Disclosures of brokerage relationship (the Brokerage Disclosure to Buyer/Seller/Tenant/Landlord)

Bottom line: the public must be told in writing what the broker is, and is not, to them. The statute puts this in C.R.S. 12-10-408, and the Commission's Rules 6.4 to 6.9 supply the timing and the forms.

Start with the office policy

Every broker who works under a firm must have a written office policy that names and describes the relationships the firm offers the public. The employing broker or independent broker adopts it before providing any services (C.R.S. 12-10-408(1)(a); Rule 6.4.A). A firm may choose not to offer every kind. It need not offer buyer agency, seller agency and transaction-brokerage all (408(1)(b)). The policy also must set up how brokers are designated to clients and how confidential information (such as "the seller will take less") is protected (Rule 6.4.B).

When the disclosure must be given

The statute ties disclosures to the moment before the broker begins any licensed activity: "prior to engaging in any of the activities" that need a license (408(2)). The Commission's Rule puts it in practical terms. The written disclosure must be made to the consumer before eliciting or discussing confidential information for real estate brokerage services (Rule 6.5.A). Confidential information means things like the person's finances, motives, and bottom-line price.

What does not trigger it: preliminary "small talk" about price range, location and style, or answering general factual questions about properties that have been advertised (Rule 6.5.B). So answering a caller's question about the price of an advertised listing does not yet require the form. Once you start asking how much they can spend and why they are moving, it does.

What the written disclosure contains

• A statement that different relationships are available: buyer agency, seller agency, and status as a transaction-broker (408(1)(c)).
• For a transaction-broker: a statement that the broker is not acting as agent for the party and is acting as a transaction-broker (408(2)(a)(I)). If the transaction-broker takes on extra duties, those must be in a separate writing signed by the parties (408(2)(a)(III)).
• For a single agent: a written agency agreement with the party to be represented, which spells out the duties in the statute (sections 404 or 405), and timely notice of the single agency to the other prospective party (408(2)(b)).
• For a seller's or landlord's agent who works with a buyer or tenant: a written disclosure saying the broker is the seller's or landlord's agent and not the buyer's, listing the tasks the agent plans to do for the seller with the buyer, and stating that the buyer is not vicariously liable for the agent's acts unless the buyer approves, directs or ratifies them (408(2)(c)(I)). This is what the buyer receives when walking into an open house of a listing agent.
• The designated broker statement: any written agreement must say the relationship exists only with the designated broker, and does not extend to the employing broker, other brokers in the firm not designated, or the company (408(2)(e)). The statute also asks that the extent and limits of the relationship be disclosed (403(6)(g)).
• If asked about a relationship the firm does not offer: the broker must give a written definition of that relationship promulgated by the Commission (408(1)(c)). Colorado's Commission publishes a form for this purpose that is commonly called "Definitions of Working Relationships". (The statute describes this written definition; check the Division's website for the current official name and number.)

Who signs

The disclosure carries a signature block so the buyer, seller, landlord or tenant can acknowledge receipt. The signature only proves they received it. By itself, it is not a contract with the broker (408(2)(a)(II), 408(2)(c)(II)). If the person refuses to sign, the broker writes that fact on a copy and keeps the copy. The broker must still keep a signed or noted copy in the transaction file.

Commission forms

The Commission issues approved forms for these disclosures and for the listing and buyer-agency agreements that carry the duties. The Rules name one outright: the Commission-approved "Change of Status" form (Rule 6.9). Because a Commission form exists, the broker must use it when it fits (C.R.S. 12-10-403(4)(c); Rule 7.1.A). Other brokerage disclosure forms are described by what they do here, so check the Division's forms page for exact titles and numbers.

Telling the other side

A broker who has already set up a relationship with one party must advise the other parties or their agents, at the earliest reasonable opportunity, about that established relationship (408(2)(d)). Also, a single agent's notice goes "in a timely manner" to the other prospective parties (408(2)(b)).

Changing the relationship mid-deal

Life is messy. A buyer's agent's client may fall in love with a house that the same broker or team has listed. Colorado does not allow the broker to stay single agent for both (C.R.S. 12-10-406; Rule 6.7). The options, if properly disclosed in writing, are:

1. Be a transaction-broker for both parties, or
2. Be a transaction-broker for one and treat the other as a customer, or
3. Be a single agent for one and treat the other as a customer (Rule 6.7 A-C).

If the broker moves from single agent for one party to helping both as a transaction-broker, the broker must give the consumer whose relationship changed the Commission-approved Change of Status form. The deadline is the time the broker begins to assist both consumers, but no later than when the consumer signs the contract (Rule 6.9). If a different designated broker in the same firm is working with the other side, no change is needed (403(6)(c)).

What happens when the broker skips the disclosure

A violation of this part of the law is an act for which the Commission may investigate and take administrative action (12-10-411, which points to 12-10-217(1)(m) and the hearing procedures of 12-10-219). Beyond discipline, a skipped disclosure can leave the broker's status unclear. If there is no written single agency agreement, the law treats the broker as a transaction-broker (12-10-403(2)). So a broker who thinks he is a buyer's agent but has nothing signed may owe the transaction-broker's neutrality instead of advocacy, and may have shared confidential information he should have protected. The firm remains responsible for supervision (12-10-403(8)).

Example with real numbers

Maya, a broker at Front Range Realty, meets a buyer at an open house for a $500,000 Boulder County listing held by her colleague Tom.

1. Small talk is fine. The buyer asks the list price and bedroom count. No form yet (Rule 6.5.B).
2. Before the money talk. The buyer asks to discuss the price range and a preapproval of $450,000. Maya must give the written disclosure first (Rule 6.5.A). Because Maya is working as the buyer's agent under a written agreement, her disclosure also includes the duties list and the designated broker statement that the relationship is with her and not with the company.
3. Same house, her own listing. Suppose Maya is the listing broker as well, with a 3% listing fee ($15,000 on $500,000). She cannot be single agent for both. She chooses to become a transaction-broker for both, gives the buyer and the seller the Change of Status form at the time she begins assisting both, and no later than the buyer's signature on the contract (Rule 6.9). Her duties switch from advocating to the neutral duties of 12-10-407. She must now keep both sides' bottom lines confidential: she cannot tell the buyer the seller would take $475,000, and cannot tell the seller the buyer would pay $495,000.
4. Money check. If she skips the form and the Commission finds the violation, her $15,000 fee is not automatically lost, but she is exposed to administrative action and the buyer may argue she breached her duties.