B.E.: Who is this law designed to protect?

L.Y.: I think the law was designed to clarify what the role of a broker is in a transaction. The consumer and broker would have a set of rules which governed their relationship, so it protects both. It clarifies what has been an ambiguous relationship up to now. The consumer knows what to expect now.

B.E.: Has vicarious liability ever been addressed in previous laws for consumers?

L.Y.: Not in Oklahoma. The Common Law talks about it, but in terms of dealing with respect to an individual's responsibility with the real estate broker, I don't think so. That is a concept we lifted from Colorado. Colorado was one of the first to have the transaction broker idea, they brought up the concept of vicarious liability in their law. In their law, at the time when we were formulating our law, they had a provision that said a transaction broker is not an agent for either party, and in their responsibilities, the consumer wouldn't be vicariously liable for the transaction.

B.E. Does the new law eliminate agency relationships in real estate brokerage?

L.Y.: Yes.

B.E.: If the single party broker is not an agent why does the consumer have vicarious liability?

L.Y.: The difference is it looks like an agent in that you are operating on someone's behalf. The concept of single party brokerage is akin to the traditional agent today. Agency provided advocacy services. We aren't saying that single party brokers do, but it is not specifically eliminated.

We aren't saying they (consumers) are going to be vicariously liable, we are saying that there is the possibility. It doesn't say shall be or can be. It is more accurate to say that you have eliminated vicarious liability when working with a transaction broker.

B.E.: How is single party broker different from an agent?

L.Y.: I don't know how to answer that question. The duties are textbook to what the duties of an agent are in other state laws, so they are very similar. I couldn't point to a difference off the top of my head. I might need to think about that one. One difference I know is that since the Law of Agency is common law theory developed by case law, it is incomplete. A statute answers questions.

In agency, you have an incomplete set of rules based on what other states have done, what other judges have held, so you have an incomplete set of rules. When you have a case in court, it deals with one specific issue, you might have one question answered, but many more questions remain.

When you get into dual agency, how do you properly inform and get informed consent to be a disclosed dual agent from the consumer? There were differing opinions on how to do that. It is not a great difference, but it is more procedural than substantive. A statute is intended to provide more of a complete set of rules and guidelines to replace this incomplete set.

B.E.: But questions still remain how to implement it.

L.Y.: When you want to go somewhere to figure out what the responsibilities are that a broker has to a member of the public, a statute tells you where to go. When a lawyer or a member of the public wants to know what to expect, they have a place to go to that tells them what to expect. They know what the duties or responsibilities are. This statute replaces the law of agency. What is being changed, is that while it contains some agency principles, it is now statutory law.

B.E.: Are agents eliminated?

L.Y.: Consumers can have people represent them as a single party broker, we're not calling them agents. It's a matter of having a place to go to look at a complete set of rules.

B.E.: What about disclosures? How does a consumer know that they have a choice between single party brokerage and transactional brokerage when meeting a licensee for the first time?

L.Y.: Unlike today, the licensee has duties and responsibilities. They don't have a defined relationship today. Under this law, the broker is presumed to be a transaction broker. From a consumer standpoint, there is a lot of protection.

For example, I'm a broker and you see a sign in a yard and call me. I talk to you about my listing. I have that listing as a single party broker for the seller. I owe you certain duties as a transaction broker. Today as a broker, I don't owe you anything. You might tell me confidential information as a buyer, and I would have the duty to go back and tell the broker. You might blurt out you love this house and you would be willing to pay anything for it. Under the law of agency you might not have known that I represent the seller. Under the new law, the minute you see the property, I owe you the duty to keep confidential information confidential. You might have blurted out that you love the house, but you are still protected. Those disclosures are built into the new law.

Disclosures are going to be different state to state when you have a smorgasbord of opportunities in agency and non-agency relationships. Here you have two choices. One of the choices, is the single party broker can't represent both parties as a single party broker, one side has to be represented as a transactional broker. The old rules have changed, embodied in transaction broker services.

B.E.: What about hiring a broker?

L.Y.: You want to hire me to sell your house. Depending on what my firm does, it is possible that my firm only provides transactional brokerage. There is nothing in the law that requires me to tell you about single party brokerage. I have to disclose what the duties and responsibilities of transactional brokerage are. In terms of telling what the possibilities are, since there are only two, some firms are going to be explaining both types of brokerage and some aren't.

B.E.: How do you think the new law will affect commissions if brokers no longer act as advocates?

L.Y.: That was discussed in Colorado. The early reports were that it has made no difference. I don't have a feel for that, but it may depend on the marketplace. I don't think this by itself is going to have an affect.

B.E.: How will the law affect those who wish to continue as agents, such as exclusive buyer's agents? Will it change the way they are doing business?

L.Y.: No, you just offer single party broker services to buyers.

B.E.: Some buyer's agents believe that the use of the word agent is outlawed. Is that true?

L.Y.: This does not outlaw the use of word agent. You can use it in a trade name. The genesis of that was to allow The BUYER"S AGENT to continue to use their name. They will have to say we are brokers for buyers, or we are buyer's brokers.

B.E.: What will other states do when they see you have effectively eliminated agency?

L.Y.: I don't know. We are the first state to eliminate agency language from its statutes. That was not completely our idea. There was the abrogation of the Law of Agency in other states. But this is regarding every available relationship. Others would abrogate just with regard to transaction or facilitator brokerage. Ours was the first to do it across the board.

Not everyone sees the new law as a panacea. Two real estate trainers, heads of their own real estate schools, have recently completed multiple viewings of the training tape that the Oklahoma Real Estate Commission has provided to trainers who are authorized to teach pre-licensing courses in the state. Vince Mooney, owner of Mooney Real Estate School in Tulsa and Janet Braswell, owner of The American Institute of Real Estate Education in Oklahoma City, both say the new law will open up new problems.

Mooney maintains that the law raises more questions than it answers. He has identified over 50 issues which the law does not but should address, he says. He is formulating his questions and proposed solutions into a book he plans to issue to state legislators, the Oklahoma Association of REALTORS®, and the Oklahoma Real Estate Commission.

Braswell's problem is with the law's strategy to lessen liability for licensees and consumers. She believes that by eliminating agency, the law eliminates the need for REALTORS®. If licensees do not serve as agents of consumers, then others can perform the same duties for less, she insists.

Find out what they believe will happen when agency is eliminated in Oklahoma. See tomorrow's Agent News.

Part III - What Will Happen to Agents Without Agency?