2.1 Michigan Agency Relationships Overview

Michigan Agency Relationships

Michigan agency is codified in Article 25 of the Occupational Code (Act 299 of 1980), administered by the Department of Licensing and Regulatory Affairs (LARA). The controlling section is MCL 339.2517, the agency-relationship disclosure statute.

The Disclosure Trigger (MCL 339.2517)

A licensee must disclose, in writing, all types of agency relationships available and the duties each creates before the consumer discloses any confidential information specific to that buyer or seller.

Exam trap: The trigger is "before confidential information," NOT "at first contact" or "at closing." The disclosure is informational — signing it does NOT make someone a client.

The Five Michigan Agency Roles

MCL 339.2517 names five relationship types a Michigan licensee can hold:

Client vs. Customer: The Core Distinction

Fiduciary duties attach only when a written service-provision agreement exists. Memorize the acronym OLD CAR for the six fiduciary duties owed to a client:

1. Obedience — follow lawful instructions
2. Loyalty — put the client's interest first
3. Disclosure — reveal all material facts to the client
4. Confidentiality — protect private information (survives termination)
5. Accounting — handle and report all funds
6. Reasonable care — act with competence and diligence

A customer (a party with no written agreement) is owed a narrower set: honesty, fair dealing, and disclosure of known adverse material facts about the property's condition.

Worked scenario

A buyer walks into an open house and asks, "How low will the seller go?" The listing agent is the seller's agent and the buyer is a customer. The agent must not reveal the seller's bottom number (confidentiality to the client) but must answer the buyer honestly about known defects such as a leaking roof. If the agent instead lies and says the roof is new, that violates the duty of honesty owed even to a customer — a disciplinable offense under MCL 339.2512.

Key point: Confidentiality runs to the client; honesty and adverse-material-fact disclosure run to everyone.

How Agency Is Created in Michigan

Fiduciary agency is created only by a written service-provision agreement — Michigan law does not recognize an oral or implied listing for a salesperson's protection. The three documents that create a client relationship are:

Each agreement must, at minimum, name the broker and client, describe the property or search criteria, state a definite start and end date, set the compensation, and list the services and duties provided. A listing without a definite expiration date is a license-law problem; an automatic-renewal listing is disfavored and may be unenforceable.

Transaction coordinator (no agency)

Michigan recognizes the transaction coordinator — a licensee who is not the agent of either party. The coordinator simply facilitates paperwork and the mechanics of the deal, owes no fiduciary duties, treats both as customers, and must disclose this limited role so neither party assumes they are being represented.

The disclosure is not the contract

A frequent test point: the MCL 339.2517 agency disclosure is an informational notice, while the service agreement is the contract that actually creates representation. A buyer can sign the disclosure and still be a customer. Only the signed listing or buyer-agency agreement converts a customer into a client with fiduciary protections.

Penalties for violations

Failing to disclose agency, or misrepresenting whom you represent, is a violation of MCL 339.2512 and can lead to fines, license suspension, or revocation by LARA, plus possible civil liability and loss of commission. Because agency questions are heavily weighted on the 35-item state portion, master the trigger, the five roles, and the client/customer line cold.

Quick-reference summary

• Statute: MCL 339.2517, Article 25 of the Occupational Code, enforced by LARA.
• Trigger: written disclosure of all available relationship types before confidential information.
• Five roles: seller's agent, buyer's agent, dual agent, designated agent, transaction coordinator.
• Client: created by a written service agreement; owed OLD CAR fiduciary duties.
• Customer: no written agreement; owed honesty, fair dealing, and adverse-material-fact disclosure.