New York Real Estate Salesperson ExaminationLaws of AgencyMedium
A prospective tenant contacts a real estate agent to help them find an apartment. The agent shows the tenant several listings and assists with the application process, but the tenant has not signed any agreement to pay the agent. If the agent receives a commission from the landlord for finding a tenant, what type of agency relationship exists between the agent and the tenant?
- ASeller's Agent (Landlord's Agent)
- BImplied Agency
- CDesignated Agency
- DBuyer's Agent (Tenant's Agent)
Show answer & explanationAnswer & explanation
Correct answer: A. Seller's Agent (Landlord's Agent)
If the agent is paid by the landlord (seller/owner) for finding a tenant, and there's no agreement with the tenant, the agent represents the landlord. The tenant is a customer to whom only fair and honest dealings are owed. The agent's allegiance is to the party paying their commission unless a separate agreement states otherwise.
Why the other options are wrong
- B. Implied agency is created by actions, but in this scenario, the payment structure clearly defines the principal-agent relationship with the landlord.
- C. Designated agency involves a single brokerage representing both parties, which is not indicated here.
- D. This would only be true if the tenant had explicitly hired the agent and agreed to pay them, or if the landlord was paying on behalf of the tenant as part of a tenant representation agreement.
Agent's Principal (Compensation)
The principal in a real estate transaction is the party who hires the agent and to whom the agent owes fiduciary duties, typically but not always the party paying the commission.
- Principal hires the agent.
- Fiduciary duties owed to the principal.
- Payment of commission does not solely define agency, but is a strong indicator if no other agreement exists.
Memory trick: WHO PAYS, WHO HIRES, WHO'S THE CLIENT?