What is a subagency relationship? I assume most readers have some idea. But is this an understanding based in past history, or an understanding of current practice, or both? The almost universal assumption is that real estate subagency is no longer in general practice. However, contrary to the opinion of most real estate agency law pundits, subagency has never gone away. As a special application of agency law, it is hidden away in the complexities of our real estate relationships. The purpose of this article is to bring subagency practice back to the forefront of our thinking, in a practical way. Of course, before we can properly understand or engage in subagency, we must be able to recognize it. Real estate “agency” is mentioned only four times in the entirety of the real estate statutes and Commissioner’s Rules: once as “agency contracts” in the statute setting forth the real estate exam requirements; once each as “agency law” and “agency relationships and disclosure” in the continuing education (“CE”) rule addressing content for an agency course; and once as “agency considerations” in the Commissioner’s Rule addressing content for a contract law course. Only twice in statute and once in the Rules is the term “fiduciary duty” actually used. Significantly, there is no definition in statute or rule for either agency or fiduciary duty, to say nothing of subagency. For the most part, our understanding of real estate agency law is gleaned from case law, the real estate prelicense course, the NAR Code of Ethics and agency law CE courses. And in the past 20 years, traditional subagency has virtually disappeared from real estate practice. Is it any wonder that the subject of subagency gets short shrift? Although subagency is an important type of agency relationship, it is totally absent from our statutes and rules. The Arizona Department of Real Estate (“ADRE”) does not address subagency with the real estate industry. Today’s agency instructors ignore it or breeze by it. Therefore, the occurrence of subagency is widely unappreciated. It is viewed as archaic – an historic relic of a time gone by. However, outside of its narrow traditional understanding and application, subagency is still very much alive and well, and remains in common use in Arizona real estate. Conventional Subagency Definitions Traditional or conventional subagency had quite a run for some decades, up through the 1980s. There is a compelling tale of buyer abuse through this application of subagency. But that’s another article. Subagency created a legal liability flowing “uphill” – from the buyer’s licensee through the licensee’s broker, through the seller’s agent and broker on up to the seller. It was generally unknown to or misunderstood by nearly all home sellers and buyers. Truly, with the demise of this form of subagency, and the advent of buyer agency, both buyers, sellers, lessees and lessors are now better served. Following are some typical definitions of this out-of-date subagency phenomenon. Definition #1: “Subagency has been around since the beginning of the organized practice of real estate. It describes an agent who brings a buyer for another company’s listing, and the buyer’s representative is working on behalf of the listing agent and seller, owing them fiduciary duties. It’s just about dead most everywhere now, as it wasn’t good for buyers and made brokers and sellers vicariously liable for the actions or errors of the buyer’s representative.” (http://realestate.about.com/bio/James-Kimmons-21991.htm), by James Kimmons, Our Real Estate Business Expert.) Definition #2: ”Subagency refers to a specific client representation relationship between a property listing broker or real estate agent and another real estate broker or agent who brings the buyer to purchase the property. “In subagency, the agent bringing the buyer is actually working for the seller as a subagent of the listing broker. This is important, as the agent working with the buyer actually owes fiduciary duties to the seller, not the buyer. “This practice is all but dead in most states, as buyer agency is becoming more common and because the buyers need an advocate to represent their interests in the transaction. Also, as the listing brokers and their seller clients are held responsible for the actions, errors and omissions of the subagent, this is not a desired situation in most of today’s real estate marketplace.” (http://realestate.about.com/od/sv/g/defsubagency.htm). Definition #3: “Subagency is a real estate term in the United States and Canada describing the relationship which a real estate broker and his/her agents have with a buyer of a business, home, or property. Lasting until the early 1990s, the broker provided a conventional full-service, commission-based brokerage relationship under a signed listing agreement only with a seller, thus creating an agency relationship with fiduciary obligations under common law in most of the US and Canada. The seller was then a client of the broker. “However, no such agency relationship existed with the buyer, and the broker’s agents helped the buyer (who was typically known as his or her “customer”). In this situation, during the entire period in which the buyer looked at properties, entered into a real estate contract, and finally closed on one, that broker/agent functioned solely as the sub-agent of the seller’s broker. “It was only with the advent of Buyer brokerage in the 1990s – the legal representation of a buyer by a broker – that a buyer became a client of the broker and entered into the same fiduciary relationship enjoyed by the seller.” (http://en.wikipedia.org/wiki/Sub-agent) Subagency Today The definitions above are a typical recitation of what traditional subagency was and how it worked. And in Arizona, as with other jurisdictions, the application of this form of subagency is largely dead. Nevertheless, Arizona’s MLSs continue to give an option for listing agents to authorize a co-broke fee for a “subagent.” However, the agency disclosure forms and personal services agreements provide no option to choose a subagency relationship. Few real estate instructors appear to have a genuine appreciation of the concept of subagency or its history. Most real estate licensees today have no practical grasp whatsoever of subagency. […]