Fact Pattern: You are the listing agent for a property for lease. The total commission is 8%, and you have offered 4% to a cooperating broker through the MLS. A tenant is interested in leasing the premises. The tenant is not represented by any agent. To complete the lease form, you must fill in the Confirmation of Agency Relationships in paragraph 41 of C.A.R.’s Residential Lease or Month-to-Month Rental Agreement (RLMM).

Multiple Choice Question: How should you complete the blank spaces for the Tenant’s Agent in the RLMM? Pick the best answer:

A. Insert your name as the tenant’s agent (dual agency).
B. Refer the tenant to another agent, and insert that other agent’s name.
C. Insert the tenant’s name.
D. Insert “None.” 

Answer: Answer A is not the best answer. When an unrepresented tenant enters into a lease agreement, you are not required to be the tenant’s agent. Although not required, you can elect to be the tenant’s agent if you and the tenant both want that. For example, you may consider creating an agency relationship if the tenant wants you to recommend and show other rental properties, provide rental comps, or help the tenant negotiate a good deal. But if, as in this Fact Pattern, the tenant just wants to rent the property you have listed, you do not have to be the tenant’s agent.

Answer B is not the best answer. You do not have to refer an unrepresented tenant to another agent.

Answer C is wrong. An unrepresented tenant has no agent, and so the tenant’s name should not be inserted as the tenant’s agent.

Answer D is the correct answer (see the comparison of leases with sales below). One advantage of not representing the tenant is that you will avoid any potential liability as the tenant’s fiduciary agent. Another advantage is that you will still be entitled to receive the total 8% commission under the terms of your C.A.R. Lease Listing Agreement.

Comparing Leases With Sales: For sales transactions, buyers can represent themselves. But an unrepresented buyer will generally not know how to handle the homebuying process without guidance from a real estate agent. So in our day-to-day practice, we do have a tendency of making arrangements for the listing agent or another agent to represent the buyer. We don’t do that as a matter of law. We do that as a matter of practice to help ensure that the transaction doesn’t fall apart.

For lease transactions, tenants can also represent themselves, just like buyers. But unlike buyers, unrepresented tenants generally do not need much guidance from a real estate agent. After all, unlike buyers, California tenants enter into leasing arrangements very heavily armed with a litany of landlord-tenant laws that protect them. There are laws requiring landlords to properly pre-screen tenants, provide disclosures, meet basic habitability standards, provide quiet use and enjoyment, give proper notices, follow rent-control rules, handle security deposits, and so on.

-Thank You to Steve Shanks (Encino Office) for suggesting this week’s legal tip!

Copyright© 2023 Berkshire Hathaway HomeServices California Properties (BHHSCP). All rights reserved. Any unauthorized reproduction or use of this material is strictly prohibited. This information is believed to be accurate as of May 15, 2023. It is not intended as a substitute for legal advice in individual situations, and is not intended to nor does it create a standard of care for real estate professionals. Written by Stella Ling, Esq.