Current through Supplement No. 394, October, 2024
1. As used in this section, unless the
context or subject matter otherwise requires:
a. "Dual agency" means a situation in which a
licensee owes a duty to more than one party to the real estate transaction.
Dual agency is established as follows:
(1)
When one licensee represents both the buyer and the seller in a real estate
transaction; or
(2) When two or
more licensees, licensed to the same broker, each represent a party to the real
estate transaction.
b.
"Party to the real estate transaction" includes any individual or individuals
who are a seller or buyer, or potential seller or buyer.
c. "Real estate transaction" means any
transaction involving residential real property that consists of separate
dwelling units for one through four families. "Real estate transaction" does
not include transactions involving agricultural or commercial property,
residential property that provides separate dwelling units for five or more
families, or commercial leaseholds.
2. In all real estate transactions in which
the licensee represents any party to a real estate transaction, the licensee
must make an affirmative written disclosure identifying which party that person
represents in the transaction. The disclosure must be made at the time of the
first substantive contact between the licensee and any party to the real estate
transaction. The disclosure must be represented by a separate written document,
and offered to the party to the real estate transaction for signature. True
copies of the disclosure form must be retained in the broker's file. As used in
this subsection, the term "substantive contact" means:
a. When representing the seller, prior to the
signing of a listing agreement.
b.
When representing a buyer, prior to the signing of a buyer's broker agreement.
c. As to all other parties, such
as potential buyers or sellers, who are not represented by the licensee, prior
to the discussion of personal financial information or the commencement of
negotiations, which could affect that party's bargaining position in the
transaction. However, a licensee shall have complied with the provisions of
this subsection if, in those circumstances where it is impossible as a
practical matter to obtain a signed written disclosure statement from a party
at the time of the first substantive contact, such as telephone contact with an
absent party, the licensee orally discloses the status of the licensee's
representation and, as soon as practicable thereafter, makes the written
disclosure required by this subsection.
d. As to any change in the licensee's
representation, including dual agency, that makes the initial disclosure of
representation incomplete, misleading, or inaccurate, a new disclosure must be
made at once to any party to the transaction.
e. Nothing in this section requires written
notice to each prospective buyer who comes to an open house display of real
property; provided, however, the licensee, by sign, poster, distributed listing
literature, or property description form, conspicuously discloses the
licensee's agency relationship.
3. Each licensee owes a duty of
confidentiality to a party being represented in a real estate transaction. The
following information may not be disclosed without the informed, written
consent of the party being represented:
a.
That the party being represented is willing to pay more than the purchase price
or lease price offered for the property.
b. That the party being represented is
willing to accept less than the purchase price or lease price being asked for
the property.
c. What the
motivating factors are for the buying, selling, or leasing of the property by
the party being represented.
d.
That the party being represented will agree to terms for financing of the
property other than those which are offered.
4. A licensee shall also keep confidential
all information received from a party being represented, which has been made
confidential by request or instruction of that party.
5. The obligation of confidentiality set
forth in subsections 3 and 4 continues in effect during the time a party is
being actively represented, and continues on after the termination, expiration,
or completion of the representation until one of the following occurs:
a. The party being represented permits the
disclosure by subsequent word or conduct.
b. Disclosure is required by law, by court
order, or order of the commission.
c. The information is made public through
disclosure from a source other than the licensee.
6. The provisions of subsections 3 and 4 do
not serve to permit or require a licensee to keep confidential any material
defects in the property of which the licensee is aware or which would
constitute fraudulent misrepresentation unless disclosed.
7. The written disclosure required by this
section must advise a party to the real estate transaction of the different
types of representation that are available. The explanation must include
information pertaining to how that party's interest shall be represented if the
party chooses the licensee to act as the owner's agent, the buyer's agent, or
as a dual agent. The written disclosure forms, in clearly understood terms,
must inform the party to the transaction as follows:
a. If the party chooses seller
representation, it must be explained that this relationship typically arises
from entering into a listing agreement, or by agreeing to act as a subagent
through the listing agency. A subagent may work in a different real estate
office. A listing agent or subagent can assist the buyer but does not represent
that party. A listing agent or subagent is required to place the interest of
the owner first, and a buyer should not tell a listing agent or subagent
anything that the buyer would not want the owner to know, because the listing
agent or subagent must disclose any material information to the owner. Also, it
must be explained that if the real estate brokerage firm and its licensees
represent two or more sellers as clients who both desire to offer competing
real property for sale or lease, the real estate brokerage firm and its
licensees may do so without breaching any duty to such clients. In such an
event, the brokerage firm and its licensees still owe agency duties to the
clients, except as limited in this subsection.
b. If the party chooses buyer representation,
it must be explained that the licensee typically becomes the buyer's agent by
entering into an agreement for such representation. A buyer's agent may assist
the owner but does not represent the owner. A buyer's agent must place the
interest of the buyer first, and the owner should not tell a buyer's agent
anything the owner would not want the buyer to know because the buyer's agent
must disclose any material information to the buyer. Also, it must be explained
that if the real estate brokerage firm and its licensees represent two or more
buyers as clients who desire to make an offer to purchase the same real
property, the brokerage firm and its licensees do not breach any duty by
assisting such clients with multiple offers even though the interest of such
clients are competing. However, if the same licensee represents two or more
buyers who desire to make an offer to purchase the same property, that licensee
must disclose to buyer clients the fact that a competing written offer has been
submitted by another buyer client of that licensee without disclosing the
identity of the other buyer client or the terms of the offer In such an event,
the brokerage firm and its licensees still owe agency duties to the clients,
except as limited in this subsection.
c. If the party selects dual agency, it must
be explained that the licensee must enter into a written agreement obtaining
the consent of both parties before such representation is authorized. This
agreement must set forth who will be responsible for paying the licensee's fee.
Under this arrangement, the licensee is required to treat both parties honestly
and impartially so as not to favor one over the other Unless written permission
from the appropriate party is obtained, the licensee is prohibited from
disclosing that the owner will accept less than the asking price, that the
buyer will pay a price greater than that submitted in the written offer, or any
other information of a confidential nature or which the party has instructed
the licensee not to disclose. Potential conflicts exist when the licensee
represents more than one party, and the licensee's activities may be more
limited. The licensee is required to inform each party of any facts that would
affect a party's decision to permit representation of both the owner and buyer.
This includes any arrangement by which the licensee will or expects to
represent a party in a future transaction.
d. It must be explained that a duty of
loyalty and faithfulness are owed to the party or parties to the transaction
with whom the licensee has an agency relationship, and the licensee must inform
that party of all important information which might affect a decision
concerning the real estate transaction. This includes disclosure of any
material facts to the buyer that may adversely and significantly affect that
person's use or enjoyment of the property. It also includes disclosure of any
information to either party which may indicate that one of the parties does not
intend to perform in accordance with the terms of the purchase agreement or any
other written agreement or obligation. However, it must be explained that
knowledge of one licensee of a real estate brokerage firm regarding an affected
real property is not imputed to another licensee in the same brokerage firm and
no duty is imposed upon a licensee in a real estate brokerage firm to disclose
facts that are known by that licensee regarding the affected real property to
another licensee within the same real estate brokerage firm. Also, it must be
explained that unless otherwise agreed in writing, a real estate brokerage firm
and its licensees are not obligated to a client, a customer, or any other
person to discover defects in any real property, to verify the ownership of any
real property, or to independently verify the accuracy or completeness of any
statement or representation made by any person other than the real estate
brokerage firm and the real estate brokerage firm's licensees involved in the
transaction under question.
e. It
must be explained that a licensee must deal honestly with any party to a real
estate transaction, regardless of whether the party is represented by that
licensee.
8. No person
required to be licensed by North Dakota Century Code chapter 43-23 may maintain
any action to recover any commission, fee, or other compensation with respect
to the purchase, sale, lease, or other disposition or conveyance of real
property, or with respect to the offer, negotiation, or attempt to negotiate
any sale, lease, purchase, or other disposition, unless that person's agency
relationship has been disclosed to the party or parties to the transaction in
accordance with the requirements of this section.
9. The commission may approve a specific form
or forms to implement the provisions of this section.
General Authority: NDCC
28-32-02
Law Implemented: NDCC
43-23-05
