Under Georgia law, a fiduciary duty exists whenever a person places the highest level of confidence or trust in another person regarding a particular transaction or in financial affairs and the other party accepts that confidence or trust. That is, a fiduciary owes the highest duty to its clients.
Brokers in Georgia do not owe a fiduciary duty to clients. The law on fiduciary duty changed in the early 1990s with the introduction of the Brokerage Relationships in Real Estate Transactions Act, O.C.G.A. §10-6A-1 et seq.; (BRETTA). BRRETA, states as follows:
A broker who performs brokerage services for a client or customer shall owe the client or customer only the duties and obligations set forth in this chapter, unless the parties expressly agree otherwise in a writing signed by the parties. A broker shall not be deemed to have a fiduciary relationship with any party or fiduciary obligations to any party but shall only be responsible for exercising reasonable care in the discharge of its specified duties as provided in this chapter and, in the case of a client, as specified in the brokerage engagement.
The GAR Listing Engagement Agreement and the GAR Buyer Brokerage Agreement are consistent with BRETTA and do not impose fiduciary duties upon the broker when acting in a brokerage capacity. That’s tremendous protection for brokers. Since the introduction of BRETTA, the frequency of lawsuits in Georgia based on a realtor’s breach of duty has dropped significantly. In other parts of the country, licensees do owe fiduciary duties to clients and the liability of those brokers remains high.
Inadvertently Increasing Duties to Fiduciary It is very important that Georgia brokers do not inadvertently increase their liability by telling clients that they do owe a fiduciary duty. If a broker tells a client that a responsibility is a part of the broker’s “fiduciary duties,” the broker can be held to be a fiduciary. BRETTA provides that if you agree to act as a fiduciary, the courts will enforce it.
Attorney Fiduciary Duty Attorneys operate under a different set of guidelines and generally do owe a fiduciary duty to their client. For example, if an attorney is holding earnest money in a cash transaction, the client is the buyer. Therefore, the attorney/holder cannot make a reasonable interpretation of the contract in the seller’s favor because it would be against the interests of the attorney’s client, the buyer. If the parties cannot agree to disbursement, the attorney/holder must interplead the earnest money.
Holder’s Fiduciary Duty
A special situation arises when earnest money is held by one of the brokers in the transaction. The Holder of earnest money is distinguished from a realtor performing a “brokerage service.” The Holder of earnest money is Holder for both parties and owes higher duties to both parties. Acting as the Holder of earnest money is not a “brokerage service;” it is an escrow service and the Holder of is the agent for both parties. The Holder cannot show unwarranted favoritism to the client in an earnest money dispute. Therefore, if a real estate broker acting as a Holder does not disburse the earnest money according to the terms of the contract, the Georgia Real Estate Commission may consider the broker to have acted incompetently.
Reference: Weissman, Seth. The Red Book on Real Estate Contracts in Georgia BookBaby. Kindle Edition.
Real Estate News, Brokers Blog & More