Illinois no longer recognizes common law agency. Additionally, Illinois no longer allows the use of sub-agency in real estate transactions, where the representative of the buyer was a sub-agent of the seller. Illinois now recognizes both a seller agency agreement and a buyer agency agreement whereby one agent has a fiduciary relationship with the seller and another agent has a fiduciary relationship with the buyer.
Agency relationships in Illinois are governed under statutory law. The body of law on which Illinois agency is based is Article 15 of the Real Estate License Act of 2000, as amended in 2010.
LAW OF AGENCY
In Illinois, the law of agency defines the rights and duties of the principal and the agent. It applies to a variety of business transactions.
Both contract law and real estate licensing laws — in addition to the law of agency— interpret the relationship between real estate licensees and their clients.
In Illinois, the Real Estate License Act of 2000 is given precedence in defining legal real estate agency concepts.
Insofar as real estate is considered, Illinois is a statutory agency state that has replaced common-law duties with statutory duties.
Definitions
Legally, agency refers to a strict, defined legal relationship. In the case of real estate, agency is a relationship that a broker, managing broker, or leasing agent (representing the sponsoring broker) may have with buyers, sellers, landlords, or tenants.
Those who hire are clients, and those who are hired are agents.
A real estate licensee becomes an agent, through a contractual agreement, whether expressed or implied. At this point, the real estate licensee actually becomes a legal, loyal agent obligated to work for the client’s best interests at all times, so long as those interests are within the law.
Definitions – Statutory (Real Estate License Act of 2000)
Key terms of the law of agency under Article 15 of the Real Estate License Act of 2000 are defined as follows:
- Agent – The individual who is authorized and consents to represent the interests of
another person. In the real estate business, a firm’s sponsoring broker is the agent and shares this responsibility with the licensees who work for them.
- Agency- A relationship in which a consumer has given consent (express or implied) to a real estate licensee to represent the consumer in a real property transaction. Consent may be given to a licensee directly or through an affiliated licensee.
- Brokerage agreement – An agreement, made verbally or set out in writing, for an agent or firm to provide brokerage services to a consumer and to receive compensation for providing those services.
- Compensation – Payment (monetary or otherwise) made to a person or entity for executing services for a client or customer.
- Consumer – A person or entity for whom an agent provides services, which are only to be
provided by a licensee, or a person or entity who seeks such services from a licensee.
- Ministerial acts – Informative or clerical service provided by a licensee to a consumer; providing ministerial acts is not equivalent to active representation.
- Confidential information – Information given by a client to a licensee during the term of a brokerage agreement that :
- the client requests (in writing or verbally) the licensee keep in confidence,
- relates to the client’s negotiating position;
- could do damage to the client’s negotiating position if
This information must not be shared unless:
- the client gives authorization for the licensee to share the information,
- the information must be shared by law, or
- the information is revealed by some person or entity other than the licensee.
- Customer— A person or entity for whom a licensee is providing services (excluding ministerial acts) but who is not represented by the licensee in an agency relationship.
- Client — The person or entity that a licensee represents in a real property transaction.
Client vs Customer
There is a distinction between the level of services a licensee (as agent) provides to a client and the level of services a licensee may provide to a customer.
The client is the principal to whom her agent gives advice and counsel and a written agency agreement has been signed by the client and agent. The agent is entrusted with certain confidential information and has fiduciary responsibilities (sometimes called statutory responsibilities) to the principal.
In contrast, the customer is entitled to factual information and honest dealings as a consumer but never receives advice and counsel or confidential information about the principal. The real estate licensee may provide ministerial acts to the customer but, as an agent, works for the client.
Just as the agent owes certain duties to the principal, the principal has responsibilities toward the agent. The principal’s primary duties are to comply with the brokerage agreement and cooperate with the agent. The principal must not hinder the agent and must deal with the agent in good faith. The principal also must compensate the agent according to the terms of the brokerage agreement.
