May a Broker Act as a Dual Agent in California ?
In California, a broker who has signed a contract to act as a sales agent for the seller can also represent the buyer and act in the capacity of a dual agent in order to complete the sale and purchase of the property.
Arguably, when acting as a dual agent, a broker could still be limited to the duty of disclosure to the buyer set forth in Civil Code section 2079 even though the broker is also representing the buyer, since the broker "has a written contract with the seller to find or obtain a buyer" as provided by section 2079, subdivision (a).
The capacity of a dual agent, however, appears to carry its own defined affirmative obligations toward both the seller and the buyer. These obligations are set out in section 2079.16, which provides that disclosure must be made to a client that a broker acting as a dual agent has a fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either the seller or the buyer, and a duty of honest and fair dealing and good faith toward the buyer and the seller, and also must diligently exercise reasonable care and skill in performing the duties of an agent.
In addition, section 2079.16 provides that a dual agent has a duty "to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the parties." Section 2079.16 also states that the aforementioned duties of a dual agent "do not relieve a Seller or Buyer from the responsibility to protect his or her own interests."
In Field v. Century 21 Klowden-Forness Realty (1998) 63 Cal. App. 4th 18, the court discussed the fiduciary duties owed by a broker who contracts exclusively to represent a purchaser of real property. While the broker in the instant case did not have an exclusive contract to represent the purchaser and instead acted in the capacity of a dual agent, we believe the discussion is informative as to the scope of fiduciary duty.
The court in Field stated:
"A broker's fiduciary duty to his client requires the highest good faith and undivided service and loyalty. 'The broker as a fiduciary has a duty to learn the material facts that may affect the principal's decision. He is hired for his professional knowledge and skill; he is expected to perform the necessary research and investigation in order to know those important matters that will affect the principal's decision, and he has a duty to counsel and advise the principal regarding the propriety and ramifications of the decision. The agent's duty to disclose material information to the principal includes the duty to disclose reasonably obtainable material information. . . . The facts that a broker must learn, and the advice and counsel required of the broker, depend on the facts of each transaction, the knowledge and the experience of the principal, the questions asked by the principal, and the nature of the property and the terms of sale. The broker must place himself in the position of the principal and ask himself the type of information required for the principal to make a well-informed decision. This obligation requires investigation of facts not known to the agent and disclosure of all material facts that might reasonably be discovered.' Thus, depending on the circumstances, a broker's fiduciary duty may be much broader than the duty to visually inspect and may include a duty to inspect public records or permits concerning title or use of the property, a duty which is expressly excluded from section 2079." (Id. at pp. 25-26.)