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Did you know the Residential Agency Law Changes on October 1, 2016?

September 23, 2016

Did You Know… the Residential Agency Law Changes on October 1, 2016?

Agency relationships and disclosure requirements under Maryland Law change significantly on October 1, 2016.  The three fundamental changes in the law are (1) a reduction in the circumstances when agency disclosure is required, (2) a deletion of the concepts of “Presumed Buyer Agency” and “Cooperating Agents”, and (3) a newly created notice of representation at open houses. 

Under prior law, disclosure of agency relationships was required at the “first scheduled face to face meeting”.  It was the obligation of the listing agent to disclose in writing to the buyer and buyer’s agent that the listing agent represented the seller.  Similarly, it was the obligation of the buyer’s agent to disclose in writing to the listing agent that the buyer’s agent represented the buyer.  The Real Estate Commission provided forms to implement that disclosure requirement (Understanding Whom Real Estate Agents Represent). Effective October 1, 2016, disclosure is not required if the other side of the transaction is represented by a Broker under a written agency agreement. This is a significant reduction in disclosure obligations.  Simply stated, if the buyer’s agent contacts the listing agent, no disclosure is required since it is presumed that each agent has previously explained agency concepts to their client, and vice versa. 

A Broker is required to provide the agency disclosure form at the time of first contact (not just scheduled meetings) only if one of the parties is not represented under a written agency agreement.  Moreover, if that contact is not a face to face contact, the disclosure is only required to be made by the same medium as the initial contact.  Thus, if initial contact was made by e-mail or fax, disclosure may be made in the same manner.  There is certainly no harm in continuing the practice of providing a copy of “Understanding Whom Real Estate Agents Represent” to each party to the transaction, but it is no longer universally required. 

The concept of “presumed buyer agency” under current law is, fortunately, deleted from the new law.  Under presumed buyer agency, an agent had all of the fiduciary responsibilities of a buyer’s agent, but without the written buyer broker agreement, the agent had absolutely no guarantee that they would ever be compensated for their work.  Under the new law, the terms “cooperating agent” and “presumed buyer agent” are eliminated.  Instead, the term “subagent” has been given priority.  Conceptually, a subagent works with a buyer, but is not affiliated with the listing company and does not have a buyer agency agreement.  Since a subagent does not have a written buyer agency agreement, there is no certainty of compensation, leaving only the potential for an expensive claim for procuring cause.  The clear intent of the new law is to emphasize the importance of obtaining a buyer agency agreement if an agent who is working with a buyer expects to be paid.

The final major change is a requirement that a specific notice be posted conspicuously in every open house, giving notice to any potential purchaser that the agent at the open house represents the seller.  Only the prescribed form is acceptable and it must even be printed and posted in the exact multi-colored format provided by the Real Estate Commission.

The substance of the new Agency Law is in some respects a return to the concept of seller only representation prior to buyer agency, providing that the only way for a buyer’s agent to be ensured compensation is to enter into a written buyer agency agreement. The changes in agency disclosure and posting of notices at open houses are changes that actually simplify the law.   

For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact the Group Chair at 301-230-6574 or settlements@shulmanrogers.com.

This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.  

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