Word of the day
A relationship that implies a position of trust and confidence wherein one person is usually entrusted to hold or manage property or money for another. The term fiduciary describes the faithful relationship owed by an attorney to a client or by a broker (and salesperson) to a principal. The fiduciary owes complete allegiance to the client. The fiduciary owes to a principal the duties of loyalty, obedience, and full disclosure; the duty to use skill, care, and diligence; and the duty to account for all monies. When an agent breaches any of these fiduciary duties, the principal can usually bring civil action for money damages, sue to impress a constructive trust upon any secret profit, or compel the agent to forfeit any compensation.
Because of the close personal relationship between broker (agent) and seller or buyer (principal), the broker often learns certain confidential information about the client and/or financial situation of the principal. In most states, this information cannot be disclosed by a broker, even after the transaction is completed and the fiduciary relationship terminated. One reason it is so difficult to represent both parties in a real estate transaction is the conflict of interest that arises for the broker, who has a duty to keep confidential that information learned from the principal and also a duty to disclose all pertinent information to the principal.
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