed with the brokerage firm which has been authorized through a listing agreement to work as the landlord's agent. In addition, other brokerage firms may accept an offer to work with the listing broker's firm as the landlord's agents. In such cases, those firms and all persons licensed with such firms, are called "sub-agents". Landlords who do not desire to have their property marketed through sub-agents should so inform the landlord's agent.
A tenant's agent WORKS ONLY FOR THE TENANT. A tenant's agent has fiduciary duties to the tenant which include reasonable care, undivided loyalty, confidentiality and full disclosure. However, in dealing with landlords a tenant's agent must act honestly. In dealing with both parties, a tenant's agent may not make any misrepresentations on matters material to the transaction, such as the tenant's financial ability to pay, and must disclose defects of a material nature affecting the physical condition of the property which a reasonable inspection by the licensee would disclose. A tenant wishing to be represented by a tenant's agent is advised to enter into a separate written tenant agency contract with the brokerage firm which is to work as their agent.
DISCLOSED DUAL AGENT
A disclosed dual agent WORKS FOR BOTH THE TENANT AND THE LANDLORD. To work as a dual agent, a firm must first obtain the informed written consent of the tenant and the landlord. Therefore, before acting as a disclosed dual agent, brokerage firms must make written disclosure to both parties. Disclosed dual agency is most likely to occur when a licensee with a real estate firm working as a tenant's agent shows the tenant properties owned by landlords for whom that firm is also working as a landlord's agent or subagent. A real estate licensee working as a disclosed dual agent must carefully explain to each party that, in addition to working as their agent, their firm will also work as the agent for the other party. They must also explain what effect their working as a disclosed dual agent will have on the fiduciary duties their firm owes to the tenant and to the landlord. When working as a disclosed dual agent, a brokerage firm must have the express permission of a party prior to disclosing confidential information to the other party. Such information includes the highest price a tenant can afford to pay and the lowest price a landlord will accept and the parties' motivation to buy or sell. Remember, a brokerage firm acting as a disclosed dual agent will not be able to put one party's interests ahead of those of the other party and cannot advise or counsel either party on how to gain an advantage at the expense of the other party on the basis of confidential information obtained from or about the other party. If you decide to enter into an agency relationship with a firm which is to work as a disclosed dual agent, you are advised to sign a written agreement with that firm.
The New Jersey Real Estate Licensing Law does not require licensees to work in the capacity of an "agent" when providing brokerage services. A transaction broker works with a tenant or a landlord or both in the sales transaction without representing anyone. A TRANSACTION BROKER DOES NOT PROMOTE THE INTERESTS OF ONE PARTY OVER THOSE OF THE OTHER PARTY TO THE TRANSACTION. Licensees with such a firm would be required to treat all parties honestly and to act in a competent manner, but they would not be required to keep confidential any information. A transaction broker can locate qualified tenants for a landlord or suitable properties for a tenant. They can then work with both parties in an effort to arrive at an agreement on the sale or rental of real estate and perform tasks to facilitate the closing of a transaction. A transaction broker primarily serves as a manager of the transaction, communicating information between the parties to assist them in arriving at a mutually acceptable agreement and in closing the transaction, but cannot advise or counsel either party on how to gain an advantage at the expense of the other party. Owners considering working with transaction brokers are advised to sign a written agreement with that firm which clearly states what services that firm will perform and how it will be paid. In addition, any transaction brokerage agreement with a landlord or landlord should specifically state whether a notice on the property to be rented or sold will or will not be circulated in any or all Multiple Listing System(s) of which that firm is a member.
YOU MAY OBTAIN LEGAL ADVICE ABOUT THESE BUSINESS RELATIONSHIPS FROM YOUR OWN LAWYER. THIS STATEMENT IS NOT A CONTRACT AND IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY.
The New Jersey Real Estate Commission
If you have any questions about the above, or if you would like to hire Hudson View Realty to be your exclusive Buyer's/ Tenant's Agent or Seller's /Landlord's Agent, please contact Paula Brown for more information.