2013 -- S 0635 SUBSTITUTE A

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LC01357/SUB A

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO BUSINESSES AND PROFESSIONS - AGENCY RELATIONSHIPS IN

RESIDENTIAL REAL ESTATE TRANSACTIONS

     Introduced By: Senators Picard, and Walaska

     Date Introduced: March 06, 2013

     Referred To: Senate Corporations

(Business Regulation)

It is enacted by the General Assembly as follows:

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     SECTION 1. The title of Chapter 20.6 of the General Laws entitled "Agency

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Relationships in Residential Real Estate Transactions" is hereby amended to read as follows:

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     CHAPTER 20.6

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Agency Relationships in Residential Real Estate Transactions

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     CHAPTER 20.6

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RELATIONSHIPS IN RESIDENTIAL REAL ESTATE TRANSACTIONS

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     SECTION 2. Sections 5-20.6-2, 5-20.6-3, 5-20.6-4, 5-20.6-5, 5-20.6-6 and 5-20.6-8 of

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the General Laws in Chapter 5-20.6 entitled "Agency Relationships in Residential Real Estate

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Transactions" are hereby amended to read as follows:

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     5-20.6-2. Definitions. -- As used in this chapter, the following terms shall have the

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following meanings:

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      (1) "Affiliated licensee" means a licensed real estate salesperson or real estate broker as

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defined in section 5-20.5-1 associated with a particular principal broker.

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      (2) "Brokerage" means a principal broker as defined in section 5-20.5-8 and his or her

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affiliated licensees.

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      (3) "Buyer" means a person who acquires or seeks to acquire an ownership interest in

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real estate.

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      (4) "Client" means a buyer, seller, tenant or landlord who has agreed to representation by

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a licensee in a real estate transaction, evidenced by an executed mandatory relationship

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disclosure, to whom a licensee owes the duties set forth in section 5-20.6-5.

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      (5) "Client representation contract" means an express, written contract between a

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principal broker or his or her affiliated licensees and a client that authorizes the principal broker

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or his or her affiliated licensees to act as a client representative for a buyer, seller, landlord, or

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tenant and meets the requirements of section 5-20.6-10.

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      (6) "Confidential information" means the following information:

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      (i) A buyer or tenant's willingness to pay more than the offered price;

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      (ii) A seller or landlord's willingness to accept less than the asking price;

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      (iii) A buyer or tenant's previous offers made to purchase or lease real estate;

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      (iv) A seller or landlord's previous offers received to purchase or lease real estate;

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      (v) Any parties' motivating factors;

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      (vi) Any parties' willingness to agree to other financing terms;

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      (vii) Any facts or suspicions regarding circumstances, other than known material defects

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of a property that a licensee must in all cases disclose, that may psychologically impact or

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stigmatize any real estate; or

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      (viii) Any information about a party's assets, liabilities, income, or expenses.

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      (7) "Customer" means a buyer, seller, tenant, or landlord who has agreed to certain

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assistance by a licensee in a real estate transaction, evidenced by an executed mandatory

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relationship disclosure, to whom a licensee owes the duties set forth in section 5-20.6-4.

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      (8) "Designated client representative" means an affiliated licensee appointed by the

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principal broker or his or her designee to represent a buyer, seller, tenant, or landlord in a real

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estate transaction.

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      The affiliated licensee so designated shall obtain the informed, written consent of the

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buyer, seller, tenant, or landlord with a signed mandatory relationship disclosure pursuant to

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section 5-20.6-8.

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     (9) "Designee" means an associate broker as defined in section 5-20.5-1 whom a

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principal broker authorizes to act on his or her behalf.

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     (9)(10) "Director" means the director of business regulation for the state.

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      (10)(11) "Dual facilitator" means a single licensee who, with the prior written consent of

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both parties assists a seller client and a buyer client in the same transaction subject to the

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limitations set forth in section 5-20.6-6.

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      (11)(12) "Landlord" means a person who leases or attempts to lease his ownership

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interest in real estate to another person.

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      (12)(13) "Lease" means an express written or oral contract between a landlord and tenant

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for the use or occupancy by the tenant of real estate that is owned by another person.

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      (13)(14) "Licensee" means an individual licensed by the director as a real estate broker

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or real estate salesperson pursuant to chapter 5-20.5.

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      (14)(15) "Mandatory relationship disclosure" means a form that describes the

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relationship between a consumer and a principal broker and his or her affiliated licensees that

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meets the requirements of section 5-20.6-8.

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      (15)(16) "Ministerial acts" means acts of an administrative nature that licensees perform

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for client or customers, including, but not limited to, showing property; preparing offers or

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agreements to sell, purchase, exchange, rent, or lease; conveying offers or agreements to the

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parties; and providing information and assistance.

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      (16)(17) "Principal broker" means a real estate broker licensed by the director who is

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designated by the brokerage to be responsible for the supervision and activities of his or her

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affiliated licensees in accordance with this chapter and chapter 5-20.5.

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      (17)(18) "Real estate" refers to vacant land on which a building is intended to be

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constructed for use as one or two (2) residential dwellings or land with physical improvements

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consisting of a house and/or structure comprised of four (4) or fewer residential units.

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      (18)(19) "Sales agreement" means an express written contract signed by the buyer and

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seller for the purchase and sale of the real estate.

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      (19)(20) "Sell," "sale," or "sold" means a transaction for the transfer of real estate from a

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seller to a buyer, including, but not limited to, exchanges of real estate between the seller and

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buyer and transactions involving the creation of a sales agreement.

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      (20)(21) "Seller" means a person who sells or attempts to sell an ownership interest in

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real estate to another person.

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      (21)(22) "Tenant" means a person who acquired or seeks to acquire an interest in real

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estate that entitles him or her to occupy or use a property that is owned by another person.

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      (22)(23) "Transaction coordinator" means a principal broker or his or her designee who

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supervises a real estate transaction in a neutral capacity in which one affiliated licensee represents

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a buyer or tenant as a designated client representative and another affiliated licensee represents a

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seller or landlord as a designated client representative in the same transaction. A transaction

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coordinator does not own any fiduciary duties to any party in a transaction except the duties to

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protect the confidential information of the parties and to properly account for money placed in his

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or her care.

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      (23)(24) "Transaction facilitator" means a licensee who provides assistance to a buyer,

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seller, tenant, or landlord, or both, in a real estate transaction as a neutral facilitator. A transaction

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facilitator does not owe any fiduciary duties to any party in a transaction but does owe the duties

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set forth in section 5-20.6-4.

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     5-20.6-3. Relationships -- Creation and presumption. -- (a) It shall be presumed that

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all licensees in a real estate transaction are neutral transaction facilitators unless, the licensee

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obtains the informed, written consent of a buyer, seller, tenant, or landlord with an executed

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mandatory relationship disclosure to represent that person as a designated client representative.

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      (b) The provisions of this chapter are expressly intended to abrogate the common law of

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agency; no type of agency representation shall be assumed by a brokerage, principal broker,

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licensee, buyer, seller, tenant, or landlord nor shall agency representation be created by

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implication.

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      (c) Types of relationships. - The following types of relationships are recognized:

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      (1) Neutral assistance Assistance as a transaction facilitator to assist one or more

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customers; and

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      (2) Representation of a buyer, seller, tenant or landlord as a designated client

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representative.

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     5-20.6-4. Duties owed by a transaction facilitator to a customer. -- (a) A neutral

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transaction facilitator owes the following duties to a customer:

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      (1) To perform agreed upon ministerial acts timely and competently;

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      (2) To perform these acts with honesty, good faith, reasonable skill and care;

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      (3) To properly account for money or property placed in the care and responsibility of

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the principal broker; and

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      (4) To protect confidential information when assisting customers as a dual facilitator.

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      (b) A licensee acting as a transaction facilitator does not owe any fiduciary duties to a

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customer except those duties specified in paragraph (a).

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     5-20.6-5. Duties owed by a designated client representative to client. -- (a) If an

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affiliated licensee is appointed by the principal broker or his or her designee to represent a buyer,

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seller, tenant, or landlord in a real estate transaction and obtains the written consent of a buyer,

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seller, tenant, or landlord with an executed mandatory relationship disclosure to represent that

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person as a designated client representative, the licensee owes the following legal duties and

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obligations to his or her client:

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      (1) To perform the terms of the client representation contract, if any, with reasonable

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skill and care;

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      (2) To promote the client's best interest in good faith and honesty;

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      (3) To protect the client's confidential information during the relationship and after its

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termination;

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      (4) To perform agreed upon ministerial acts timely and competently;

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      (5) To perform these acts with honesty, good faith, reasonable care and skill; and

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      (6) To properly account for money or property placed in the care and responsibility of

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the principal broker.

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      (b) A principal broker or his or her designee may appoint one or more affiliated licensees

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to act as the designated client representative(s) of a seller or landlord and one or more affiliated

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licensees to act as the designated client representative(s) of a buyer or tenant in the same

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transaction; provided; that, all parties to the transaction receive written notice that an inherent

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conflict of interest may exist when designated client representatives are affiliated with the same

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principal broker.

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      (c) A designated client representative of a seller client or landlord client shall have no

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duty to protect the confidential information of a buyer customer or tenant customer involved in a

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transaction with his or her client. Conversely, a designated client representative of a buyer client

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or tenant client shall have no duty to protect the confidential information of a seller customer or

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landlord customer involved in a transaction with his or her client.

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      (d) In the event that one or more affiliated licensees represent a seller as a designated

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client representative and one or more affiliated licensees represent the buyer as a designated client

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representative in the same transaction, the principal broker or his or her designee shall act in a

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neutral capacity as the transaction coordinator and shall protect the confidential information of all

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parties to the transaction and properly account for funds.

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      (e) No affiliated licensees of the principal broker other than those licensee(s) specifically

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designated to represent the client as a designated client representative shall represent the client or

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owe any other duties except that affiliated licensees not appointed to represent a client in a

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transaction shall have the duty to protect the client's confidential information.

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      (f) All other affiliated licensees of the principal broker not appointed as a designated

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client representative for a party in a real estate transaction may represent another party with

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conflicting interests in the same transaction.

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      (g) The mandatory relationship disclosure shall be presented, explained, and executed at

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the first personal contact with the prospective buyer, seller, tenant, or landlord, or prior to an offer

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to purchase, whichever is first to occur.

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      (h)(g) A designated client representative is exclusively responsible for the performance

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of any duties owed to the client.

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      (i)(h) An appointment of a designated client representative by a principal broker or his or

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her designee to represent a client shall not limit the principal broker's liability or responsibility for

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any breach of duty owed to a client by the designated client representative.

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     5-20.6-6. Dual facilitator. -- (a) A licensee may assist both the buyer client and the seller

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client or tenant client and landlord client in the same transaction only as a neutral dual facilitator.

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      (b) The dual facilitator relationship between the licensee and buyer and seller, or

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between the licensee and tenant client and landlord client, exists solely for the specific transaction

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between the parties. In the event the transaction is not completed or fails to close, then the dual

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facilitator remains the designated client representative for the respective buyer and the seller or

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tenant and landlord in all future, separate transactions where there is no relationship with other

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party.

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      (c) A licensee may be a neutral dual facilitator only after he or she has obtained the

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informed, written consent of his or her principal broker and all parties involved in the transaction

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before presenting an offer to a seller client on behalf of a buyer client or to a landlord client on

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behalf of a tenant client. Such consent shall specifically inform all parties to the transaction of the

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following:

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      (1) The dual facilitator is authorized to assist both parties in a transaction but shall be

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neutral as to any conflicting interests between the parties to the transaction;

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      (2) A dual facilitator shall not have the ability to satisfy fully the duties of loyalty, full

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disclosure, reasonable care and obedience to lawful instructions, but shall still owe a duty to

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protect the confidential information of all parties and a duty to account for funds;

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      (3) Confidential information obtained by a dual facilitator from either party may not be

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disclosed except:

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      (i) If disclosure is expressly authorized;

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      (ii) If such disclosure is required by law;

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      (iii) If such disclosure is intended to prevent illegal conduct; or

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      (iv) If such disclosure is necessary to prosecute a claim against a person represented or to

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defend a claim against the licensee. The duty to protect confidential information shall continue

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after the completion of the transaction; and

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      (4) If a comparative market analysis was prepared for a seller client or a buyer client and

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a dual facilitation situation subsequently arises, the dual facilitator may only provide the

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comparative market analysis to the other party with the prior consent of the party for whom it was

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initially prepared. A dual facilitator shall not be able to prepare a comparative market analysis for

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either party after a dual facilitation situation arises as it may adversely affect one party's

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bargaining position relative to the other party.

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      In the event that either the seller client or buyer client in the case of a sale of property, or

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the landlord client and the tenant client in the case of a rental of property, does not consent to dual

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facilitation, then the principal broker or his or her designee, may, with the consent of the

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party(ies) withholding consent designate another licensee to represent one of the parties as a

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designated client representative.

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      In the event that an affiliated licensee is acting as a dual facilitator, the principal broker

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or his or her designee shall act as a neutral transaction coordinator in the transaction, except as

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required by section 5-20.8-2, and shall protect the parties' confidential information. In the event

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that the clients of a principal broker consent to his or her acting as a disclosed dual facilitator, the

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principal broker may also oversee the transaction as a transaction coordinator.

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     5-20.6-8. Mandatory relations disclosure. -- Mandatory relationship disclosure. -- (a)

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The Rhode Island real estate commission shall approve a mandatory relationship disclosure that

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conforms to the requirements of this section.

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      (b) A licensee shall provide a prospective buyer, seller, tenant, or landlord in a real estate

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transaction with a copy of the mandatory relationship disclosure and shall obtain a signed

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acknowledgement of receipt from the buyer, seller, tenant, or landlord at the first personal contact

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with the prospective buyer, seller, tenant, or landlord, or prior to an offer to purchase whichever is

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first to occur prior to the disclosure of any confidential information. If a buyer, seller, tenant, or

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landlord, refuses to sign an acknowledgement of receipt, the licensee shall set forth, sign and date

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a written declaration of the facts of the refusal.

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      (c) The mandatory relationship disclosure shall contain the following information:

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      (1) A list of the types of representation or assistance available to a prospective buyer,

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seller, tenant, or landlord consistent with section 5-20.6-3;

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      (2) A statement that a principal broker and his or her affiliated licensees must disclose

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their relationship as a designated client representative, transaction facilitator, or transaction

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coordinator to the buyer, seller, tenant, or landlord in any transaction;

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      (3) The legal duties and obligations owed to the buyer, seller, tenant, or landlord in each

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type of relationship as set forth in this chapter and chapter 5-20.5;

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      (4) A conspicuous notice that a licensee cannot act as a client representative for a

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prospective buyer, seller, tenant, or landlord unless the licensee obtains the informed written

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consent of a prospective buyer, seller, tenant, or landlord with a signed mandatory relationship

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disclosure;

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      (5) A box for the client or customer to select the type of representation or assistance that

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he or she desires;

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     (6) A box for the client or customer to acknowledge the type of representation or

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assistance that a real estate licensee is offering to the other party in the same transaction.

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      (6)(7) A statement that a principal broker may designate one or more affiliated licensees

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to act as the designated client representative(s) of a seller or landlord and one or more affiliated

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licensees to act as the designated client representative(s) of a buyer or tenant in the same

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transaction; provided, that the licensee obtains the consent from the client being represented;

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      (7)(8) A statement that, when the principal broker or his or her designee appoints

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designated client representatives to represent clients on different sides of a transaction, he or she

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shall: (i) act in a neutral capacity as a transaction coordinator; (ii) protect all parties' confidential

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information; and (iii) properly account for funds;

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      (8)(9) A statement that all affiliated licensees not appointed as a designated client

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representative for the client may represent another party in a transaction with conflicting interests;

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      (9)(10) An explanation of the potential conflicts of interest that exist if a licensee acts as

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a designated client representative in a transaction or a neutral transaction facilitator for more than

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one party in the same transaction;

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      (10)(11) A statement that a principal broker and his or her affiliated licensees must

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disclose their relationship as a designated client representative, transaction facilitator, or

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transaction coordinator to the buyer, seller, tenant, or landlord in any transaction;

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      (11)(12) A statement that the failure of a licensee to give a prospective buyer, seller,

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tenant, or landlord the mandatory relationship disclosure timely or the failure of a licensee to

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obtain any other written consent required by this chapter shall be a violation of Rhode Island real

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estate license law and may subject the licensee to disciplinary action;

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      (12)(13) A statement that if a consumer desires to change the nature of a relationship

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with a licensee from a customer relationship to a client relationship that a licensee's relationship

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with a buyer, seller, tenant, or landlord as a designated client representative must be established

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no later than the preparation of a sales agreement, offer to purchase, or lease; and

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      (13)(14) Written confirmation from each party signing the mandatory relationship

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disclosure that he or she has received, read, and understood this mandatory relationship disclosure

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and has consented to the relationship confirmed above.

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      (d) In all instances, a licensee's relationship with a buyer, seller, tenant, or landlord as a

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designated client representative must be established, and the mandatory relationship disclosure

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executed, no later than the preparation of a sales agreement, offer to purchase, or lease.

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SECTION 3. This act shall take effect upon passage.

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LC01357/SUB A

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO BUSINESSES AND PROFESSIONS - AGENCY RELATIONSHIPS IN

RESIDENTIAL REAL ESTATE TRANSACTIONS

***

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     This act would provide that a real estate broker or salesperson who provides assistance in

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a real estate transaction shall no longer be deemed a neutral transaction facilitator. This act would

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further provide that the mandatory relationship disclosure form include a box for the customer to

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acknowledge the type of representation that a real estate broker or salesperson is offering to the

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other party in the transaction.

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     This act would take effect upon passage.

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LC01357/SUB A

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