2.1 Kentucky Agency Relationships
Key Takeaways
- Kentucky recognizes four agency arrangements under KRS 324.121: single agency, dual agency, designated agency, and transactional brokerage
- KREC Form 400, the Guide to Agency Relationships, must be given to any consumer at the first contact involving specific real estate before disclosing confidential information
- Clients are owed the OLDCAR fiduciary duties; customers are owed only honesty, fair dealing, and disclosure of known material defects
- Form 400 is informational only and does not create agency; agency is created by a written agency consent agreement (Form 401S for sellers, 401B for buyers)
- Transactional brokerage owes only good faith and fair dealing and does not relay confidential information between the parties
Kentucky Agency Law Framework
Agency in Kentucky is governed by Kentucky Revised Statutes (KRS) Chapter 324 and the administrative regulations in 201 Kentucky Administrative Regulations (KAR) 11:121. The Kentucky Real Estate Commission (KREC) prescribes the exact disclosure forms you must use, so the state portion of the PSI exam tests form names and timing, not just concepts. Expect several questions that turn on whether someone is a client or a customer, and on which form applies.
Real Estate SalespersonFree exam prep with practice questions & AI tutor
The Four Agency Arrangements (KRS 324.121)
Kentucky does not list "seller's agent" and "buyer's agent" as separate legal categories; both are simply single agency. The four arrangements the statute and KREC recognize are:
| Arrangement | Who is represented | Duties |
|---|---|---|
| Single agency | One client (seller OR buyer) | Full OLDCAR fiduciary duties |
| Dual agency | Both parties as clients | Limited fiduciary; impartial |
| Designated agency | Each client by a separate designated agent in one firm | Full fiduciary to the assigned client |
| Transactional brokerage | Neither party as a client | Good faith and fair dealing only |
Single Agency
In single agency, the principal broker and every affiliated licensee in the firm represent one client and owe that client the complete set of fiduciary duties. A licensee can be a seller's agent (listing side) or a buyer's agent (buyer side), but the legal status is identical.
Transactional Brokerage
A transactional broker provides brokerage services to either or both parties but represents neither as a client. Per KREC, the transactional broker owes only the duties of good faith and fair dealing and does not relay confidential information between the parties unless directed by the sending party. This is Kentucky's version of the "facilitator" role tested on the national portion.
Fiduciary Duties (OLDCAR)
A Kentucky agent owes a client six fiduciary duties, remembered as OLDCAR:
| Duty | What it requires |
|---|---|
| Obedience | Follow all lawful instructions of the client |
| Loyalty | Place the client's interests above all others, including the agent's own |
| Disclosure | Reveal all material facts that could affect the client's decision |
| Confidentiality | Protect the client's private and financial information indefinitely |
| Accounting | Account for all money and documents (earnest money goes to escrow within 3 business days) |
| Reasonable care | Use the skill and diligence of a competent licensee |
Worked example: A buyer's agent learns the seller will accept $290,000 on a home listed at $315,000. Loyalty and confidentiality require the agent to use that for the buyer's benefit. If the same agent later becomes a dual agent, that figure cannot be disclosed to the seller without written permission.
Disclosure Timing and the KREC Forms
Three KREC forms drive agency disclosure, and the exam expects you to match each to its trigger:
| Form | Name | Purpose | When delivered |
|---|---|---|---|
| Form 400 | Guide to Agency Relationships | Informational; explains the arrangements | At the first contact involving specific real estate, before confidential info is shared |
| Form 401S | Agency Consent Agreement – Seller | Creates agency with the seller | At or before signing the listing agreement |
| Form 401B | Agency Consent Agreement – Buyer | Creates agency with the buyer | At or before substantive representation begins |
Exam Tip: Form 400 is informational only—receiving it does not create an agency relationship. Agency is created by a signed consent agreement (401S or 401B). A favorite trap question presents Form 400 as if it establishes representation; it does not.
What Triggers Delivery of Form 400
Kentucky ties delivery to the first contact concerning specific real estate, before the licensee learns confidential information. Use this contrast on the exam:
| Triggers delivery | Does NOT trigger delivery |
|---|---|
| Discussing a specific property's features or price | Handing out general MLS printouts |
| Discussing the consumer's needs, motivation, or finances | Giving directions to a property |
| Beginning to negotiate or recommend terms | Answering a purely factual question (lot size) |
| Touring a home with a prospect | Casual conversation at an open house |
Client vs. Customer
The single most tested distinction in this chapter is client vs. customer, because the duties owed differ sharply:
| Term | Definition | Duties owed |
|---|---|---|
| Client | A party the licensee represents under a consent agreement | Full OLDCAR fiduciary duties |
| Customer | A party the licensee does not represent | Honesty, fair dealing, and disclosure of known material defects |
Duties Owed to Customers
Even without an agency relationship, a licensee must still:
- Deal honestly and not commit fraud or misrepresentation
- Treat the customer fairly and not engage in discriminatory conduct
- Disclose known material defects in the property
- Account properly for any money received
Common trap: Confidentiality is owed to a client, never a customer. A listing agent who tells the seller's confidential bottom line to a buyer-customer has not breached confidentiality (none was owed to the buyer) but has breached loyalty to the seller-client.
Which KREC form, by itself, creates an agency relationship between a licensee and a consumer?
Under Kentucky law, which set of duties does a transactional broker owe the parties?
A buyer-customer who is not represented by the listing agent is still owed which duty?