We have all been bitten by a mosquito, pestered by a fly or even stung by a bee. But very few of us have ever been personally bitten by an elephant! This leads me to believe that it's the little things that will get us a majority of the time! This article is devoted to the little things.

LET THE MASTER ANSWER!

In nearly every jurisdiction in the country, the broker is held accountable for the actions of all whom they employ by both the regulatory authorities and the court system. This is fostered by the maxim or doctrine of "Respondeat Superior"; Latin for let the master answer. You may already be familiar with that expression as a result of learning about agency relationships. Please understand, these laws and rules are not a mandate for the broker to stand alone when a complaint comes into the picture. There is a defense mechanism called an "Office Policy Manual". Unfortunately, most brokers haven't updated their existing policies, or even worse, they haven't even started to create such a document! There is significant case law that promotes the importance of a formalized office policy. Today, brokers are being dismissed from litigation based on the independent actions of their agents when such actions are contrary to a formalized office policy.

Let me first explain that an office policy is not intended to be a document pitting the broker against the agent, it actually works both ways. First and foremost, an office policy defines the work discipline for the agents and in many ways, enhances the "independent contractor" relationship between the broker and agent. Secondly, it provides both the agent and broker sufficient notice to protect their individual interests. For example: Today it is very common for agents to have car phones, paging systems and computers for use in their business. What if their car phone or computer were stolen from the office? I can only guess that both the broker and agent would look to the office insurance policy. Sorry about that, most office insurance WILL NOT cover, in whole or in part, the personal equipment of an agent. Simply put, the agent is out the cost of the equipment unless he/she has a separate rider for the equipment from his/her own insurance as a homeowners insurance provider will not cover the loss either.

Problems such as this could easily be addressed within an office policy. At least then the agent would have notice that he/she needs to make an effort in protecting personal equipment and the potential for adversity may be removed.

I can't think of an NAR magazine or newspaper that has come out in recent years that hasn't highlighted some of the liabilities we have in doing business as licensees. These articles have included such things as haunted houses, toxic waste, lead poisoning, catastrophic events and Super Fund problems. The Judge Thomas Hearings raised new questions about sexual harassment, IRS has looked to brokers for the non-payment of income tax by an agent with a personal assistant, and the list seems endless. Yet, it is very rare that I find a broker that has addressed these issues in an office policy.

The office policy is just the beginning. A career in real estate can become a legal minefield unless we change our work habits. Each of us, brokers and agents alike, can take a defensive posture by modifying some of our work habits. For example, I would rarely take a call that came into the office from a client or customer. My reasoning was that when they call, they were prepared for the conversation. My preference was to be able to call them back after I had the file in front of me. This way, I could document the call and answer their questions in greater detail.

PAPER TRAILS TO YOU! aka DUCES TECUM

Defense mechanisms should also include an expanded "Paper Trail". Countless times a customer or client will call an agent and ask some very pointed and serious questions. In most cases the agent responds and in the short term, the problem is resolved. But where is the documentation for that phone call? Who said what? What actions were or were not taken as a result of the call or meeting?

If litigation begins, everyone will become very familiar with the term "Duces Tecum", meaning to bring all records. Without a diary of that transaction, your attorney has very little to work with in providing you with a defense. A very simple form that I would call a "Transaction log" can be developed and used with every opened file. Ultimately, such a log will become part of the permanent file.

That single "Risk Reduction" technique has protected several agents and brokers from expensive litigation. When the opposition sees a well documented transaction file, their enthusiasm for continuing with a complaint is often replaced with an apology.

Imagine, for the sake of just one or two minutes after each customer or client contact, the potential for litigation can be reduced by as much as 80% if a transaction log is used!. Another benefit is that such a work habit may help you lower your E&O premiums.

In closing I will say: "Don't worry about the elephants, but look out for the mosquitoes!"

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Published: August 27, 1999

Use of this article without permission is a violation of federal copyright laws.

Editor's Note: This article reflects the opinions of Cecil G. Daniel only and not necessarily the views of this or any other publication, organization or Website owner.

"Cec" Daniels, GRI is one of the nation's leading authorities and speakers on risk management, brokerage management, agency and real estate contracts. He has authored and maintains all the curriculum for the Arizona REALTOR Institute GRI Program on Agency and Contract Law. His expertise is supported with over thirty years of experience, and in 1996 was named Educator of the Year by the National Association of REALTORS®. Cec lives in Peoria, Arizona and invites you to email him at Cec@CecDaniels.com.