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July 25, 2017 • Stay Connected!
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QUESTION:  I have a managing broker in my firm who, with permission from his principal, signs documents for the principal, such as notices. (Joe Smith as agent for John Doe, seller) They have confirmed with a real estate attorney that as an agent for the principal, they can do this when the principal is not readily available. We are prepared to make a policy on this. I have my opinion and would love to have yours.



ANSWER:   There is a technically correct answer to this question and there is a best practices answer to this question. It is the opinion of the Hotline lawyer that the best practices answer consumes and eliminates entirely, the technical answer. DB should, by office policy, prohibit this practice without equivocation or opportunity for further discussion. A clear office policy prohibiting this practice will give brokers the ability to deflect any such request from a client by stating that office policy prohibits the practice. That removes brokers from an uncomfortable conversation with a client who thinks broker should do this for them.
 
Technical answer: it is probably possible for a principal to empower an agent to sign on the principal's behalf. This answer will not provide any detail as to what is required to create that authority because there is intolerable risk associated with any broker accepting that authority.
 
Best Practices Answer: Broker should never accept any authority from a consumer/principal to act on behalf of the principal. There is too much liability associated with a broker acting on behalf of a principal. What if broker makes a decision that principal would not have made? What if principal, in hindsight, would have made a different decision and challenges broker's action? What if liability results from seller's action, taken by broker? In all of these situations, broker and firm assume liability that broker and firm are under no obligation to assume.
 
Acting on behalf of a client is not the provision of RE Brokerage Services. By entering a RE agency relationship with a client, broker has no duty to assume liability for acting on behalf of the client. The Agency Law (RCW 18.86) identifies ALL duties owed from a broker to a consumer and/or client and none of those duties include acting on behalf of a client.
 
Additionally, it is unlikely that broker's and firm's E&O insurance would cover any liability arising from broker signing or initialing documents or in any other way, acting on behalf of a client. Acting on behalf of a client is not the provision of RE Brokerage Services and E&O Insurance ONLY covers liability claims that arise out of the provision of RE Brokerage Services. Accordingly, when a broker acts on behalf of a client, broker and firm provide that service to client without the protection of insurance.
 
It is impossible to believe that in this era, a client cannot empower some person, other than broker, to act on client's behalf if, for some reason, client is beyond the reach of technology. With technology, clients can be reached across the globe. But, if client will be inaccessible for some reason, client can empower a trusted relative, friend or business associate, who may also be located around the globe, to make decisions for client.
 
Simply put, there is absolutely no compelling reason why a broker should agree to serve as a surrogate for client with respect to decision making or document signing and immeasurable risk associated with doing so. Designated broker should implement an office policy prohibiting any broker licensed to designated broker's office from providing any service to a client or consumer that allows broker to make decisions or sign documents for a client or consumer.

 

The Legal Hotline Lawyer does not represent Washington REALTORS or its members. To browse through our database of past Q & A's, visit www.warealtor.org. Attorney Annie Fitzsimmons writes the Legal Hotline Question and Answer of the Week. Please submit questions to legalhotline@warealtor.org . Please tell us your NRDS number when you e-mail the Hotline with your question.



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