New York State has amended and modified its Agency Disclosure Law and has adopted two new Agency Disclosure Forms to replace the single form which has been used since 1991. The new amendment creates a separate form for sales and another form for rentals. Commencing on January 1, 2007, you will be required to use one of the two new forms. The new law and the forms place new duties and obligations on brokers and agents when they take listings and when they show homes which are listed with another broker.

The form that you are presently using has on its signature page an option to disclose whether you are an agent for the seller, an agent for the buyer or a dual agent. Thus, a listing broker simply had to point out to the seller that they were representing the seller, check the appropriate box and have the seller acknowledge that disclosure. At the time of listing, it would be a rarity to anticipate that you would be acting as a dual agent. That form also defined agents acting for the buyer and broker's agents. Therefore, the broker needed to make no further explanations with respect to the various types of agency described in the form unless asked questions by the owner. The issue of buyer agency typically did not have to be discussed except with respect to compensation offered to cooperating brokers, at which time the owner had and still has the right to be fully informed with respect to buyer agency and the advantages and disadvantages of authorizing buyer broker compensation. The listing broker had and still has the obligation to inform the seller that the listing broker was required to cooperate with buyer's agents. For cooperating brokers, the task was even less complicated. Unless they were acting as buyer's agents, they simply advised the buyer that they were agents for the seller, check off the appropriate box and had the buyer sign the form.

The new form has more choices and, therefore, is more complex. A cooperating broker can act as a seller's agent, a broker's agent, a buyer's agent, a dual agent or a dual agent with designated sales associates. Both the listing broker and selling brokers who act as subagents check the space for seller's agents. Broker’s agents and buyer’s agents check the space provided for such disclosure. If an agent is acting as a dual agent with designated sales associates, the name of the associates negotiating for the buyer and the seller must be set forth in the disclosure.

Clearly the listing broker is always acting as a seller's agent. The listing broker will simply check off the box that says seller's agent and have the seller sign the form. This is no different than what is presently being done using the old form. However, because there are now different ways in which a cooperating broker can be authorized to act by the seller, it is now necessary to discuss these choices with the seller and to convey the seller's choice(s) to cooperating brokers. The listing broker must point out to the seller the three different choices that the seller has with respect to cooperating brokers; subagency; broker agency and buyer agency. After advising the owner of the choices, the listing broker must either explain the difference in each type of cooperating brokerage or at least refer the owner to the definitions set forth in the Agency Disclosure Form. There is no definition of subagent contained in the form, so subagents are included under the definition of seller agent. This should be explained to the owner.

The definition of broker's agent contains the following language. "You are not vicariously liable for their (a broker's agent) conduct."  This vicarious liability attaches because of the contractual relationship between the listing broker or a subagent and the seller. Since there is no contractual relationship between a broker's agent and the seller, the owner is not exposed to liability. If the seller is willing to accept the possibility of vicarious liability, then other brokers can serve as the seller's subagent just as is the prevailing practice on Long Island at the present time. If the seller elects to attempt to free themselves from such vicarious liability, then the seller would select either broker agency or buyer agency, but not subagency. (A seller may elect both broker agency and buyer agent or subagency and buyer agency.) If the seller authorizes broker's agents but not subagents, then the listing broker must notify all cooperating brokers (except buyer's agents) that they are to act as broker's agents. In such a circumstance, the listing broker could be vicariously liable for any misconduct of a cooperating broker but, the owner could not be so liable. If the seller elects to work only with buyer's agents, then neither the listing broker nor the seller would be liable for such agent's misconduct.

If there are agents in the listing broker's office who regularly act as buyer's agent, the listing broker must also explain dual agency and dual agency with designated sales associate and how those situations might come into play in marketing the seller's property. The listing broker must at all times keep in mind that their fiduciary duty is to work in the best interest of the owner. It is therefore incumbent upon the listing broker to make sure that the owner understands that they could avoid vicarious liability by selecting either buyer's agents and broker's agents. The seller should also be advised that the listing broker is always obligated to cooperate with buyer's agents.

Once the seller has selected how they have authorized interaction with cooperating brokers, the issue next to be discussed is offers of compensation to such brokers and how such offers would motivate those brokers to bring buyers to the seller. MLS policy requires that compensation be offered to at least one type of cooperating broker. (While listing brokers are required to cooperate with buyer's brokers, they are not required to offer compensation to buyer's brokers.)

Thereafter, the listing agreement must be drawn in such a way as to properly reflect the seller's choices. The multiple listing service ("MLS") will be printing a new listing form to facilitate the owner's choice as to whether or not cooperating brokers will be subagents, broker's agents or buyer's agents and the MLS property description section (PDS) and the input screens on STRATUS will also be changed to provide a method of informing cooperating brokers of the seller's choices. However, there is much yet to be clarified concerning the implementation of this new law. Consequently the new listing forms will not be available on January 1, 2007. Until the new forms are available, MLS suggest you note on the remarks section the type of cooperation (sub agency, broker agency and/or buyer agency) being offered.

The cooperating broker must carefully review each offer of cooperation made by listing brokers to determine whether or not there is authority to act as a broker's agent, a subagent or a buyer's agent. Based upon the authorizations set forth in the listing, the selling broker must act in a capacity designated by the seller. This capacity may change from listing to listing. Therefore, it is most likely that a selling broker will have to deliver a separate disclosure form to the customer for each property shown. If the selling broker is acting as a buyer's broker, they need not be concerned about the seller's instructions. A buyer's agent must deliver a proper disclosure form to each seller or listing broker at first substantive contact. In the case of a cooperating broker, this usually would be when the listing broker is called to make an appointment to show. The disclosure may be delivered by fax. The buyer's agent should request the listing broker to sign the disclosure form and fax or deliver a signed form back to the buyer's agent. If this does not occur, the buyer's agent must prepare a refusal to sign Affidavit or Affirmation and retain that form for a three-year period.

Assuming a potential purchaser makes an appointment to see a house for which your company is the listing broker, at the first face-to-face contact with that prospective buyer, you would provide an agency disclosure form showing that you are acting as an agent for the seller exactly the same as you do now. Assume that you arrange to have available three other properties to show this prospective purchaser in the event that they do not make an offer to purchase your company's listing. Assume all three of these properties are listed by other brokers. An examination of the listings show that property 1 is offering only subagency cooperation; property 2 is offering only broker agency cooperation and property 3 is offering only buyer's agency cooperation. In showing these properties, you would have to provide the buyer with three separate disclosure forms. One for your company's listing and property 1 in which you would disclose that you are acting as a seller's agent; one for property 2 to show that you are acting as a broker's agent; and one for property 3 to show that you are acting as a buyer's agent. Additionally, with respect to property 3, it is strongly recommended that you have a buyer's agency agreement with the buyer setting forth exactly what duties you are undertaking on the buyer's behalf and what obligations you clearly are not undertaking. Each of the three disclosure forms should identify the property for which they were delivered to the buyer. Since the buyer is signing the form, it is required that the copy of the form delivered to the buyer be identical to the broker's form. Therefore, it might be best practice to make one disclosure on your company's listing and a separate disclosure on property 1.

If all of this sounds confusing, it is because in fact it is very confusing. At the outset of every showing, check to ensure that you have an appropriate agency disclosure form showing how you are acting with respect to that particular property.

The author wishes to acknowledge the input of attorneys Michael Wallender, Jim Branen, Edward Sumber, Al Fazio and Mordy Jacobi as well as CEO Joseph E. Mottola and Vice President of Operations Jim Speer in the writing of this article.