SENATORS Carey, Mumper, Stivers, Harris, Prentiss

To amend sections 4735.53, 4735.58, 4735.70, 4735.71,

1

and 4735.72, to enact new sections 4735.56 and

2

4735.57 and section 4735.181, and to repeal

3

sections 4735.56, 4735.57, and 4735.73 of the

4

Revised Code to modify agency relationships

5

between real estate licensees and customers,

6

including disclosures made to customers, and to

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establish a penalty for noncompliance with

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disclosure requirements.

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BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF OHIO:

Section 1. That sections 4735.53, 4735.58, 4735.70, 4735.71,	10
and 4735.72 be amended and new sections 4735.56 and 4735.57 and	11
section 4735.181 of the Revised Code be enacted to read as	12
follows:	13

Sec. 4735.181. (A)(1) It shall be a violation of division	14
(A)(9) of section 4735.18 of the Revised Code if any individual	15
licensed as a real estate broker or salesperson pursuant to this	16
chapter fails to comply with section 4735.55, 4735.56, or 4735.58	17
of the Revised Code or any rules adopted under those sections.	18

(2) When the superintendent determines that a violation of	19
division (A)(9) of section 4735.18 of the Revised Code has	20
occurred because a licensee has failed to comply with section	21
4735.55, 4735.56, or 4735.58 of the Revised Code or any rules	22
adopted under those sections, the superintendent may do either of	23
the following:	24

(a) Initiate disciplinary action under section 4735.051 of	25
the Revised Code for a violation of division (A)(9) of section	26
4735.18 of the Revised Code, in accordance with Chapter 119. of	27
the Revised Code;	28

(b) Personally, or by certified mail, serve a citation and	29
impose sanctions in accordance with this section upon the	30
licensee.	31

(B) Every citation served under this section shall give	32
notice to the licensee of the alleged violation or violations	33
charged and inform the licensee of the opportunity to request a	34
hearing in accordance with Chapter 119. of the Revised Code. The	35
citation also shall contain a statement of a fine of up to two	36
hundred dollars per violation. All fines collected pursuant to	37
this section shall be credited to the real estate recovery fund,	38
created in the state treasury under section 4735.12 of the Revised	39
Code.	40

(C)(1) If any licensee is cited three times under this	41
section within twelve consecutive months, the superintendent shall	42
initiate disciplinary action pursuant to section 4735.051 of the	43
Revised Code for any subsequent violation that occurs within the	44
same twelve-month period.	45

(2) If a licensee fails to request a hearing within thirty	46
days of the date of service of the citation, or the licensee and	47
the superintendent fail to reach an alternative agreement, the	48
citation shall become final.	49

(D) Unless otherwise indicated, the licensee named in a final	50
citation under this section must meet all requirements contained	51
in the final citation within thirty days of the effective date of	52
that citation.	53

(E) The superintendent shall suspend automatically a	54
licensee's license if the licensee fails to comply with division	55
(D) of this section.	56

Sec. 4735.53.  (A) The types of agency relationships a	57
licensee may establish in a real estate transaction are limited to	58
the following:	59

(1) An agency relationship between the licensee and the	60
seller;	61

(2) An agency relationship between the licensee and the	62
purchaser;	63

(3) A dual agency relationship between the licensee and both	64
the seller and the purchaser;	65

(4) A subagency relationship between the licensee and the	66
client of another licensee.	67

(B) When an agency relationship is formed between a licensee	68
and a client, bothall of the following applyalso are considered	69
the agent of that client:	70

(1) The brokerage with whom the licensee is affiliated and,	71
except as provided in division (C) of section 4735.70 of the	72
Revised Code, the management level licensees in that brokerage who	73
have direct supervisory duties over licensees are also agents of	74
that client;	75

(2) Any licensee employed by, or affiliated with, the	76
brokerage who receives confidential information from the agent of	77
the client is also an agent of that client;	78

(3) Any other licensee in the brokerage who assisted in	79
establishing the agency relationship;	80

(4) Any licensee in the brokerage who specifically is	81
appointed with the client's consent to represent that client.	82

(C) Except as otherwise provided in divisions (B)(1) and (2)	83
to (4) of this section, another licensee who is affiliated with	84
the same brokerage as the licensee is not an agent of that client	85
unless that licensee assisted in establishing the agency	86
relationship or is specifically appointed, with the client's	87
consent, to represent the client.	88

(C)(D) A payment or the promise of a payment to a licensee	89
does not determine whether an agency relationship has been created	90
between a licensee and a client or between other licensees in the	91
brokerage with which the licensee is affiliated and that client.	92

Sec. 4735.56. (A) Each brokerage shall develop a written	93
brokerage policy on agency to be given to prospective sellers and	94
purchasers in accordance with divisions (C) and (D) of this	95
section.	96

(B) The brokerage policy on agency described in division (A)	97
of this section shall include all of the following information:	98

(1) An explanation of the permissible agency relationships	99
available under section 4735.53 of the Revised Code and the duties	100
that the agent owes their client;	101

(2) The brokerage's policy on representation of purchasers or	102
sellers;	103

(3) Whether at some time during the agency relationship the	104
brokerage and its licensee may act as a dual agent, and the	105
options and consequences for the client if a dual agency situation	106
arises including the right of the client to terminate the agency	107
relationship and seek representation from another source;	108

(4) Whether at some time during the agency relationship,	109
another licensee affiliated with the same brokerage as the	110
licensee may become the exclusive agent for the other party in the	111
transaction and whether each licensee will represent only the	112
interests of that licensee's client;	113

(5) The brokerage's policy on cooperation with other	114
brokerages, including whether the brokerage offers compensation to	115
other brokerages or will seek compensation from other brokerages;	116

(6) That a brokerage that has a purchaser as a client	117
represents the purchaser's interests even though the seller's	118
agent or the seller may compensate that purchaser's brokerage;	119

(7) That the signature of the purchaser or the seller	120
indicates acknowledgement of receipt of the brokerage policy on	121
agency.	122

(C) A licensee acting as a seller's agent shall provide the	123
seller with the brokerage policy on agency described in this	124
section prior to marketing or showing the seller's property and	125
shall obtain a signature from the seller acknowledging receipt. If	126
the seller refuses to provide a signature acknowledging receipt of	127
the brokerage policy on agency, the licensee shall note this on	128
the policy.	129

(D) A licensee working directly with a purchaser in a real	130
estate transaction, whether as the purchaser's agent, the seller's	131
agent, or the seller's subagent, shall provide the purchaser with	132
the brokerage policy on agency described in this section and	133
obtain a signature from the purchaser acknowledging receipt of the	134
policy. If the purchaser refuses to provide a signature	135
acknowledging receipt of the brokerage policy on agency, the	136
licensee shall note this on the policy. The brokerage policy on	137
agency shall be provided to a purchaser prior to the earliest of	138
the following events:	139

(1) Initiating a prequalification evaluation to determine	140
whether the purchaser has the financial ability to purchase or	141
lease the particular property;	142

(2) Requesting specific financial information from the	143
purchaser to determine the purchaser's ability to purchase or	144
finance real estate in a particular price range;	145

(3) Showing the property to the purchaser other than at an	146
open house;	147

(4) Discussing, with the purchaser, the making of an offer to	148
purchase or lease real property;	149

(5) Submitting an offer to purchase or lease real property on	150
behalf of the purchaser.	151

(E) If the earliest event described in division (D) of this	152
section is by telephone or electronic mail, the licensee shall	153
disclose by that same medium the nature of the agency relationship	154
that the licensee has with both the seller and the purchaser. The	155
licensee shall provide the purchaser with the brokerage policy on	156
agency described in this section at the first meeting with the	157
purchaser following this disclosure of the agency relationship.	158

(F) A licensee acting as a seller's agent is not required to	159
provide a purchaser with the brokerage policy on agency described	160
in this section except in the case of an event described in	161
division (D) of this section.	162

(G) The disclosure requirements of this section do not apply	163
in any of the following situations:	164

(1) The rental or leasing of residential premises as defined	165
in section 5321.01 of the Revised Code, if the rental or lease	166
agreement can be performed in eighteen months or less;	167

(2) The referral of a prospective purchaser or seller to	168
another licensee;	169

(3) Transactions involving the sale, lease, or exchange of	170
foreign real estate as defined in division (E) of section 4735.01	171
of the Revised Code;	172

(4) Transactions involving the sale of a cemetery lot or a	173
cemetery interment right.	174

Sec. 4735.57.  (A) The superintendent of real estate, with	176
the approval of the Ohio real estate commission, shall establish	177
by rule the agency disclosure statement. The agency disclosure	178
statement shall contain a place for the licensee and the parties	179
to the transaction to sign and date the statement and shall	180
contain sections for the disclosure or explanation of all of the	181
following:	182

(1) Unless confidential, the names of all the parties in the	183
transaction;	184

(2) The address of the property being sold or leased;

185

(3) The name of the licensee or licensees and the brokerage	186
with which each licensee is affiliated;	187

(4) The party that each licensee in the named brokerage	188
represents in the transaction;	189

(5) If two licensees affiliated with the same brokerage	190
represent the purchaser and the seller, whether each licensee	191
represents their separate client or are acting as dual agents;	192

(6) If only one licensee is involved in the transaction,	193
whether that licensee is a dual agent or represents only one party	194
to the transaction;	195

(7) If both the purchaser and the seller are represented by	196
licensees affiliated with the same brokerage, that the brokerage	197
is a dual agent;	198

(8) That the signature of the client indicates the client's	199
informed consent to the agency relationship and that if the client	200
does not understand the agency disclosure statement, the client	201
should consult an attorney.	202

(B) On the reverse side of the agency disclosure statement,	203
the duties of a licensee acting as a dual agent shall be specified	204
and contain sections disclosing all of the following:	205

(1) An explanation of the nature of a dual agency	206
relationship, including a statement that in serving as a dual	207
agent, licensees in the brokerage represent two clients whose	208
interests are, or at times could be, different or adverse;	209

(2) That as a result of the dual agency relationship, the	210
dual agent may not be able to advocate on behalf of the client to	211
the same extent the agent may have if the agent represented only	212
one client.	213

(3) A description of the duties the brokerage and its	214
affiliated licensees and employees owe to each client, including	215
the duty of confidentiality;	216

(4) That neither the brokerage nor its affiliated licensees	217
have any material relationship with either client other than	218
incidental to the transaction, or if the brokerage or its	219
affiliated licensees have such a relationship, a disclosure of the	220
nature of the relationship. For purposes of this division,	221
"material relationship" means any actually known personal,	222
familial, or business relationship between the brokerage or an	223
affiliated licensee and a client that could impair the ability of	224
the brokerage or affiliated licensee to exercise lawful and	225
independent judgment relative to another client.	226

(5) That as a dual agent, the brokerage cannot engage in	227
conduct that is contrary to the interests or instructions of one	228
party or act in a biased manner on behalf of one party;	229

(6) A section specifying the source of compensation to the	230
real estate broker;	231

(7) That the client does not have to consent to the dual	232
agency relationship, and the options available to the client for	233
representation in the transaction if the client does not consent,	234
including the right of the client to terminate the agency	235
relationship and seek representation from another source;	236

(8) That the consent to the dual agency relationship by the	237
client has been given voluntarily, that the signature indicates	238
informed consent, and that the duties of a licensee acting as a	239
dual agent disclosed to the client pursuant to division (B) of	240
this section have been read and understood.	241

(C) The disclosure requirements of this section do not apply	242
in any of the following situations:	243

(1) The rental or leasing of residential premises as defined	244
in section 5321.01 of the Revised Code, if the rental or lease	245
agreement can be performed in eighteen months or less;	246

(2) The referral of a prospective purchaser or seller to	247
another licensee;	248

(3) Transactions involving the sale, lease, or exchange of	249
foreign real estate as defined in division (E) of section 4735.01	250
of the Revised Code;	251

(4) Transactions involving the sale of a cemetery lot or a	252
cemetery interment right.	253

(D) The licensee is obligated to perform all duties imposed	254
on a real estate agent at common law except to the extent the	255
duties are inconsistent with the duties prescribed in this chapter	256
or are otherwise modified by agreement.	257

Sec. 4735.58.  (A) A licensee acting as a seller's agent	258
shall provide the seller an agency disclosure statement described	259
in section 4735.57 of the Revised Code prior to marketing or	260
showing the seller's property.	261

(B)(1) A licensee working directly with a purchaser in a real	262
estate transaction, whether as the purchaser's agent, the seller's	263
agent, or the seller's subagent, shall provide the purchaser with	264
an agency disclosure statement described in section 4735.57 of the	265
Revised Code prior to the earliest of the following events:	266

(a) Initiating a prequalification evaluation to determine	267
whether the purchaser has the financial ability to purchase or	268
lease the particular property;	269

(b) Requesting specific financial information from the	270
purchaser to determine the purchaser's ability to purchase or	271
finance real estate in a particular price range;	272

(c) Showing the property to the purchaser other than at an	273
open house;	274

(d) Discussing, with the purchaser, the making of an offer to	275
purchase real property;	276

(e) Submitting an offer to purchase or lease real property on	277
behalf of the purchaser.	278

(2) If the earliest event described in division (B)(1) of	279
this section is by telephone, the licensee shall make a verbal	280
disclosure of the nature of the agency relationship that the	281
licensee has with both the seller and the purchaser. The licensee	282
shall obtain the purchaser's signature and the date on an agency	283
disclosure statement at the first meeting with the purchaser	284
following verbal disclosure of the agency relationship.	285

(3) A licensee acting as a seller's agent is not required to	286
provide a purchaser with an agency disclosure statement except in	287
the case of an event described in division (B)(1) of this section.	288

(C) A licensee who is a purchaser's agent or a seller's	289
subagent working with a purchaser shall present the agency	290
disclosure statement described in section 4735.57 of the Revised	291
Code to the purchaser and request the purchaser to sign and date	292
the statement pursuant to division (B) of this sectionno later	293
than the preparation of an offer to purchase or lease, or a	294
written request for a proposal to lease. The licensee shall	295
deliver the statement signed by the purchaser to the seller's	296
agent, or to the seller if the seller is not represented by an	297
agent, prior to presenting the seller with either a written offer	298
to purchase or lease, or a written request for a proposal to	299
lease.	300

(D)(B) A licensee selling property at auction shall, prior to	301
the auction, verbally disclose to the audience that the licensee	302
represents the seller in the real estate transaction. The licensee	303
shall provide the agency disclosure statement described in section	304
4735.57 of the Revised Code to the successful bidder prior to the	305
bidder's signing a purchase contract.	306

(E)(C) Evidence that a licensee has failed to comply with	307
this section constitutes prima-facie evidence of misconduct in	308
violation of division (A)(6) of section 4735.18 of the Revised	309
Code.	310

Sec. 4735.70.  The following are dual agents under this	311
chapter:	312

(A) A licensee who represents both the purchaser and the	313
seller as clients in the same real estate transaction;	314

(B) A brokerage that represents both the purchaser and the	315
seller as clients in the same real estate transaction;	316

(C) A management level licensee who represents a client in an	317
in-company transaction. If there is more than one management level	318
licensee affiliated with the brokerage and either of the following	319
applies, the management level licensee is not a dual agent:	320

(1) The management level licensee personally represents	321
either the seller or the purchaser in a transaction, in which case	322
the management level licensee will represent only the interests of	323
that licensee's client.	324

(2) The management level licensee is the purchaser or seller	325
in a transaction and will represent only that licensee's interest.	326

Sec. 4735.71.  (A) Except as provided in division (C) of this	327
section, noNo licensee or brokerage shall participate in a dual	328
agency relationship described in section 4735.70 of the Revised	329
Code unless both the seller and the purchaser in the transaction	330
have full knowledge of the dual representation and consent in	331
writing to the dual representation on the dual agency disclosure	332
statement described in section 4735.734735.57 of the Revised	333
Code. Before a licensee obtains the consent of any party to a dual	334
agency relationship, the licensee shall disclose to both the	335
purchaser and the seller all relevant information necessary to	336
enable each party to make an informed decision as to whether to	337
consent to the dual agency relationship. If, after consent is	338
obtained, there is a material change in the information disclosed	339
to the purchaser and the seller, the licensee shall disclose such	340
the change of information to the purchaser and the seller and give	341
them an opportunity to revoke their consent.	342

(B) The brokerage shall make the dual agency disclosure to	343
both the seller and purchaser as soon as practicable after it is	344
determined that such dual agency may exist. The parties to the	345
real estate transaction shall sign and date the dual agency	346
disclosure statement in a timely manner after it is determined	347
that a dual agency relationship exists. The form must be signed	348
and dated prior to the signing of any offer to purchase or lease	349
the real estate that is the subject of the transaction.	350

(C) A brokerage that is a dual agent is not required to	351
obtain the consent of the seller and the purchaser on the dual	352
agency disclosure statement described in section 4735.73 of the	353
Revised Code if the seller and purchaser are each represented by a	354
different, nonmanagement level licensee who is affiliated with the	355
same brokerage and all of the following conditions are met:	356

(1) The licensees made disclosures as required under sections	357
4735.56 and 4735.58 of the Revised Code;	358

(2) The potential for the formation of the dual agency was	359
disclosed to all parties in the agency disclosure statement	360
pursuant to section 4735.57 of the Revised Code;	361

(3) Each party consents by initialing, in a timely manner	362
after it is determined that a dual agency relationship exists in	363
the transaction, the section in the agency disclosure statement	364
that discloses the potential for a dual agency relationship.	365

(D) No brokerage shall participate in a dual agency	366
relationship described in division (C) of section 4735.70 of the	367
Revised Code, unless each of the following conditions is met:	368

(1) The brokerage has established a procedure under section	369
4735.54 of the Revised Code under which licensees, including	370
management level licensees, who represent one client will not have	371
access to and will not obtain confidential information concerning	372
another client of the brokerage involved in the dual agency	373
transaction.	374

(2) The licensee who is an agent for each client in the dual	375
agency relationship fulfills the licensee's duties exclusively to	376
that client.	377

Sec. 4735.72.  (A) The brokerage and management level	378
licensees in a brokerage in which there is a dual agency	379
relationship described in divisions (A) and (B) of section 4735.70	380
of the Revised Code shall do each of the following:	381

(1) Objectively supervise the affiliated licensees in the	382
fulfillment of their duties and obligations to their respective	383
clients;	384

(2) Refrain from advocating or negotiating on behalf of	385
either the seller or the purchaser;	386

(3) Refrain from disclosing to any other employee of the	387
brokerage or any party or client, any confidential information of	388
a client of which the brokerage or management level licensee	389
becomes aware and from utilizing or allowing to be utilized for	390
the benefit of another client, any confidential information	391
obtained from a client.	392

(B) When two nonmanagement level licensees affiliated with	393
the same brokerage represent separate clients in the same	394
transaction, each affiliated licensee shall do both of the	395
following:	396

(1) Serve as the agent of only the party in the transaction	397
the licensee agreed to represent;	398

(2) Fulfill the duties owed to the respective client as set	399
forth in this chapter and as agreed in the agency agreement.	400

(C)(1) In all cases, a management level licensee shall keep	401
confidential information of the client or brokerage.	402

(2) Nothing in this section prohibits the brokerage or	403
management level licensees in the brokerage from providing	404
factual, nonconfidential information that presents or suggests	405
objective options or solutions, or assisting the parties in an	406
unbiased manner to negotiate or fulfill the terms of the purchase	407
contract or lease, provided that confidential information of a	408
client is not utilized in any manner in formulating such	409
suggestions or providing suchthis assistance.	410

(D) No cause of action shall arise on behalf of any person	411
against a licensee in a dual agency relationship for making	412
disclosures to the parties that are permitted or required by this	413
chapter, or that have been made on the dual agency disclosure	414
statement. Making permitted disclosures does not terminate any	415
agency relationship between a licensee and a client.	416

(E)(1) If a brokerage determines that confidential	417
information of one client in a dual agency relationship has become	418
known to any licensee employed by or affiliated with the brokerage	419
who is representing the other client in the dual agency	420
relationship, as a result of the failure of the brokerage, its	421
licensees, or its employees to maintain such confidentiality, the	422
brokerage shall do both of the following:	423

(a) Notify both clients of suchthe fact immediately in	424
writing;	425

(b) Offer to resign representation of both clients.

426

(2) If either client elects to accept suchthe resignation,	427
the brokerage shall not be entitled to any compensation from that	428
client. If either client does not accept suchthe resignation, the	429
brokerage may continue to represent that client.	430

(3) A licensee who obtains confidential information	431
concerning another client of the brokerage in a dual agency	432
relationship shall not, under any circumstances, disclose that	433
information to or use that information for the benefit of the	434
licensee's client.	435

(F) A client of a brokerage who is involved in a dual agency	436
relationship may bring an individual action against a brokerage	437
and any licensee who has failed to comply with the procedure	438
described in division (D)(1)(B)(1) of section 4735.71 of the	439
Revised Code to recover actual damages and to rescind an agency	440
agreement with the brokerage.	441

Section 2. That existing sections 4735.53, 4735.58, 4735.70,	442
4735.71, and 4735.72 and sections        Sec. 4735.56. ,        Sec. 4735.57. , and        Sec. 4735.73.  of	443
the Revised Code are hereby repealed.	444