Tennessee Agency Law


A real estate licensee may provide real estate services to any party in a prospective transaction, with or without an agency relationship to one or more parties to the transaction. Until such time as a licensee enters into a specific written agreement to establish an agency relationship with one or more parties to a transaction, such licensee shall be considered a facilitator and shall not be considered an agent or advocate of any party to the transaction. An agency or subagency relationship shall not be assumed, implied or created without a written bilateral agreement that establishes the terms and conditions of such agency or subagency relationship.

Limited Agency ( 62-13-402 )

(a) If a real estate licensee is engaged as an agent, such real estate licensee serves as a limited agent retained to provide real estate services to a client. Such licensee shall function as an intermediary in negotiations between the parties to a transaction unless such parties negotiate directly.

b) A real estate licensee shall owe all parties to a transaction the duties enumerated in TCA 62-13-403. A licensee shall owe to such licensee's client the duties enumerated in TCA 62-13-404.

(c) Notwithstanding any provision of law to the contrary, the duties enumerated in TCA 62-13-403 and TCA 62-13-404 shall supersede any fiduciary or common law duties owed by a licensee to such licensee's client on January 1, 1996.

Duty owed to all parties ( TCA 62-13-403 )

"A licensee who provides real estate services in a real estate transaction shall owe all parties to such transaction the following duties, except as provided otherwise by TCA 62-13-405, in addition to other duties specifically set forth in the official manual of the Tennessee Real Estate Commission or the rules of the commission:

1. Diligently exercise reasonable skill and care in providing services to all parties to the transaction.

2. Disclose to each party to the transaction any adverse facts of which licensee has actual notice or knowledge.

3. Maintain for each party to a transaction the confidentiality of any information obtained by a licensee prior to disclosure to all parties of a written agency or subagency agreement entered into by the licensee to represent either or both of the parties in a transaction. This duty of confidentiality extends to any information which the party would reasonably expect to be held in confidence, except for information which the party has authorized for disclosure, information required to be disclosed under this part, and information otherwise required to be disclosed pursuant to this chapter. This duty survives both the subsequent establishment of an agency relationship and the closing of the transaction.

4. Provide services to each party to the transaction with honesty and good faith.

5. Disclose to each party to the transaction timely and accurate information regarding market conditions that might affect such transaction only when such information is available through public records and when such information is requested by a party.

6. Timely account for trust fund deposits and all other property received from any party to the transaction.

7. (a) Not engage in self-dealing nor act on behalf of licensee's immediate family, or on behalf of any other individual, organization, or business entity in which the licensee has a personal interest without prior disclosure of such interest and the timely written consent of all parties to the transaction.

(b) Not recommend to any party to the transaction the use of services of another individual, organization or business entity in which the licensee has an interest or from whom the licensee may receive a referral fee or other compensation for the referral, other than referrals to other licensees to provide real estate services under the Tennessee Real Estate Broker License Act of 1973, without timely disclosing to the party who receives the referral, the licensee's interest in such referral or the fact that a referral fee may be received.

Duty owed to licensee's client ( TCA 62-13-404 )

Any licensee who acts as an agent in a transaction regulated by the Tennessee Real Estate Broker License Act of 1973 owes to such licensee's client in that transaction the following duties, to:

1. Obey all lawful instructions of the client when such instructions are within the scope of the agency agreement between licensee and licensee's client.

2. Be loyal to the interests of the client. A licensee must place the interests of the client before all others in negotiation of a transaction and in other activities, except where such loyalty duty would violate licensee's duties to a customer under TCA 62-13-402 or a licensee's duties to another client in a dual agency.


(a) If a licensee personally assists a prospective buyer or seller in the purchase or sale of a property, and such buyer or seller is not represented by this or any other licensee, the licensee shall verbally disclose to such buyer or seller the licensee's facilitator, agent, subagent or designated agent status in the transaction before any real estate services are provided. Known adverse facts about a property must also be disclosed under the Tennessee Residential Property Disclosure Act, title 66, chapter 5, part 2, but licensees shall not be obligated to discover or disclose latent defects in a property or to advise on matters outside the scope of their real estate license.

(b) The disclosure of agency status pursuant to subsection (a) must be confirmed in writing with an unrepresented buyer prior to the preparation of an offer to purchase. The above disclosure of agency status must be confirmed in writing with an unrepresented seller prior to execution of a listing agreement or presentation of an offer to purchase, whichever comes first. Following delivery of the written disclosure, the licensee shall obtain a signed receipt for such disclosure from the party to whom it was provided.

(c) The disclosure of agency or facilitator status, as provided in subdivision (a), shall not be construed as, or be considered a substitute for, a written agreement to establish an agency relationship between the broker and a party to a transaction as referenced in TCA 62-13-406.

(d) Upon initial contact with any other licensee involved in the same prospective transaction, the licensee shall immediately disclose such licensee's role in the transaction, including any agency relationship, to this other licensee. If the licensee's role changes at any subsequent date, such licensee shall immediately notify any other licensees and any parties to the transaction relative to such change in status.

(e) Real estate transactions involving the transfer or lease of commercial properties, the transfer of property by public auction, the transfer of residential properties of more than four units, or the lease or rental of residential properties shall not be subject to the disclosure requirements of TCA 62-13-403, 62-13-404 and this section.

Designated Agency – Managing Broker ( 62-13-406 )

(a) A licensee entering into a written agreement to represent any party in the buying, selling, exchanging, renting or leasing of real estate, may be appointed as the designated and individual agent of this party by the licensee's managing broker, to the exclusion of all other licensees employed by or affiliated with such managing broker. A managing broker providing services under the provisions of the Tennessee Real Estate Broker License Act of 1973, shall not be considered a dual agent if any individual licensee so appointed as designated agent in a transaction, by specific appointment or by written company policy, does not represent interests of any other party to the same transaction.

(b) The use of designated agency does not abolish or diminish the managing broker's contractual rights to any listing or advertising agreement between the firm and a property owner, nor does this section lessen the managing broker's responsibilities to ensure that all licensees affiliated with or employed by such broker conduct business in accordance with appropriate laws, rules and regulations.

(c) There shall be no imputation of knowledge or information among or between clients, managing broker and any designated agent(s) in a designated agency situation.

Liability ( 62-13-407)

A client or other party to whom a real estate licensee provides services as an agent, subagent or facilitator shall not be liable for damages for the misrepresentations of the licensee arising out of such licensee's services, unless the client or party knew, or had reason to know, of the misrepresentation.

This section shall not limit the liability of a licensee's managing broker for the misrepresentations of the managing broker's licensees.

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