agency relationships

Definition: The common law of agency refers to the body of laws regarding agency that has evolved through custom and case law, rather than statutory law at the state or federal level.
In Georgia, the law of agency is a combination of both common law and statutory law.

Definition of an Agent:
- An agent is an individual who has the authority to act on behalf of another party.
- In the context of real estate, both brokers and their licensed sponsors operate as agents.
Definition of a Fiduciary:
- A fiduciary is an individual who holds the highest level of trust and confidence while acting on behalf of another.
- Fiduciaries are expected to prioritize their clients' interests above their own.
- The obligation of fiduciaries is severe, necessitating a strong ethical commitment.
Comparison:
- A fiduciary can be thought of as an “agent on steroids,” emphasizing the increased level of responsibility and trust involved.
- However, agents are not automatically considered fiduciaries in Georgia, which might be surprising to some.

Key Legal Provision:
- According to Section 10-6A-4, the duties and obligations owed by a broker to a client or customer are limited to those specified in this chapter unless further agreed upon in a written contract signed by the parties involved.
- A broker does not automatically establish a fiduciary relationship with clients or customers.
- The broker is only responsible for exercising reasonable care and fulfilling their specific duties defined in the brokerage engagement.
Implications for Brokers:
- Certain selling points for brokers include offering contracts that assure clients of a higher fiduciary standard compared to typical Georgia requirements, requiring approval from the sponsoring broker.
- Since many clients assume fiduciary obligations, this course will cover fiduciary duties in depth.
- It is crucial that fiduciary obligations are explicitly stated in the contract to be legally binding.

Definition of Agency Relationship:
- An agency relationship is formed between two parties, where one party (the principal) authorizes another (the agent) to act on their behalf and represent their best interests.
Agency in Georgia:
- Georgia’s Rules and Regulations (Section 520-1-.02(a)):
- Agency encompasses any relationship where a real estate broker represents another person (the principal) with their express authority in a property transaction.
- Mutual Consent Requirement:
- Notably, an agency relationship requires mutual consent from both the agent and the principal.
- This agreement can occur through one of three methods:
  - Written agreement
  - Oral agreement
  - Action
- Best Practice Recommendation:
- To avoid miscommunication and protect commissions, agency relationships should always be established in writing.
- In many states, including Georgia, it is a statutory requirement to formalize agency relationships in writing before providing brokerage services.

Three Essential Components:
1. Two Parties: The agent and the principal.
2. Agreement: A formal agreement that establishes the relationship.
3. Fiduciary Obligation: This is applicable if specified within the contract.

Example of Agency Formation:
- Buyer Krista entered an agency relationship with broker Giselle by signing a buyer broker agreement.
- Components of the relationship:
1. Parties Involved: Krista (the principal) and Giselle (the agent).
2. Agreement: The signed buyer broker agreement.
3. Fiduciary Obligation: Giselle’s duty to assist Krista in purchasing a house.
Importance of Broker Level Relationships:
- Agency relationships are primarily established at the broker level.
- Example: When a seller signs a listing agreement, they enter an agency relationship with the licensee's sponsoring broker, not directly with the agent.
- Brokers can sponsor salespersons to assist in fulfilling fiduciary duties owed to clients.