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A Ban on Dual Agency Fails…For Now

As you probably know, at REATA, we only represent users – companies that lease or buy office and warehouse space. We won’t take landlord listings for lease because it has the potential to create conflicts of interest.

Furthermore, we don’t think that real estate companies should be allowed to represent both sides of a transaction. That would mean that one agent in BrokerageCo (made up name) shouldn’t be allowed to represent the landlord or seller while another agent in the same BrokerageCo represents the tenant or buyer.

Fortunately, some powerful forces in the industry are starting to agree with us and take action to make this mandatory.

California Assembly Bill 1059 is legislation that was crafted to end “dual agency” (it’s called “intermediary” in Texas). While the specific provision ending this practice was removed from the bill before it made it to committee, the good news is that it was considered at all. It has to be discussed a few times before it actually becomes law.

This all began in 2007 when a Hong Kong businessman sued Coldwell Banker and its agents. He had been represented by a Coldwell Banker agent as had the seller. When a giant discrepancy was found in the size of the property he purchased (long after closing), he filed suit. It went all the way to the California Supreme Court which determined that Coldwell Banker failed in its fiduciary responsibility to him. That was a lightning bolt decision.

The United Kingdom is ahead of the USA on this issue. The Royal Institution of Chartered Surveyors (think of them as the UK version of the National Association of Realtors) in early 2017 created a policy statement with strict conflict-of-interest requirements which specifically bans the practice in the UK.

So the government and industry groups appear to be moving in the right direction. It will likely take several more years, but we’re hopeful that all concerned will do the right thing for clients whether legislation requires it or not.

A more-comprehensive article is available here if you want to learn more.

Bob Gibbons is a Real Estate Advisor & Tenant Advocate with REATA Commercial Realty, Inc. which is a tenant advisory firm based in Plano, Texas. Bob serves companies in Plano, Frisco, McKinney, Allen, Richardson, Addison, Dallas and the surrounding areas and specializes in companies which lease or buy office and warehouse properties.

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