RE72C11: Commercial Buyer Brokerage

Approved Sept. 29, 2011
  1. History of written relationship disclosure (10 mins)
    1. States response to Federal Trade Commission survey – license regulation requires disclosure of licensee representation
    2. 1990 MA Board of Registration of Real Estate Brokers and Salespersons (Board) created its first written agency form
    3. 1993 Board revised agency disclosure


  1. Disclosure Form (10 mins)
    1. Disclosure form required at the first personal meeting (see 2005 Massachusetts Mandatory Licensee-Consumer Relationship Disclosure)
    2. Difference between commercial and residential representation 
    3. 2003-04 Mass Association of Realtors (MAR) Agency Law Task Force redrafts new Agency Law to include the role of a “Facilitator”
    4. Applies to real estate agents engaged in the purchase or sale of land with a building intended for use as 1-4 Single Family Dwelling Unit (SFDU) and purchase or sale of land intended for 1-4 unit residential  dwelling

a.       July 1, 2005: Mass Registration Board implements new agency law

b.      See and review former and new “State Mandatory Agency Disclosure Form”


  1. Establishment of Agency (5 mins)
    1. Express written or oral contract where agent and principal agree to terms
    2. Implied agency by actions and/or words
    3. Compensation does not create an agency relationship


  1. Duties That May Be Required of licensees, commonly referred to by the acronym OLD CAR (15 mins)
    1. Obedience – the duty to carry out all lawful instructions of the Client
    2. Loyalty – the duty to act in the best interest of the Client
    3. Disclosure – the duty to disclose all information relevant to the Client
    4. Confidentiality – the duty to keep the Client’s confidential information, confidential - Duty survives termination of agency relationship. Duty does not apply to legally required disclosures such as known physical hazardous conditions of property
    5. Accountability – the duty to protect, isolate and account for all money, documents, or other personal property provided to the agent
    6. Reasonable Care and Due Diligence – the duty to act competently and being capable of performing the duties undertaken


  1. Massachusetts General Definitions  (10 mins)
    1. Real estate broker (See M.G.L., Chapter 112, Sec. 87PP)
    2. Real estate salesman (See M.G.L. Chapter 112, Sec. 87PP)
    3. Agent – One who is authorized to represent and act on behalf of a principal - the principal i.e. client (buyer/seller) or real estate broker (broker of record)
    4. Principal – commonly known as person who engages agent for representation
    5. Client – also known as a Principal - a person who empowers another to act as his or her representative/agent. Client relationship = fiduciary relationship
    6. Customer – generally refers to person without representation involved in a transaction (All agents have a duty to treat customers fairly)
    7. Vicarious Liability - "liability created not because of a persons actions but because of the relationship between the libel person and other parties.” Give example
    8. Informed Consent - "Consent to a certain act that is given after a full and fair disclosure of all facts needed to make a conscientious choice." (The Language of Real Estate)
    9. Subagent - An agent of a person or entity who is already acting as agent for a principal (agent of an    
    10. Fiduciary - "A relationship that implies a position of trust or confidence wherein one person is usually entrusted to hold or manage property or money for another.”


  1. Types of Licensee/Consumer Relationships (5 mins)
    1. Buyer Agency – Real estate agent represents buyer client in real estate transaction
    2. Buyer agent’s duties to buyer include "OLD CAR"


  1. Services of a Commercial Buyer Representative (25 mins)
    1. Assist the Client to develop goals and specifications such as geographical, dimensional, functional, aesthetic and financial
    2. Assist in developing the full team for this project including the client’s legal counsel, accountant, environmental firm, space planners, insurance agents, etc.
    3. Determine if a lease termination or extension can be reached
    4. Establish with the prospective client if alternative sites for lease may exist with purchase options
    5. Conduct a property inventory survey for the Client
    6. Review the inventory survey with the Client and short-list buildings/homes for tour
    7. Coordinate a site tour
    8. Conduct final tour
    9. Develop a customized acceptable Request for Proposal (RFP) format that advocates the client’s interests
    10. Create a competitive process with prospective sellers
    11. Assist in analyzing lease or sales proposals submitted by sellers
    12. Investigate any public economic tax benefits and environmental issues for the commercial or residential end-user, Small Business Administration (SBA) financing, state economic trade zone districts, 21E issues, Title V, etc.
    13. Develop financial analysis of proposals and operating expenses
    14. Assist with a letter of intent
    15. Contact the appropriate legal counsel for a lease or sales agreement


  1. Engaging a commercial broker by a commercial buyer (10 mins)
    1. Represents buyers (exclusively) as a client
    2. Many brokers work with buyers without exclusive written contract
    3. Many issues on whose best interests the broker represent
    4. Buyer engages the services of broker to work in its best interests
    5. Similar to being an “in-house” real estate manager but only being hired for a limited time on limited work
    6. Mandatory Licensee - Consumer Relationship Disclosure is not Buyer Agent Contract
  2. Buyer Agency Compensation (10 mins)
    1. Commission based on sales price

a.       Paid by buyer directly via contract between broker and buyer

b.      Paid from transaction by listing broker via agreement between listing and seller broker  

c.       Paid directly by seller, unrepresented

  1. Flat Fee/Counseling Fee: (not a net commission fee)
  2. Fee for Service/Advisory or Counseling Fees
  3. Beware that without a license, commissions cannot be shared


  1. Termination of Buyer Agency Relationship (5 mins)
    1. Expiration of agreement
    2. Mutual agreement to terminate or rescission
    3. Completion of performance under agreement
    4. Death or Insanity of Buyer Agent or Client Principal
    5. Impossibility of performance (i.e. destruction of property)
    6. Incapacity (i.e. mentally incapable) or Bankruptcy of either party
    7. Repudiation – either principal or agent withdraws consent, court may deem this a breach of fiduciary obligation and breaching party may be held liable for damages.


  1. Other Legal Issues More Pertinent to Commercial Representation (10 mins)
    1. State and Federal Lead Paint Laws: Real estate licensees are required to notify all prospective purchasers and lessees about the dangers of lead paint and must inform prospective buyers about buyer’s 10-day right to a lead paint inspection such as Multi-family buildings or mill buildings. See Massachusetts General Law Chapter 111.
    2. Mass. General Law - Chapter 93A – Consumer Protection Statute

a.       Requires seller’s agent to disclose known material defects of the property to potential                       commercial buyers. 

b.      Due Diligence: Buyer’s agent has a duty to ask questions on behalf of his/her commercial client.

c.       Disclosure by buyer’s commercial broker to the client on anything that may influence a prospective  commercial purchaser

d.      Physical defects in the property, Title defects, encumbrances

e.       Latent Defects


  1. Company Policy & Record Keeping (5 mins)
    1. Advantages of written company policy versus verbal policies
    2. Record Keeping
    3. Consumer Relationship Disclosure Forms: State regulation requires retaining forms for 3 years
    4. Contracts: Contract law statute of limitations is 6 years; recommend keeping records of contracts
    5. All business records – state regulations do not specify time frame.
    6. Escrow check copies: State regulation requires retaining copies for 3 years.

Buyer Representation in Real Estate” by Dianna Brouthers and Roger Turcotte
Agency Relationships in Real Estate”, 2nd ed., by John Reilly

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