Agency vs. Non-Agency
The first step to deciding which hat you’re wearing is to understand the difference between creating an Agency or non-Agency relationship. As defined by law, the sole difference rests on whether the written Brokerage Agreement states the Licensee is acting as a Standard Agent (Agency) or as an Independent Contractor (non-Agency) relationship. While Independent Contractor parties are still obligated as agreed to within the Broker agreement, the Licensee has no obligations under §§ 54.1-2131 through 54.1-2135, which is outlined below.
If you’ve eliminated Independent Contractor hat, then the other two forms of Agency in Virginia are as a Standard Agent or Limited Service Agency, which under HB 1907 is no longer referred to as Limited Service Representative.
Acting as a Standard Agent refers to a licensee who acts for or represents a Client in an Agency relationship. As a Standard Agent you are obligated by numerous mandatory statutory duties, which are outlined within the Virginia Code §§ 54.1-2131 through 54.1-2135, as well as any additional obligations agreed to by the parties in the Brokerage Agreement.
Here are a few examples of those responsibilities from VAR:
- Receiving and presenting in a timely manner written offers and counteroffers between the sellers and purchasers, even when the property is already subject to a contract of sale;
- Maintain confidentiality of all personal and financial information received from the client during the brokerage relationship, and any other information the client requests be kept confidential during the brokerage relationship, unless otherwise provided by law or the client consents in writing to the release of such information; and
- Account in a timely manner for all money and property received in which the seller has or may have an interest.
- A limited services representative performs limited services selected by the client. This can only be done pursuant to a written brokerage agreement in which the limited service representative:
- Discloses that the licensee is acting as a limited service representative;
- Provides a list of the specific services that the licensee will provide to the client; and
- Provides a list of the specific duties of a standard agent that the limited service representative will not provide to the client.
Limited Service Agent
A Limited Service Agent (LSA), formerly a limited service representative, is another form of Agency. Specifically, the law defines an LSA as a licensee who acts for or represents a client, with respect to real property containing from one to four residential units, pursuant to a brokerage agreement that provides that the limited service agent will not provide one or more of the Standard Agency duties as set forth within §§ 54.1-2131, 54.1-2132, 54.1-2133 and 54.1-2134.
Think of LSA as an “Al La Carte” type of real estate service option for consumers. As simple as it sounds, LSA limits the Agency relationship to the services defined within the Brokerage Agreement, for example only listing a home for sale in MLS.
An LSA can represent a Seller, Buyer or both, under certain circumstances, without creating a Dual or Designated Agency. One example would be if the Licensee was employed by the Seller to input their home into MLS, and later employed by a Buyer to assist in writing an offer to Purchase the property. Of course both scenarios would require a properly written and consented to Brokerage Agreement.
In addition to the obligations set out in the brokerage agreement, an LSA must also provide the Client, at the time of entering the brokerage agreement, copies of any and all Disclosures required by federal or state law, or local Disclosures expressly authorized by state law. To include the following Disclosures:
- Rights and obligations of the client under the Virginia Residential Property Disclosure Act (§ 55-517 et seq.);
- Rights and obligations of the client to deliver to the purchasers, or to receive as purchaser, the condominium resale certificate, if the client is selling a condominium, as required by § 55-79.97; and
- If the client is selling a property subject to the Property Owners’ Association Act (§ 55-508 et seq.), LSA shall disclose the rights and obligations of the client to deliver to the purchasers, or to receive as purchaser, the association disclosure packet required by § 55-509.5.
An LSA acts as the Agent or Representative of the Client, but must do so only as described within the written Brokerage Agreement. Should the Brokerage Agreement not specifically state that the Licensee is acting as an Agent or Representative then the law deems the LSA to be acting as an Independent Contractor of the Client.
The status of Independent Contractor is recognized in Virginia, permitting the Licensee to offer representation in a non-agency capacity.
The relationship that exists between a Client and an Independent Contractor is merely a contractual one defined by the terms of the agreement. The agreement must clearly state that the Licensee is acting solely as an Independent Contractor and not as Agent, and Licensee should perform only those duties defined.
Here are a few examples of services a real estate Licensee can offer as an Independent Contractor:
- List an owner’s property for sale in a MLS (see Risk Management note below);
- Accept and discuss inquires with real estate agents regarding a property listing, provide property information, and schedule showing appointments;
- Assist an owner with the use of the residential property disclosure form, lead-based paint disclosure and property owners’ association/condominium resale packets, as applicable;
- Review with an owner any offers and counteroffers of purchase contracts received by the owner, and provide advice to the owner regarding the negotiation of any such offers or counteroffers; and/or
- Prepare a comparable market analysis (CMA) of the owner’s property.
Additionally, if the Independent Contractor is providing a service which would be subject to certain MLS and REALTOR Association requirements/regulations then the Licensee must also provide Client with all pertinent documents and information. For example, if the contractual service is to list the home of a Seller Client in MLS, then the Independent Contractor Brokerage Agreement must contain Internet Opt-Out notices and all other MLS provisions for listing a property. It is highly recommended that Licensee’s entering into an Independent Contractor agreement seek professional assistance to develop such a contract.
Distinguishing the Difference: Limited Service Agent vs. Independent Contactor
|Limited Service Agent
A quick review: a Licensee in a brokerage relationship must act as a standard agent, a limited service agent or independent contractor.
Additionally, the Licensee is permitted to enter into a non-agency brokerage relationship as an independent contractor facilitator or transaction broker, but advice of an experienced legal professional is strongly suggested, especially in order to assist in preparing a Brokerage Agreement, since they are not provided as a standard form by local Associations.
“Dual Agent” or “Dual Representative” refers to a situation where a Licensee, and therefore also his/her Principle or Supervising Broker, have entered into a Brokerage relationship with both seller and buyer, or both landlord and tenant, in the same real estate transaction with competing interests. However, be careful not to confuse “Agent” and “Representative”, as the terms are not interchangeable as explained below.
Dual Agent vs. Dual Representative: What’s the difference?
- Dual Agent is the term used for a real estate licensee acting in an agency relationship (e.g. standard agent or limited service agent) and representing both seller and buyer, or both landlord and tenant, in the same real estate transaction.
- Dual Representative is the term used for a real estate licensee acting as an independent contractor representing both seller and buyer, or both landlord and tenant, in the same real estate transaction.
“Designated Agent” or “Designated Representative”, formerly designated standard agency, is very similar to “Dual Agent” or “Dual Representative”. It refers to a situation where a Licensee, and therefore also his/her Principle or Supervising Broker, have entered into a Brokerage relationship with both seller and buyer, or both landlord and tenant, in the same real estate transaction with competing interests, however in this scenario the Principle or Supervising Broker has assigned a second Licensee, also affiliated with the Broker, to represent the second Client in the transaction. Again, do not to confuse “Agent” and “Representative”, as the terms are not interchangeable as explained below.
Designated Agent vs. Designated Representative: What’s the difference?
- Designated Agent is the term used for a real estate Licensee acting as a Standard Agent or a limited service agent who has been assigned to represent a client.
- Designated Representative is the term used for a real estate Licensee acting as an Independent Contractor who has been assigned to represent a Client.
It is important to remember that all Brokerage Agreements exist only between the Client and the Principle Broker, not the engaging Licensee. Therefore despite the assignment of two Licensees’, the Principle Broker would continue to hold a form of Dual Agency. However, most Brokerage Agreements are written to permit the creation of Sub-Agency, whereas the Principle Broker is able to delegates authority to the Licensee to act on behalf of the Principle Broker and promote both their and the Clients best interests in the Agency relationship. Additionally, the Broker who is supervising the Licensee in the
Designated Agency as a Dual Agent must remain neutral and maintain the confidence of all clients to the transaction.
Author: Lee Gosselin, Associate Broker & Owner