Real Estate Agency Law — Agent, Principal, and Fiduciary Duties

DUAL AGENCY occurs when the same broker/agent represents both sides of a transaction. The conflict: the agent owes fiduciary duties (loyalty, confidentiality, full disclosure) to both parties — but their interests directly conflict. The seller wants maximum price; the buyer wants minimum price. The agent cannot fully advocate for either without harming the other. State laws: most states allow dual agency ONLY with full written informed consent from both parties; some states prohibit it; some permit only 'disclosed dual agency' or 'facilitated agency' where the agent becomes a transaction facilitator without full fiduciary duties to either party. Designated agency (different agents from the same brokerage represent each party) avoids some but not all dual agency issues.

STEERING is the illegal practice of directing buyers toward or away from certain neighbourhoods based on the protected characteristics of current or prospective residents. It violates the Fair Housing Act regardless of whether the request comes from the buyer themselves. The fact that a client requested it does NOT make it legal. BLOCKBUSTING is the related illegal practice of inducing owners to sell by suggesting that persons of a protected class are moving into the neighbourhood, leading to panic selling. The agent's obligations: refuse the instruction; explain that it violates fair housing law; if the client insists, the agent should consider whether to continue the relationship. Agents who comply with steering requests face licence revocation, civil penalties, and private lawsuits.

FREEHOLD ESTATE is an ownership interest in real property of indefinite duration: FEE SIMPLE ABSOLUTE (most common, most complete — owner has full rights, passes to heirs); FEE SIMPLE DEFEASIBLE (ownership that can be terminated if a condition occurs — 'so long as used as a school'); LIFE ESTATE (ownership limited to someone's lifetime). LEASEHOLD ESTATE is a non-ownership possessory interest: tenant has the RIGHT TO POSSESS the property under a lease but does not own it; landlord retains ownership (the 'leased fee' interest). Types of leaseholds: Estate for Years (fixed term, definite end date); Periodic Tenancy (month-to-month); Tenancy at Will (terminable by either party at any time); Tenancy at Sufferance (holdover tenant after lease expires). The distinction between owning (freehold) and renting (leasehold) is foundational to real estate.

Property tax calculation: Tax = (Assessed Value ÷ $1,000) × Tax Rate. Tax = ($180,000 ÷ $1,000) × $15 = 180 × $15 = $2,700. This is the standard mill-rate calculation. A mill rate (or millage) represents tax per $1,000 of assessed value. $15 per $1,000 = 15 mills. Annual property tax = $2,700. Variations on the exam: assessed value may be expressed as a percentage of market value (e.g., assessed at 80% of $225,000 = $180,000 assessed value); the mill rate may be expressed as decimals (0.015 × $180,000 = $2,700 — same result).

PRORATION divides shared ongoing costs between buyer and seller at closing based on the date of ownership transfer. Common items prorated: PROPERTY TAXES (if paid in arrears — seller owes for the days they owned the property in the current tax period); PREPAID RENT (if income property — buyer gets credit for rent already collected for days buyer will own); HOA FEES; INSURANCE PREMIUMS (if assumed). HOW IT WORKS: If taxes are $3,600/year and closing is on day 200 of the year: Seller owes 200/365 × $3,600 = $1,973 — this is typically a credit to the buyer (buyer receives cash at closing) or deducted from seller proceeds; the buyer then pays the full tax bill when due. Correct proration is one of the most tested calculation areas on real estate exams.