1659.E

AN ACT Relating to real estate brokerage relationships; amending RCW 18.85.230; adding a new chapter to Title 18 RCW; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. DEFINITIONS. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Agent" means a licensee who enters into a brokerage relationship under this chapter.

(2) "Affiliated licensee" means a licensed associate broker or a salesperson as defined in chapter 18.85 RCW.

(3) "Broker" means the same as defined in chapter 18.85 RCW.

(4) "Brokerage relationship" means a limited agency relationship created under this chapter between a licensee and a principal either by mutual agreement or as provided in section 2 of this act relating to the performance of services of a licensee.

(5) "Business opportunity" means and includes a business, business opportunity and good will of an existing business, or any one or combination thereof.

(6) "Buyer's/tenant's agent" means a licensee who has entered into a brokerage relationship with only the buyer/tenant in a real estate transaction, and includes subagents engaged by a buyer's/tenant's agent.

(7) "Dual agent" means a licensee who, with the written consent of all parties to a contemplated real estate transaction, has entered into a brokerage relationship with both the seller/landlord and buyer/tenant.

(8) "Leasing" means and includes renting and a "lease" means and includes a rental agreement.

(9) "Licensee" means a broker, as defined in chapter 18.85 RCW, or an affiliated broker or salesperson, as defined in chapter 18.85 RCW, acting as subagent of the broker.

(10) "Limited agency relationship" means an agency relationship between a licensee and a principal as limited by this chapter.

(11) "Principal" means the seller/landlord or the buyer/tenant who enters into a brokerage relationship with a broker under to this chapter.

(12) "Seller's/landlord's agent" means a licensee who has entered into a brokerage relationship with only the seller/landlord in a real estate transaction, and includes subagents engaged by a seller's/landlord's agent.

(13) "Purchase and sale agreement" means any preclosing agreement regarding the sale or other conveyance of an interest in real estate or a business opportunity.

(14) "Real estate transaction" and "transaction" and other similar terms shall include real estate sales, real estate leasing, and sales of business opportunities.

(15) "Real estate" and "property" and other similar terms include real estate, leases, and business opportunities.

(16) "Seller/landlord" and "buyer/tenant" means, when applying to a transaction, as appropriate based upon whether the transaction is a sale or a lease transaction.

(17) "Subagent" means a licensee who is authorized to act on behalf of a principal by the principal's agent.

NEW SECTION. Sec. 2. RELATIONSHIPS BETWEEN LICENSEES AND THE PUBLIC. (1) Unless otherwise agreed in writing and signed by all parties, a licensee who enters into a brokerage relationship with a principal shall be limited to representing only that principal in the transaction.

(2) A licensee shall be a buyer's/tenant's agent unless the:

(a) Licensee enters into a written agency agreement with the seller/landlord;

(b) Licensee enters into a subagency agreement with the seller's/landlord's agent;

(d) Parties agree otherwise in writing.

(3) A licensee may work with a party in separate transactions pursuant to different relationships including but not limited to, selling or leasing property as a seller's/landlord's agent and working with that seller/landlord in buying or leasing another property as a seller's/landlord's agent, or as a subagent, if the licensee complies with this chapter.

(4) A broker is not required to offer or engage in more than one of the brokerage relationships under this chapter.

(5) A licensee shall provide to the licensee's principal a separate written disclosure indicating by a bold print heading that this form is an optional waiver of the statutory duties of a licensee as set forth in sections 3 through 5 of this act. This disclosure shall be provided on or before the earlier of the date that a written agreement establishing a brokerage relationship is entered into between the licensee and the principal, or the date that the licensee obtains the principal's signature on a purchase and sale agreement.

NEW SECTION. Sec. 3. DUTIES OF A SELLER'S/LANDLORD'S AGENT. (1) Unless otherwise agreed in writing signed by a seller/landlord and a seller's/landlord's agent after the disclosures required by section 2(5) of this act have been made, the duties and obligations of a seller's/landlord's agent or subagent are limited to the following:

(a) Exercise reasonable skill and care for the seller/landlord;

(b) Deal with the seller/landlord at all times in good faith;

(c) After a purchase and sale agreement or lease is entered into by the seller/landlord, be loyal to the seller/landlord by taking no action that is adverse or detrimental to the seller's/landlord's interest in the transaction;

(d) Abide by the terms of the brokerage agreement;

(e) Advise the seller/landlord to obtain expert advice on material matters that are outside the scope of the brokerage relationship;

(f) Disclose to the seller/landlord in a timely manner all material facts that the agent has agreed in writing to investigate, and items described in section 9(3) of this act;

(g) Seek a buyer/tenant to purchase or lease the seller's/landlord's property at a price, terms, and conditions acceptable to the seller/landlord; except that the seller's/landlord's agent is not obligated to seek additional offers to purchase or lease the property while the property is subject to an existing purchase and sale agreement or lease;

(h) Present all written offers to and from the seller/landlord in a timely manner regardless of whether the property is subject to an existing purchase and sale agreement or lease;

(i) Disclose to the seller/landlord all existing material facts actually known by the seller's/landlord's agent and not reasonably ascertainable to the seller/landlord that substantially adversely affect the ability of the buyer/tenant to perform under the terms of any seller/landlord financing or the terms of the lease;

(j) Not disclose any confidential information from or about the seller/landlord, except with the seller's/landlord's consent, even after termination of the brokerage relationship. "Confidential information" means information from or concerning a seller/landlord that:

(i) Was acquired by the seller's/landlord's agent during the course of a brokerage relationship with the seller/landlord;

(ii) The seller/landlord reasonably expects to be kept confidential;

(iii) Is not a matter of public record;

(iv) The seller/landlord has not disclosed or authorized to be disclosed to third parties;

(v) If disclosed, would operate to the detriment of the seller/landlord; and

(vi) The seller/landlord personally would not be obligated to disclose to the buyer/tenant or third parties;

(k) Account to the seller/landlord in a timely manner for all money and property received from, or on behalf of, the seller/landlord; and

(l) Comply with all requirements of this chapter.

(2)(a) A seller's/landlord's agent owes no duty or obligation to a buyer/tenant; except that a seller's/landlord's agent shall disclose to the buyer/tenant all existing material facts actually known by the seller's/landlord's agent and not reasonably ascertainable to the buyer/tenant, that substantially adversely affects the value of the property or operates to materially impair or defeat the purpose of the transaction.

(b) A seller's/landlord's agent owes no duty to conduct an independent inspection of the property for the benefit of the seller/landlord or buyer/tenant and owes no duty to independently verify the accuracy or completeness of any statement made by the seller/landlord or other information obtained from any source reasonably believed by the seller's/landlord's agent to be reliable.

(3) A seller's/landlord's agent's showing of alternative properties not owned by the seller/landlord to prospective buyers/tenants, and the listing of competing properties for sale or lease by the seller's/landlord's agent, is not a breach by the seller's/landlord's agent of any duty or obligation to the seller/landlord.

NEW SECTION. Sec. 4. DUTIES OF A BUYER'S/TENANT'S AGENT. (1) Unless otherwise agreed in writing signed by a buyer/tenant and a buyer's/tenant's agent after the disclosures required by section 2(5) of this act have been made, the duties and obligations of a buyer's/tenant's agent or subagent are limited to the following:

(a) Exercise reasonable skill and care for the buyer/tenant;

(b) Deal with the buyer/tenant at all times in good faith;

(c) After a purchase and sale agreement or lease is entered into by the buyer/tenant, be loyal to the buyer/tenant by taking no action that is adverse or detrimental to the buyer's/tenant's interest in the transaction;

(d) Abide by the terms of the brokerage agreement, if any;

(e) Advise the buyer/tenant to obtain expert advice on material matters that are outside the scope of the brokerage relationship;

(f) Seek for a buyer a property for purchase, and for a tenant, a property to lease, at a price, terms, and conditions that are acceptable to the buyer/tenant; except that the buyer's/tenant's agent shall not be obligated to seek other properties while the buyer/tenant is a party to an existing purchase and sale agreement or lease;

(g) Present all written offers to and from the buyer/tenant in a timely manner regardless of whether the buyer/tenant is already a party to an existing purchase and sale agreement or lease;

(h) Disclose to the buyer/tenant in a timely manner all existing material facts actually known by the buyer's/tenant's agent and which are not reasonably ascertainable to the buyer/tenant, including without limitation material facts regarding the condition of the property and items described in section 9(3) of this act;

(i) Not disclose any confidential information from or about the buyer/tenant, except with the buyer's/tenant's consent, even after termination of the brokerage relationship. "Confidential information" means information from or concerning the buyer/tenant that:

(i) Was acquired by the buyer's/tenant's agent during the course of a brokerage relationship with the buyer/tenant;

(ii) The buyer/tenant reasonably expects to be kept confidential;

(iii) Is not a matter of public record;

(iv) The buyer/tenant has not disclosed or authorized to be disclosed to third parties;

(v) If disclosed, would operate to the detriment of the buyer/tenant; and

(vi) The buyer/tenant personally would not be obligated to disclose to the seller/landlord or third parties;

(j) Account to the buyer/tenant in a timely manner for all money and property received from, or on behalf of, the buyer/tenant; and

(k) Comply with all requirements of this chapter.

(2)(a) A buyer's/tenant's agent owes no duty or obligation to a seller/landlord, except that a buyer's/tenant's agent shall disclose to the seller/landlord all existing material facts actually known by the buyer's/tenant's agent and not reasonably ascertainable to the seller/landlord, that substantially adversely affects the ability of the buyer/tenant to perform under the terms of any seller/landlord financing.

(b) A buyer's/tenant's agent owes no duty to conduct an independent investigation of the buyer's/tenant's financial condition for the benefit of the seller/landlord and owes no duty to independently verify the accuracy or completeness of statements made by the buyer/tenant, or other information obtained from any source reasonably believed by the licensee to be reliable.

(3) A buyer's/tenant's agent may show properties in which the buyer/tenant is interested to other prospective buyers or tenants without breaching any duty or obligation to the buyer/tenant. A buyer's/tenant's agent's assistance to competing buyers or tenants in making offers for and entering into agreements to purchase properties in which any other buyer/tenant represented by the buyer's/tenant's agent is interested is not a breach of any duty or obligation to a buyer/tenant.

NEW SECTION. Sec. 5. DUTIES OF A DUAL AGENT. (1) A licensee may act as a dual agent only with the written consent of both the seller/landlord and the buyer/tenant in the transaction, and the written consent may not be waived. The written consent must include a statement of the licensee's duties and responsibilities and describe the amount of the broker's compensation and identify the party obligated to pay the compensation.

(2) A dual agent represents both the seller/landlord and the buyer/tenant and unless otherwise agreed in writing signed by the licensee's principal after the disclosures required by section 2(5) of this act have been made, has the following limited duties and obligations:

(a) Exercise reasonable skill and care for both principals;

(b) Deal with both principals at all times in good faith;

(c) After a purchase and sale agreement or lease is entered into by the principals, take no action that is adverse or detrimental to the transaction;

(d) Advise both principals to obtain expert advice on material matters that are outside the scope of the brokerage relationship;

(e) Disclose to the respective principal in a timely manner all material facts that the agent has agreed in writing to investigate for such principal, and items described in section 9(3) of this act;

(f) Seek a buyer/tenant to purchase or lease the seller's/landlord's property at a price, terms, and conditions acceptable to the seller/landlord, except that the licensee is not obligated to seek additional offers to purchase or lease the property while the property is subject to an existing purchase and sale agreement or lease;

(g) Seek for the buyer a property for purchase, and for the tenant, a property to lease, at a price, terms, and conditions that are acceptable to the buyer/tenant, except that the licensee is not obligated to seek other properties while the buyer/tenant is a party to an existing purchase and sale agreement or lease;

(h) Present all written offers to and from each principal in a timely manner regardless of whether the principal is already a party to an existing purchase and sale agreement or lease;

(i) Disclose to the seller/landlord all existing material facts actually known by the licensee and not reasonably ascertainable to the seller/landlord that substantially adversely affect the ability of the buyer/tenant to perform under the terms of any seller/landlord financing or the terms of the lease;

(j) Disclose to the buyer/tenant in a timely manner all existing material facts actually known by the buyer's/tenant's agent and which are not reasonably ascertainable to the buyer/tenant, including without limitation material facts regarding the condition of the property, and items described in section 9(3) of this act;

(k) Not disclose any confidential information from or about either principal, except with the principal's consent, even after termination of the brokerage relationship; and

(l) Account to each principal in a timely manner for all money and property received from, or on behalf of, each principal.

(3) Notwithstanding any other provision in this chapter to the contrary, a dual agent may not disclose to any party of the transaction confidential information about the other party to the transaction. Information required to be disclosed under sections 3(1)(i) and 4(1)(h) of this act is not confidential information.

(4) In a transaction in which different licensees affiliated with the same broker represent different parties, the broker is a dual agent and each affiliated licensee shall represent only the party with whom the licensee has a brokerage relationship, unless all parties agree otherwise in writing.

NEW SECTION. Sec. 6. DURATION OF BROKERAGE RELATIONSHIP. (1) A brokerage relationship commences when the licensee agrees to provide brokerage services to a principal and shall continue until performance, completion, expiration, or termination of the agency agreement in accordance with its terms.

(2) A licensee owes no further duty or obligation after termination of the brokerage relationship, except as otherwise agreed in writing, and as follows:

(a) Accounting for all moneys and property received during the relationship; and

(b) Keeping confidential all confidential information.

(3) Nothing in this section affects an agreement between the parties regarding the payment of compensation during or after the brokerage relationship.

NEW SECTION. Sec. 7. COMPENSATION. (1) In any real estate transaction, the broker's compensation may be paid by the seller/landlord, and/or the buyer/tenant, and/or a third party, and/or by sharing the compensation between brokers.

(2) An agreement to pay, or the payment of, compensation does not establish an agency relationship between the party who agrees to pay, or pays, the compensation and the broker or any affiliated licensee.

(3) A seller/landlord may agree that a seller's/landlord's broker may share with another seller's/landlord's and/or a buyer's/tenant's broker the compensation paid by the seller/landlord.

(4) A buyer/tenant may agree that a buyer's/tenant's broker may share with another buyer's/tenant's and/or seller's/landlord's broker the compensation paid by the buyer/tenant.

(5) A broker may be compensated by more than one party for services in a transaction, if those parties consent in writing at or before the time of entering into a purchase and sale agreement or lease.

(6) An agreement for a buyer's/tenant's broker to receive compensation based on the purchase price or rents charged is not a breach of any duty or obligation to the buyer/tenant.

NEW SECTION. Sec. 8. VICARIOUS LIABILITY. (1) A principal is not liable for an act, error, or omission by the principal's agent or subagent arising out of a brokerage relationship unless the principal expressly consented to the act, error, or omission.

(2) A licensee is not liable for an act, error, or omission of a subagent under this chapter, unless the licensee knew of the act, error, or omission. This section does not limit the liability of a broker for an act, error, or omission by an affiliated licensee under his or her supervision.

NEW SECTION. Sec. 9. IMPUTED KNOWLEDGE AND NOTICE. (1) A principal is not deemed to have knowledge or notice of any facts known by a principal's agent or subagent, unless the principal has actual knowledge or notice of those facts.

(2) A licensee is not deemed to have knowledge or notice of any facts known by a subagent, unless the licensee has actual knowledge or notice of those facts.

(3) Notwithstanding subsections (1) and (2) of this section, communication to or from a principal's agent regarding the other party's offer, acceptance of offer, refusal of offer, counteroffer, withdrawal of offer, any extension of time periods, a disclosure statement under chapter 64.06 RCW, or other communications with persons or entities named in the purchase and sale agreement or lease constitutes notice to and knowledge of the licensee' principal. This subsection does not alter any legal or contractual provision requiring written notice.

NEW SECTION. Sec. 10. AFFILIATED LICENSEES. (1) All affiliated licensees to the extent allowed by their license, have the same duties and responsibilities to the parties as the broker under this chapter, except as provided in section 5(4) of this act.

(2) All affiliated licensees have the same protection from vicarious liability as their broker.

NEW SECTION. Sec. 11. CONSTRUCTION. This chapter applies to the exclusion of common law duties and responsibilities of principal and agent which have to this date been applied to real estate brokers affiliated licensees and their principals. Nothing in this chapter affects the obligations and responsibilities of a licensee while engaging in the authorized or unauthorized practice of law as determined by the Washington courts.

NEW SECTION. Sec. 12. This chapter applies to brokerage relationships first entered into after the effective date of this act, unless the licensee and the licensee's principal agree in writing that, commencing with the effective date of this act, this chapter will apply to a brokerage relationship which is entered into prior to the effective date of this act.

NEW SECTION. Sec. 13. CAPTIONS. Captions used in this chapter do not constitute any part of the law.

Sec. 14. RCW 18.85.230 and 1990 c 85 s 1 are each amended to read as follows:

The director may, upon his or her own motion, and shall upon verified complaint in writing by any person, investigate the actions of any person engaged in the business or acting in the capacity of a real estate broker, associate real estate broker, or real estate salesperson, regardless of whether the transaction was for his or her own account or in his or her capacity as broker, associate real estate broker, or real estate salesperson, and may impose any one or more of the following sanctions: Suspend or revoke, levy a fine not to exceed one thousand dollars for each offense, require the completion of a course in a selected area of real estate practice relevant to the section of this chapter or rule violated, or deny the license of any holder or applicant who is guilty of:

(1) Obtaining a license by means of fraud, misrepresentation, concealment, or through the mistake or inadvertence of the director;

(2) Violating any of the provisions of this chapter or any lawful rules or regulations made by the director pursuant thereto or violating a provision of chapter 64.36, 18.-- (sections 1 through 13 of this act), 19.105, or 58.19 RCW or the rules adopted under those chapters;

(3) Being convicted in a court of competent jurisdiction of this or any other state, or federal court, of forgery, embezzlement, obtaining money under false pretenses, bribery, larceny, extortion, conspiracy to defraud, or any similar offense or offenses: PROVIDED, That for the purposes of this section being convicted shall include all instances in which a plea of guilty or nolo contendere is the basis for the conviction, and all proceedings in which the sentence has been deferred or suspended;

(4) Making, printing, publishing, distributing, or causing, authorizing, or knowingly permitting the making, printing, publication or distribution of false statements, descriptions or promises of such character as to reasonably induce any person to act thereon, if the statements, descriptions or promises purport to be made or to be performed by either the licensee or his or her principal and the licensee then knew or, by the exercise of reasonable care and inquiry, could have known, of the falsity of the statements, descriptions or promises;

(5) Knowingly committing, or being a party to, any material fraud, misrepresentation, concealment, conspiracy, collusion, trick, scheme or device whereby any other person lawfully relies upon the word, representation or conduct of the licensee;

(6) Accepting the services of, or continuing in a representative capacity, any associate broker or salesperson who has not been granted a license, or after his or her license has been revoked or during a suspension thereof;

(7) Conversion of any money, contract, deed, note, mortgage, or abstract or other evidence of title, to his or her own use or to the use of his or her principal or of any other person, when delivered to him or her in trust or on condition, in violation of the trust or before the happening of the condition; and failure to return any money or contract, deed, note, mortgage, abstract or other evidence of title within thirty days after the owner thereof is entitled thereto, and makes demand therefor, shall be prima facie evidence of such conversion;

(8) Failing, upon demand, to disclose any information within his or her knowledge to, or to produce any document, book or record in his or her possession for inspection of the director or his or her authorized representatives acting by authority of law;

(9) Continuing to sell any real estate, or operating according to a plan of selling, whereby the interests of the public are endangered, after the director has, by order in writing, stated objections thereto;

(10) Committing any act of fraudulent or dishonest dealing or a crime involving moral turpitude, and a certified copy of the final holding of any court of competent jurisdiction in such matter shall be conclusive evidence in any hearing under this chapter;

(11) Advertising in any manner without affixing the broker's name as licensed, and in the case of a salesperson or associate broker, without affixing the name of the broker as licensed for whom or under whom the salesperson or associate broker operates, to the advertisement; except, that a real estate broker, associate real estate broker, or real estate salesperson advertising their personally owned real property must only disclose that they hold a real estate license;

(12) Accepting other than cash or its equivalent as earnest money unless that fact is communicated to the owner prior to his or her acceptance of the offer to purchase, and such fact is shown in the earnest money receipt;

(13) Charging or accepting compensation from more than one party in any one transaction without first making full disclosure in writing of all the facts to all the parties interested in the transaction;

(14) Accepting, taking or charging any undisclosed commission, rebate or direct profit on expenditures made for the principal;

(15) Accepting employment or compensation for appraisal of real property contingent upon reporting a predetermined value;

(16) Issuing an appraisal report on any real property in which the broker, associate broker, or salesperson has an interest unless his or her interest is clearly stated in the appraisal report;

(17) Misrepresentation of his or her membership in any state or national real estate association;

(18) Discrimination against any person in hiring or in sales activity, on the basis of race, color, creed or national origin, or violating any of the provisions of any state or federal antidiscrimination law;

(19) Failing to keep an escrow or trustee account of funds deposited with him or her relating to a real estate transaction, for a period of three years, showing to whom paid, and such other pertinent information as the director may require, such records to be available to the director, or his or her representatives, on demand, or upon written notice given to the bank;

(20) Failing to preserve for three years following its consummation records relating to any real estate transaction;

(21) Failing to furnish a copy of any listing, sale, lease or other contract relevant to a real estate transaction to all signatories thereof at the time of execution;

(22) Acceptance by a branch manager, associate broker, or salesperson of a commission or any valuable consideration for the performance of any acts specified in this chapter, from any person, except the licensed real estate broker with whom he or she is licensed;

(23) To direct any transaction involving his or her principal, to any lending institution for financing or to any escrow company, in expectation of receiving a kickback or rebate therefrom, without first disclosing such expectation to his or her principal;

(24) Buying, selling, or leasing directly, or through a third party, any interest in real property without disclosing in writing that he or she holds a real estate license;

(25) In the case of a broker licensee, failing to exercise adequate supervision over the activities of his or her licensed associate brokers and salespersons within the scope of this chapter;

(26) Any conduct in a real estate transaction which demonstrates bad faith, dishonesty, untrustworthiness or incompetency;

(27) Acting as a mobile home and travel trailer dealer or salesperson, as defined in RCW 46.70.011 as now or hereafter amended, without having a license to do so;

(28) Failing to assure that the title is transferred under chapter 46.12 RCW when engaging in a transaction involving a mobile home as a broker, associate broker, or salesperson; or

(29) Violation of an order to cease and desist which is issued by the director under this chapter.

NEW SECTION. Sec. 15. Sections 1 through 13 of this act constitute a new chapter in Title 18 RCW.

NEW SECTION. Sec. 16. This act shall take effect January 1, 1996.