2.1 Pennsylvania Agency Relationships
Key Takeaways
- Pennsylvania recognizes seller agency, buyer agency, dual agency, designated agency, and the non-agency transaction licensee role
- The broker is the agent of the client; salespersons and associate brokers act as agents of the broker
- The Consumer Notice must be provided at the initial interview under 49 Pa. Code 35.336, before confidential information is exchanged
- Clients are owed full fiduciary duties (OLD CAR); customers are owed only honesty, fair dealing, and disclosure of known material defects
- Who pays the commission never determines agency; only the written agreement does
Pennsylvania agency is governed by the Real Estate Licensing and Registration Act (RELRA) and the State Real Estate Commission (SREC) regulations at 49 Pa. Code Chapter 35. Agency answers one question: whose interests does the licensee legally advance?
Types of Agency Relationships
Pennsylvania authorizes five business relationships under 49 Pa. Code 35.314:
| Relationship | Whom the licensee represents |
|---|---|
| Seller/Landlord Agency | The seller's or landlord's interests |
| Buyer/Tenant Agency | The buyer's or tenant's interests |
| Dual Agency | Both parties, with written consent — neutral |
| Designated Agency | Different licensees in one firm represent each side |
| Transaction Licensee | Neither party; provides services without representation |
The Broker Is the Agent
In Pennsylvania the broker is the agent of the client. A salesperson or associate broker is licensed through the broker and acts as the broker's agent in transactions. So when a salesperson lists a home, the agency relationship is between the seller and the broker — the salesperson works under that umbrella. This matters for liability: the broker is responsible for the salesperson's conduct.
Creating Agency Relationships
Agency in Pennsylvania is created by written agreement, not by conduct:
- Listing agreement — creates seller/landlord agency
- Buyer agency agreement — creates buyer/tenant agency
- Dual agency consent form — when one licensee serves both sides
- Designated agency designation — assigns separate licensees within the firm
A written agency agreement must state its term, fee, and the licensee's duties, and it must be signed before the licensee performs services as an agent.
Fiduciary Duties Owed to Clients
Pennsylvania licensees owe clients full fiduciary duties, easily remembered with the mnemonic OLD CAR:
| Duty | What it requires |
|---|---|
| Obedience | Follow all lawful instructions of the client |
| Loyalty | Place the client's interests above the licensee's own |
| Disclosure | Reveal all material facts affecting the client's decision |
| Confidentiality | Protect client information indefinitely, even after closing |
| Accounting | Account for all money and documents received |
| Reasonable care | Act with the skill and diligence of a competent licensee |
Trap: Confidentiality survives termination of the relationship. A licensee who learns the seller is desperate to sell cannot reveal that motivation to a future buyer-client even years later.
Duties Owed to Customers (Non-Clients)
A customer is a party the licensee does not represent. Under RELRA section 606.1, every licensee — even to non-clients — owes these baseline duties:
- Honesty and fair dealing in all communications
- Disclosure of known material defects in the property
- Answering questions truthfully and not making false statements
- Exercising reasonable professional skill and care
What customers do not get: loyalty, confidentiality, obedience, or advocacy.
Transaction Licensee
A transaction licensee provides real estate services without representing either party. The licensee owes no fiduciary duties but must still be honest, deal fairly, disclose known material defects, and provide the Consumer Notice. A transaction licensee is the default in Pennsylvania when no written agency agreement is signed.
The Consumer Notice Requirement
The single most-tested logistics rule in this chapter: under 49 Pa. Code 35.336, the Consumer Notice must be given at the initial interview — the first contact where the licensee discusses the consumer's real estate needs — before confidential information is exchanged.
| Element | Rule |
|---|---|
| When | At the initial interview, before confidential info is shared |
| Format | SREC-prescribed form titled "Consumer Notice" |
| Non-in-person interview | Give oral disclosure at the interview, written form by the first in-person meeting or first property shown, whichever is earlier |
| Acknowledgment | Licensee retains the signed/refused acknowledgment for 6 months |
The Consumer Notice is informational — signing it does not create agency. It simply explains the relationship options. A consumer who refuses to sign still must be given the notice, and the licensee documents the refusal.
Worked Scenario
A buyer calls about a yard sign and the licensee, who is the seller's agent, arranges a showing. At that first conversation the licensee must deliver the Consumer Notice, disclose that he represents the seller, and not ask the buyer for confidential information (such as her maximum price) until representation is clarified. Skipping the notice and quietly gathering the buyer's bargaining position is the most common violation tested here.
Compensation Does Not Determine Agency
Who pays the fee never determines who the licensee represents. A seller may agree to pay the buyer's agent's compensation; the buyer's agent still owes loyalty to the buyer. Only the written agency agreement controls representation.
| Fact pattern | Resulting agency |
|---|---|
| Seller pays the buyer's agent's fee | Buyer agency still exists |
| Listing broker splits with cooperating broker | No agency created by the split |
| Cooperating broker paid by listing broker | Cooperating broker may still be the buyer's agent |
Why This Matters on the Exam
The state portion repeatedly tests three lines: (1) client versus customer duties, (2) the timing of the Consumer Notice at the initial interview, and (3) that the notice does not itself create agency. Anchor every agency question to the written agreement and the timing of disclosure, and most distractors fall away.
When must a Pennsylvania licensee provide the Consumer Notice?
A buyer-client asks her agent to keep secret that she will pay up to $400,000. The seller, who the agent does not represent, asks the agent that buyer's top price. What must the agent do?