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26 Jun
World body (RICS) speaks out against agents who double dip

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With Fraser Drummond, Director ACORPP

The world’s foremost global real estate accreditation body that certifies property and construction professionals has banned the practice of dual agency representation in the UK. Under the new policy from the Royal Institution of Chartered Surveyors (RICS), dual or multiple relationships between brokers and agents will only be allowed with the informed consent of the parties involved in a transaction.

The statement also requires clearer guidance on confidentiality. Both of the standards go into effect January 1, 2018. The change in the UK was prompted by the results of a study conducted by the University of Leeds. The study found that potential conflicts of interest, and lack of transparency, in UK property transactions could potentially harm tenants.

RICS member and Chair of the ITRA Global (International Tenant Representatives Alliance) Board, Charles Tatham, based in Paris added “small and medium‐sized businesses, which often underestimate the financial risks of agent double‐dipping, were considered to be particularly at risk.” The Leeds white paper also found that property agencies that act for both tenants and landlords often do not have sufficient separation between departments. One department might be managing the property on behalf of the landlord, and another conducting lease negotiations on behalf of new or existing tenants.

 

RICS JOOMLA image

 

ACORPP Director Fraser Drummond says when a tenant appoints a real estate representative, that representative must act with undivided loyalty on behalf of the tenant. “A dual agency occurs when an agent acts and collects fees from both sides of the same transaction,” he says. “Although there are Western Australian laws governing situations in which dual agency arises, tenants are better off appointing the services of an independent representative who operates solely as their representative.”

A recent California Supreme Court ruling resolved a similar issue that has long plagued the commercial real estate industry in that state. Mark C. Rosen, Principal and Co-founder of Rosen Realty Group in San Francisco and a broker who exclusively represents tenants, has for four decades championed the concept of no dual representation in commercial real estate transactions without disclosure. “I am thrilled to see that California is now coming in line with the market leaders of the world to require transparency in all real estate relationships.”

Across the pond, Fred Anton-Knoop, Partner of AREA OS in Amsterdam challenges whether disclosure is enough to meet the expectations of tenants. “In my former life, my experience from having been a tenant representative in a full service brokerage is that there is definitely much more potential conflict than a tenant could even conceive and the only winner is the double-dipping agent.”

Fraser offered 7 great questions a tenant can ask to find out on whose side an agent is on:

  1. Who owns the business?
  2. Is the company a subsidiary of a full service real estate agency?
  3. Does the person being hired normally receive fees from landlords either through leasing, selling or property management? 
  4. Does this agent only represent tenants in leasing transactions?
  5. Is this agent paid/retained only by the tenant?
  6. Does this agent have any potential, perceived or actual conflicts of interest?
  7. Will this agent be searching the whole market when identifying all options for you to consider?

“You wouldn’t think it would be necessary in this age of transparency, but there are still property businesses operating in Australia that need to align their practices with modern standards,” he says.

 

 

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World body (RICS) speaks out against agents who double dip

The world’s foremost global real estate accreditation body that certifies property and construction professionals has banned the practice of dual agency representation in the UK.