This is the first episode of our new Office Management Principles video series. This first episode introduces the concept of agency and distinguishes the authorized activities that can be exercised by a broker or an agent.
Presentation of the agency
As brokerage services became more prevalent in California in the mid-twentieth century, and the public demanded greater consistency and skill in the provision of these services, the state legislature began to standardize and regulate:
- who is eligible to become a licensee and offer brokerage services;
- the duties and obligations of licensees to members of the public; and
- procedures for soliciting and rendering services when performing permitted activities on behalf of clients.
Collectively, the standards establish the minimum standard of conduct expected of a licensee when dealing with the public, such as competence and honesty. The key to implementing these professional standards is the Education and formation licensees.
People who wish to become real estate brokers are issued a broker’s license by the California Department of Real Estate (DRE) only after completing in-depth real estate courses and meeting minimum experience requirements. Upon obtaining the license, brokers are presumed to be competent and diligent, with the expectation that they will conduct themselves in a manner that exceeds the minimum level of duties owed to clients and other members of the public.
For these reasons, the natural or legal person that a buyer or a seller, an owner or a tenant, or a borrower or a lender retains to represent him in a real estate transaction can only be a licensee. Real estate broker.
To retain the services of a broker to act as a real estate agent, the buyer or seller enters into an employment contract with the broker, called listing agreement. [See RPI Forms 102 and 103]
Broker vs Sales Agent
Brokers are in a distinctly different category from sales agents. Brokers are authorized to deal with members of the public to offer, contract and render brokerage services for remuneration, called authorized activities. Commercial agents are not. [Calif. Business and Professions Code §10131]
A real estate salesperson is strictly an agent of the employing broker. Agents may not contract in their own name or on behalf of anyone other than their employing broker. Thus, an agent cannot be employed by a person who is a member of the public. This is why an agent’s license must be given to the employing broker, who retains the license until the agent leaves the broker’s employment. [Bus & P C §10160]
Only when acting as a representative of the broker can the sales agent perform brokerage services which only the broker is authorized to contract and provide to others, called clients. [Grand v. Griesinger (1958) 160 CA2d 397]
In addition, a sales agent can only receive remuneration for real estate-related activities from the broker who employs him. An agent cannot receive compensation directly from anyone, such as the seller or buyer, or another licensee. [Bus & P C §10137]
Thereby, brokers are the officers members of the public who employ them, while a broker sales agents are the agent agentspersons who render services to the broker’s clients by acting on behalf of the broker. [Calif. Civil Code §2079.13(b)]
Therefore, brokers are responsible for all activities that their agents engage in within the course and range of their job. [Gipson v. Davis Realty Company (1963) 215 CA2d 190]