When it comes to commercial real estate, the complexity of many of the transactions can lead to some exceptionally intricate deals. Often, in the course of a commercial venture, the lines can blur between where one side of the deal begins and where the other side ends, especially when there are multiple parties involved in the transaction. Needless to say, this creates a potential for many serious conflicts of interest.
Now new proposed state legislation would prohibit a real estate brokerage firm, any specific broker or any broker’s associated licensees from operating in a dual agent role. Basically, this just means that one broker or firm cannot represent both the buying and selling side of a transaction. This restriction would extend to lease agreements as well as purchases, affecting a wide range of businesses and commercial deals.
Under current California law, anyone acting as a dual agent must disclose the fact to a client. As it stands, the law aims at increasing transparency in real estate transactions and reducing potential conflicts of interest that can easily arise in a dual agency scenario. Under the proposed law, dual agency would be done away with entirely.
The proposed law also speaks to a broker’s fiduciary responsibility to a client, an issue that was recently thrust into the public view when the laws governing the fiduciary responsibility of financial advisors was rolled back. The new law, if passed, would strengthen the fiduciary responsibility of a real estate broker.
There are many ways that a commercial real estate deal can become a mess, unfairly benefiting those who might take advantage of a complex situation. If you are considering a real estate transaction, don’t hesitate to enlist the guidance of an experienced attorney to ensure your rights remain secure.
Source: CoStar, “CA Legislator Introduces Bill Banning Dual Agency Representation in CRE Transactions,” Randyl Drummer, April 04, 2017