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Conflict of Laws
An Opinion by Stephen H. Perry, Esq.

The following excerpt is a citation from MA General Laws pertaining to real estate Brokers.

It is VERY CLEAR from the plain language of this Licensing Statute that Brokers are responsible for and MUST oversee and supervise all of their salesman's transactions. Therefore, it is very significant that, in order for a Broker to follow the Licensing Statute to the letter, the Broker must risk being sued for insider trading on EVERY DEAL in his office that involves himself (the Broker) as an agent of a client adverse to one of his associate salesman's client (under the proposed Designated Agency law).

In other words, if the Broker has a seller listing and his new salesman "Joe" has a buyer client that wants to make an offer on the Broker's listing, the Broker is compelled by the Licensing Statute herein to supervise and approve the actions of Joe. However, if the Broker assists Joe (as this Statute demands), he is violating his fiduciary duty of undivided loyalty to his client (the listing seller) under the Common Law of Agency.

It is a legal "catch 22" that no disclosure or consent form can cure!

A real estate consumer can not give prior consent to forego a protection that the Licensing Statute provides with no ambiguous language and with a mandate that all salesmen and their clients or customers be represented by one Broker only. The Broker is trapped in the middle, despite the proposed law's language about remaining "neutral"! The Licensing Statute, however, does not mention neutrality.

Ignore Joe and Joe's client, and the Broker risks being sued under the Licensing Statute herein, for failure to properly supervise and oversee or approve the negotiation of his salesman. CH 93A big time with no real defense! Assist and supervise young Joe and the Broker risks fiduciary violations to his seller/client and BOTH parties may sue the Broker for Insider Trading, because the Common Law will presume an agency relationship between Joe and his statutory, supervisory Broker {who is also receiving both sides of the commission}, no matter what MAR's new Designated Agency law says.

Significantly, MAR's proposed Designated Agency statute says that Brokers must adhere to the Licensing Law provision of a supervisory role. Well, the ONLY way that Brokers can "legally" and safely do that is to NOT actively participate in the listing and selling of real estate. Supervise, manage and appoint or designate other agents only, OR only hire licensed Brokers. PERIOD.

Therefore, small and mid-sized offices with active, top producing DR/Brokers, who also have inexperienced salesmen/licensee's (of which there are thousands currently working in MA) are in a bit of a legal jam. No clear path for a Broker to avoid this inherent conflict.

{Please see the two Statutes cited below.} NOTE: * = my emphasis added.

Chapter 112: Section 87RR License; completion of transactions; fee or commission; action for compensation Section 87RR. Except as otherwise provided, no person shall engage in the business of or act as a broker or salesman directly or indirectly, either temporarily or as an incident to any other transaction, or otherwise, unless he is licensed.* No salesman may conduct or operate his own real estate business nor act except as the representative of a real estate broker who *shall be responsible for the salesman and* who must approve the negotiation and completion by the salesman of any transaction or agreement which results or is intended to result in the sale, exchange, purchase, renting or leasing of any real estate or in a loan secured or to be secured by mortgage or other encumbrance upon real estate. No salesman shall be affiliated with more than one broker at the same time nor shall any salesman be entitled to any fee, commission or other valuable consideration or solicit or accept the same from any person except his licensed broker in connection with any such agreement or transaction. A salesman may be affiliated with a broker either as an employee or as an independent contractor *but shall be under such supervision of said broker as to ensure compliance with this section and said broker shall be responsible with the salesman for any violation of section eighty-seven AAA committed by said salesman.*

Proposed Designated Agency statute (MAR):

"A real estate broker who appoints designated agents shall continue to have the administrative and supervisory duties and responsibilities set forth in section 87RR of this chapter. The designating broker shall be neutral as to any conflicting interests of the buyer and seller and shall not reveal material confidential information about either party without consent from that party."