Lesson 03 · 13 min read
Agency, Disclosure, and Conflicts in Commercial Deals
Who you represent, what you owe each party, what counts as a material fact, and how to handle conflicts, confidentiality and referral money in commercial deals.
Every commercial deal has one question underneath it: who are you working for? If you cannot answer in one sentence and prove it with a signed page, the rest of your file cannot protect you.
This lesson covers the relationships Florida recognizes, the ban on dual agency, what you owe each party, material facts, conflicts, confidentiality and referral money. Lesson 2 showed how a complaint moves through the Florida Real Estate Commission (FREC). This lesson helps you stay out of it.
Builds on. Lesson 1 (your broker of record owns these calls) and Lesson 2 (how discipline works).
Education, not legal advice. Statutes and rules change. Confirm legal and tax points with your broker of record, a Florida attorney and a CPA.
The three brokerage relationships
Under F.S. 475.278, a Florida licensee works in one of three ways. A client is a party you represent. A customer is one you deal with but do not represent.
| Relationship | Who it serves | How it is set |
|---|---|---|
| Single agent | One client, with fiduciary duties (duties of loyalty and trust) | In writing |
| Transaction broker | Facilitates the deal for both sides with limited duties and no fiduciary duty | Presumed default |
| No brokerage relationship | Nobody. Basic duties only | In writing |
As we read F.S. 475.278(1), a licensee is presumed to be a transaction broker unless single agent or no-relationship status is set in writing. A licensee may not act as a disclosed or nondisclosed dual agent. Your broker of record decides which role the firm offers on a deal. You do not choose on the fly.
How the written notices attach
The statutory notices in F.S. 475.278 are built around residential sales of four units or fewer, where the licensee hands over a prescribed form early on. The statute says the disclosure requirements do not apply to nonresidential transactions (F.S. 475.278(5)). So industrial, single-tenant NNN (net lease, where the tenant pays taxes, insurance and maintenance), retail, medical office and most land deals sit outside those notices, unlike residential practice, where a form goes in every hand. In commercial practice the paper you write yourself has to do that job.
Three cautions:
- No notice does not mean no relationship. You are still a transaction broker by default, and the dual agency ban still applies.
- The statute's definition of a covered sale also reaches some small-acreage land. On a small land deal, ask your broker of record whether the notices apply.
- Missing a required notice or a designated-associate disclosure is a discipline ground under F.S. 475.25(1)(q).
The dual agency ban and designated sales associates
Dual agency means one licensee (or firm) represents both sides as an agent. Florida bans it. The narrow exception, F.S. 475.2755, is the broker's tool, not yours. The broker designates one sales associate as single agent for the buyer (or tenant) and a different one for the seller (or landlord). Conditions:
| Test | What to confirm |
|---|---|
| Transaction type | Not a residential sale. Sales and leases can qualify |
| Assets | Buyer and seller each have $1,000,000 or more in assets |
| Paper | Both parties sign the required disclosures |
| People | The broker designates a different sales associate for each side, each acting as a single agent |
Industrial example: one associate represents a warehouse tenant and a colleague represents the landlord in the same firm. Both parties meet the asset test and sign. NNN example: your buyer in a 1031 exchange (a tax-deferred swap into replacement property, with strict deadlines) wants a dollar-store pad your firm listed. Same test, same signatures. If either party fails, the firm does not do both sides.
What you do in practice:
- Tell your broker of record before you show your firm's own listing to your client.
- Let the broker decide the structure and assign the associates.
- Wall off each side. Never share one client's confidences with the other associate.
- Never promise anyone you will "handle both sides."
See Course 25 Lesson 1 and Course 24 Lesson 7.
Put the relationship in writing anyway
No statutory notice may apply to your commercial deal. Write one anyway. A short written relationship statement ends most later arguments about who you worked for. Attach it to the listing agreement or buyer rep engagement, with wording your broker of record approves. These are samples, not statutory forms.
(a) Sample for a listing: "[Agent] of MaxLife Commercial, a division of MaxLife Realty LLC, will represent [Owner] as [single agent / transaction broker] in the sale of [property]. We will treat all parties honestly and disclose known facts materially affecting value that are not readily observable. We will keep [Owner]'s bottom line and motivation confidential unless [Owner] permits otherwise in writing. Our firm may represent other buyers and owners. We will tell you in writing before any conflict arises. Owner initials: [ ] Date: [date]"
(b) Sample for a buyer rep engagement: "[Agent] of MaxLife Commercial, a division of MaxLife Realty LLC, will represent [Buyer] as [single agent / transaction broker] in the search for [property type] in [county]. If [Buyer] wants a property our firm has listed, we will tell you before the showing, in writing, and our broker of record will explain the options. Buyer initials: [ ] Date: [date]"
What you owe each party
Duties depend on the role, but some never switch off. This table summarizes the F.S. 475.278 duty lists at a high level. Ask your broker of record how the firm applies them to your role.
| Who | What you owe | What you may not do |
|---|---|---|
| Your client (single agent) | Honest and fair dealing, loyalty, confidentiality, obedience to lawful instructions, full disclosure, accounting for funds, skill, care and diligence, presenting all offers promptly unless the client directs otherwise in writing | Reveal the client's bottom line or motivation |
| Each party in a transaction broker deal (both are customers, not clients) | Honest and fair dealing, accounting for funds, skill, care and diligence, presenting all offers, limited confidentiality, and any added duty agreed in writing | Reveal that a party will accept less or pay more, or why, without written permission. Advocate for one side against the other |
| A customer with no brokerage relationship | Honest and fair dealing, accounting for funds, and disclosure of known material facts that are not readily observable | Advise them as if they were your client |
| Everyone | Honesty and fair dealing, and disclosure of known material facts that are not readily observable | Misrepresent or conceal |
One wording point. In the statute, the duty to disclose known facts affecting value is written for residential property. On a commercial deal, treat that duty as owed anyway. F.S. 475.25(1)(b) reaches fraud, misrepresentation and concealment, professional codes require honesty, and your written agreements will promise it.
Material facts in commercial deals
A material fact is one a reasonable buyer or tenant would weigh in deciding whether to close or at what price. Florida courts have historically let commercial sellers stay quiet about many defects (the buyer-beware rule, or caveat emptor), but that protection has limits and does not cover a licensee who states false facts or hides something. Lesson 2 explains the case law and F.S. 475.25(1)(b), including why carelessness with a number can be enough.
| Category | Industrial examples | NNN examples |
|---|---|---|
| Physical | Roof age and leaks, floor slab, drainage, HVAC and building systems, clear height stated wrong | Who owns roof and structure repairs, parking lot condition |
| Legal | Zoning for industrial outdoor storage (IOS, yards for trucks, trailers and equipment), open permits, pending code cases | Tenant purchase option or right of first refusal (a right to match an offer), easements, litigation |
| Financial | Vacant bays, below-market rents, rollover, special assessments | Remaining lease term, rent bumps, lease guaranty, tenant go-dark rights (right to stop operating), loan prepayment terms |
| Environmental | Solvent smell, staining, old floor drains | Prior fuel or dry-cleaning use |
Puffery ("great location") is opinion. Facts ("28-foot clear height," "12 years left on the lease") must come from a document. When you learn of an issue:
- Stop repeating the earlier statement.
- Tell your client in writing and call your broker of record the same day.
- Correct marketing pieces, including flyers and offering memoranda (OMs, the sales package for an investment property).
- Recommend the right expert. You are not the environmental or engineering expert. Do not diagnose.
See Course 22 Lesson 6 for tenant-rights disclosures and Course 25 Lesson 6 for diligence deadlines. For environmental signals, use the environmental due diligence guide.
Conflicts of interest
A conflict exists whenever your interest, or a related party's, could pull against your client's. The cure is the same each time: disclose in writing, get informed written consent, and involve your broker of record. Sometimes the cure is to decline.
| Situation | What to do |
|---|---|
| You or a family member owns or plans to buy the property | Disclose in writing to all parties before anyone signs. Broker of record approves |
| Your firm has the listing your buyer wants | Broker of record chooses the structure (see the dual agency section) |
| A vendor pays you or your firm a referral fee | Disclose to the client, and get written consent before the referral |
| You have a relationship with a lender or title company | Disclose. Offer alternatives. Never require one |
| Your client instructs you to hide a known material fact | Decline that instruction and escalate |
A kickback or rebate on a business placement is a violation unless the principal and all affected parties are fully advised beforehand (F.A.C. 61J2-10.028). Sharing brokerage compensation with a party to the deal is not a violation if fully disclosed. If you are a REALTOR, the Code of Ethics adds written-disclosure duties for your own interest (Article 4) and for benefits from services you recommend (Article 6).
Decline when: you cannot serve one side without harming the other, your broker says no, or the client will not consent after full disclosure.
Confidentiality
What each side may reveal is not symmetrical.
| Information | Owed to | Rule of thumb |
|---|---|---|
| Seller's motivation and lowest price | Seller | Never reveal without written permission |
| Buyer's maximum price | Buyer | Never reveal without written permission |
| Tenant lease terms and rent roll | Owner and tenant | Share only after a signed non-disclosure agreement (NDA) and owner approval |
| Material facts not readily observable | Everyone | Not confidential. Disclose |
An NDA is a contract layer on top of the license law. On social media, never post pricing, tenant names or "under contract" news without the client's written approval. Every post is advertising. Lesson 5 covers ad rules.
Confidentiality ends when the client consents in writing, when the law or a court compels disclosure (a subpoena, for example), when the client is using you to commit fraud, or when you must defend yourself against a claim. Never decide that alone. Call your broker of record first.
Referral fees and compensation sharing
F.S. 475.25(1)(h) makes it a discipline ground to share a commission with, or pay compensation to, an unlicensed person for referring business, clients or customers. F.S. 475.42(1)(e) also makes that conduct a prohibited act.
| Person | May you pay a referral fee? |
|---|---|
| Licensed Florida broker | Yes, broker to broker through your brokerage, with a written referral agreement |
| Broker licensed in another state | Yes, if that broker does not violate Florida law |
| Unlicensed friend, lender, contractor, attorney, CPA | No |
| Yourself, directly | No. Associates are paid through the brokerage (F.S. 475.42(1)(d)) |
Industrial example: an unlicensed contractor introduces a flex-building buyer and asks for a thank-you cut. NNN example: your 1031 client's CPA offers an introduction for a share. Both fail the rule. A written thank-you note is safe. Anything of real value goes to your broker of record first. Disclose every referral arrangement that pays you or your firm, in writing, before the client acts on it.
Penalties. Paying an unlicensed person is charged per count, and Lesson 2 shows the guideline range for it and how the per-count math works. See Course 23 Lesson 6 for referral networks done right.
A worked example
Assumptions (invented, not market data and not MaxLife results): Jordan, a newer sales associate at MaxLife Commercial, represents Cypress Freight, an owner-user buyer. The target is a small-bay flex building in Orange County at $2,400,000, listed by Chris, a friend of Jordan's at another firm. Jordan learns the seller, Pine Street Holdings LLC, has Chris's spouse as a 20% member. Assume a 3% listing fee.
- Spouse's gross share of price: 0.20 x $2,400,000 = $480,000, before debt and costs.
- A $50,000 price cut costs the spouse 0.20 x $50,000 = $10,000.
- The same cut costs the listing firm 0.03 x $50,000 = $1,500 in fee. Chris's share of that depends on the firm's split, so we do not add it in.
So Chris may have a personal stake against a lower price, and Cypress has not been told. The friendship is not the problem. The undisclosed interest is. Designated-associate rules do not help, because the two sides are at different firms.
| Step | Owner | Action | When |
|---|---|---|---|
| 1 | Jordan | Confirm the facts from a public source, not gossip. The state business records site may list only managers, so ask for the seller's disclosure of its members | Same day |
| 2 | Jordan | Tell Cypress in writing what you learned, and that the friendship exists | Same day |
| 3 | Jordan | Call the broker of record with the facts | Same day |
| 4 | Jordan | Ask Chris, in writing, to confirm and disclose the interest, and to confirm the seller has been told | Within 1-2 days |
| 5 | Broker of record | Advise on structure and whether counsel is needed | Before the offer |
| 6 | Cypress | Decide in writing: proceed, adjust protocol, or walk | Before the offer |
| 7 | Jordan | Keep price talk in writing, keep Cypress's maximum private from Chris, and add a file note | Ongoing |
If Chris is a REALTOR, Article 4 of the Code of Ethics requires written disclosure of a family member's interest before anyone signs. Do not accuse Chris. Ask, document, and let the broker of record lead. If Chris refuses to disclose, tell Cypress and consider walking.
Key takeaways
- Assume transaction broker status unless a written single-agent or no-relationship agreement says otherwise.
- The F.S. 475.278 notices are aimed at residential sales, but dual agency is still banned and honesty duties still apply.
- Designated sales associates need the $1,000,000 asset test and signed disclosures. The broker of record decides.
- Write your relationship down on every listing and buyer rep engagement.
- Facts need documents. Never repeat a number you cannot source.
- Disclose any conflict in writing before anyone signs, and decline when you cannot cure it.
- Pay referral money only to licensed brokers, through your broker.
Next: Lesson 4 covers money, escrow, and records.