California case throws wrench into ‘dual agency’ transactions

If the California Supreme Court upholds an appeals court decision that a listing agent owed a “fiduciary duty” to a buyer represented by another agent at the same brokerage, it could upend the way agency representation has worked in the state for more than two decades, according to Bloomberg News.

The controversy centers over what constitutes “dual agency” in the sale of a $12.25 million Malibu view compound that reportedly turned out to be smaller than advertised. The decision could greatly influence how two agents in the same office represent bother the seller and buyer in the same transaction.

A “fiduciary duty” to both the buyer and the seller would mean providing undivided loyalty, confidentiality and counseling to both sides.

According to Bloomberg News, the buyer, who had visited more than 80 properties, claimed he was cheated and sued the agent and the brokerage. He won a state appeals court ruling that sellers’ agents have a fiduciary duty to protect buyers’ interests, not just those of their clients, when there’s only one brokerage involved in a deal.

If the decision is upheld, it could force the disclosure of confidential client information or compel brokerages to drop out of transactions where they represent both buyers and sellers, threatening commissions on thousands of deals.