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Designated Agency- A Legal Opinion

This summary is excerpted material from a 1999 Essay entitled "The Disintegrating Erosion of Particular Exceptions" by Professor of Law Charles E. Rounds, Jr. of Suffolk University Law School. Professor Rounds teaches Fiduciary Relations (Agency & Trusts) and is recognized as an expert on common law fiduciary issues.

His Essay highlighted the inherent conflicts of practicing dual agency and designated agency in any real estate office setting. Undivided loyalty and strict confidentiality, as well as meaningful informed consent (all uncompromising elements of common law agency) are disingenuously blurred in "designated agency " legislation.

Designated agency is an attempt to erode the common law notion of undivided loyalty as the cornerstone fiduciary duty owed by an agent to his/her principal.

The law recognizes that "no man can serve two masters". No agent can give to each of two principals his undivided allegiance, advice and counsel.

Professor Rounds highlights several problems associated with designated agency:

- How does a real estate office prevent the transfer of confidential information with office policies and procedures alone?

- Isn't the appointing/designating broker a dual agent with duties owed to both parties?

- Can true informed consent be given to both parties in designated agency when both clients are unrepresented by independent counsel at the time of their consent?

- How can a State Realtor Association lobby for legislation that would undermine the protections that the common law of agency affords to principals?

- Won't confusion reign in a setting whereby real estate offices attempt to represent both sides in every real estate transaction?

"It should not be necessary to resort to a 93A action to sort out the conflicts inherent in the designated agency movement. There is more than enough ammunition lurking in the common law of agency. No amount of dual agency legislation can totally eclipse the common law." (Quoting Professor Rounds)

Some large real estate firms are already offering mortgages, insurance products and moving services, and many firms offer financial advising and home inspections as well.

Now those same firms want the ability to be both the buyer's agent and seller's agent for the same property, encroaching further upon the prohibited common law notion against agent self-dealing.

"A fiduciary who benefits in a transaction with the person for whom he is a fiduciary bears the burden of establishing that the transaction did not violate his obligation."

See Cleary v. Cleary, 427 Mass 286, 692 N.E. 2d 955 (1998)

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