2.1 Tennessee Agency Relationships
Key Takeaways
- In Tennessee a licensee is a FACILITATOR (transaction broker) by default and becomes an AGENT only when a written agency agreement is signed (T.C.A. 62-13-401)
- An agent owes fiduciary-type duties (loyalty, confidentiality, obedience, disclosure, accounting, reasonable care); a facilitator owes only the statutory duties to all parties
- Tennessee recognizes single agency (seller or buyer), disclosed dual agency, and designated agency
- Every licensee owes duties to ALL parties under T.C.A. 62-13-403, including disclosing adverse facts
- Agency or facilitator status must be disclosed early and confirmed in writing before a purchase agreement or lease is executed
Tennessee's representation law lives in Part 4 of the License Act (T.C.A. 62-13-401 through 62-13-408) and is unusual among states. The default relationship is facilitator, not agency.
Facilitator Is the Default
Under T.C.A. 62-13-401, a licensee acts as a facilitator (a non-agent, also called a transaction broker) unless and until the licensee enters a specific written agreement to establish an agency relationship. The statute says that until that point the licensee 'shall be considered a facilitator and shall not be considered an agent or advocate of any party.' Merely showing property, answering questions, or helping with paperwork does not create agency. Agency is never implied by conduct in Tennessee.
| Relationship | How It Arises | Who the Licensee Works For |
|---|---|---|
| Facilitator (transaction broker) | The default - no written agency agreement | Neither party as an agent; assists the transaction |
| Agent | Created only by a written agency agreement | The client named in the agreement |
Critical exam point: Disclosing agency or facilitator status (a separate duty under 62-13-405) is not the same as creating an agency relationship. A written agency agreement under 62-13-401 is required to make a licensee an agent. This is the single most-tested twist in Tennessee agency law.
Duties: Facilitator vs. Agent
What a licensee owes depends on which hat they wear.
Duties a FACILITATOR Owes (T.C.A. 62-13-403, to all parties)
A facilitator is not a fiduciary but still owes the statutory duties imposed on every licensee:
- Diligently exercise reasonable skill and care
- Disclose adverse facts of which the licensee has actual notice or knowledge (62-13-403)
- Maintain confidentiality of information designated confidential, unless disclosure is required by law
- Account for money and property received
- Be honest and deal fairly with all parties
Additional Duties an AGENT Owes (T.C.A. 62-13-404, to the client)
When a written agreement creates agency, the licensee additionally owes the client the duty to 'place the interests of the client before all others' - fiduciary-type duties:
| Duty | Meaning |
|---|---|
| Loyalty | Put the client's interests first; avoid conflicts |
| Obedience | Follow the client's lawful instructions |
| Confidentiality | Protect the client's bargaining position |
| Disclosure | Tell the client all known material facts |
| Accounting | Account for all funds and documents |
| Reasonable care/diligence | Competent, diligent representation |
Memory aid: An agent owes the extra OLD-CAR loyalty duties to the client; a facilitator owes only the baseline honesty, adverse-facts disclosure, confidentiality of designated information, and accounting to everyone.
The Three Agency Structures
When agency IS created by written agreement, Tennessee recognizes three forms.
Single Agency
The licensee (and firm) represents only one party - a seller, buyer, landlord, or tenant - and owes that party the full agent duties.
Disclosed Dual Agency
One licensee or firm represents both buyer and seller in the same transaction. Tennessee permits it only with the informed written consent of both parties. A dual agent must stay neutral and cannot advocate for one side over the other or disclose one party's confidential bargaining information to the other.
| Requirement | Detail |
|---|---|
| Written consent | Both parties must consent in writing |
| Neutrality | Cannot favor either party |
| Confidentiality | Cannot reveal price/terms one party would pay/accept |
Designated Agency (T.C.A. 62-13-406)
The principal broker designates different affiliate brokers in the same firm to represent the buyer and the seller separately. Knowledge held by one designated agent is not imputed to the other. Each designated agent owes full agent duties to their own client, and the principal broker supervises while keeping the parties' confidences walled off. Designated agency lets a firm represent both sides without one person being a dual agent.
Exam trap: In designated agency the firm is not a dual agent because two different affiliates each represent one client. In dual agency the same licensee represents both.
When and How Status Is Disclosed
Tennessee requires the licensee to disclose whether they are acting as an agent or a facilitator, and to confirm agency in writing before the deal is signed.
| Timing | Requirement |
|---|---|
| Early contact | Disclose agency/facilitator status before sharing confidential information or entering an agency agreement |
| Before execution | Written confirmation of the agency relationship before the purchase agreement or lease is executed |
The Confirmation of Agency Status is provided to the other party's representative/broker before the contract is signed. A licensee generally has each of their own clients sign the firm's disclosure; the other side's licensee handles their own client.
Duties to ALL Parties - Adverse Facts (T.C.A. 62-13-403)
Regardless of whether the licensee is an agent or facilitator, the statute requires disclosing to each party any adverse facts of which the licensee has actual notice or knowledge.
Adverse facts are conditions or occurrences that a competent licensee generally recognizes will:
- significantly and adversely affect the value of the property,
- significantly reduce the structural integrity of improvements, or
- present a significant health risk to occupants.
Key point: Adverse-facts disclosure is a duty to everyone, not just the client, and it cannot be waived by an agency agreement. It does not require the licensee to investigate - only to disclose facts actually known.
| Likely Adverse Fact | Not an Adverse Fact (TN) |
|---|---|
| Known foundation failure | A prior natural death in the home |
| Active roof leak the agent saw | A nearby registered offender |
| Known mold or flooding history | Alleged paranormal activity |
In Tennessee, what relationship does a licensee have with a consumer by default, before any written agreement is signed?
Which duty is owed by an AGENT to the client but NOT by a facilitator to the parties?
How does designated agency differ from dual agency in Tennessee?
Under T.C.A. 62-13-403, an 'adverse fact' the licensee must disclose to all parties includes: