Fiduciary Duties, Self-Dealing and Misrepresentation

The safest exam method is to identify the client first, then ask what the agent knew, what interest or fact should have been disclosed, what the agent said or did, and whether the action served the client or the agent.

The six fiduciary duties

Real Property Law section 443 prints these duties in New York's residential agency-disclosure forms. The agreement may add specific obligations, but it cannot authorize unlawful conduct.

Official source map

The Department of State's 77-hour curriculum includes fiduciary duties, confidentiality, informed consent, undisclosed dual agency, property interests, compensation and misrepresentation. Real Property Law section 443 states the duties to residential clients and the honest, fair, careful and good-faith duties owed when dealing with the other side.

The March 2026 Department license-law compilation contains the current rules on client funds, accounting, management profits, broker interests, compensation, owner authorization, net listings, supervision, records and advertising. New York's official court reports explain loyalty, adverse interests, commission forfeiture and the faithless-agent rule. These sources were checked on August 27, 2026.

Reasonable care

Reasonable care means doing the authorized work competently. It includes reading documents, communicating accurately, meeting deadlines, presenting material information, using reliable sources and recognizing when a lawyer, inspector, appraiser, tax adviser or lender should answer the question.

A licensee should not turn uncertainty into a confident answer. If the zoning classification, tax amount, flood status or building approval has not been verified, say what source was checked and what remains unknown.

Reasonable care does not make the agent a property-condition insurer. It does require the agent to avoid careless factual claims and to disclose facts the law requires.

Undivided loyalty

Loyalty requires the agent to act in the client's best interests within the lawful scope of the agency. A broker may not quietly improve the broker's position at the client's expense.

Loyalty problems include:

• representing conflicting interests without required informed consent
• steering the client toward the agent's own property or investment
• taking a secret profit
• favoring an offer because it produces a personal benefit
• withholding a material conflict
• using confidential information against the client
• frustrating a transaction to improve compensation

New York courts describe the broker as a fiduciary with a duty of loyalty and an obligation to act in the principal's best interests. A serious loyalty breach can forfeit the broker's commission even without proof of separate damages.

Confidentiality

Confidentiality protects information obtained through the agency that the client has not authorized the agent to disclose and that the law does not require to be revealed.

Examples include a client's:

• maximum purchase price
• minimum acceptable sale price
• urgency or personal motivation
• preferred negotiation sequence
• private financial information
• willingness to change a nonpublic term

Confidentiality is not permission to lie. A seller's agent cannot invent a competing offer, deny a known material fact or conceal information that lawfully must be disclosed. The correct response is to protect the client's confidential strategy while communicating truthfully.

Full disclosure

Full disclosure to the client covers material information affecting the agency and the client's decision. Conflicts require especially clear treatment.

An agent should disclose:

• a personal ownership or financial interest
• a close relationship that could affect judgment
• proposed representation of both sides
• compensation from more than one party
• facts known to the agent that materially affect the client
• an error or unauthorized act by the agent

Disclosure must be timely enough to let the client make an informed choice. Revealing the conflict after the client is committed does not provide the same protection.

Obedience applies only to lawful instructions

The agent follows lawful instructions within the granted authority. The agent does not obey an instruction to discriminate, conceal a required fact, misstate a property's condition, mishandle trust money or practice law without authority.

If a seller says, “Do not show the home to families with children,” the agent must refuse. Obedience never overrides fair housing law.

The agent also cannot exceed authority in the name of loyalty. Wanting a good result for the client does not permit changing price, signing for the client or accepting an offer without authority.

Duty to account

The agent must safeguard and accurately report money and property handled for the client.

Title 19 NYCRR section 175.1 prohibits commingling principal money with the broker's own funds and requires the separate special bank-account treatment stated in the rule. Section 175.2 requires the broker, within a reasonable time, to render an account and remit client money collected and unexpended for the client's account.

Accounting also includes clear records for deposits, keys, documents, repair funds and other entrusted property. A licensee may not borrow, hide or redirect client funds.

Self-dealing

Self-dealing occurs when the agent participates for a personal interest that conflicts with the duty to the client. It is not limited to buying the client's property. It includes indirect interests, relatives, controlled entities, referral benefits and hidden profits.

Buying property listed with the broker

Section 175.4 says a broker may not directly or indirectly buy property listed with the broker or acquire an interest without first making the broker's true position clearly known to the listing owner.

The words “directly or indirectly” matter. Using an LLC, relative or partner does not remove the conflict.

Buying for a client when the broker has an ownership interest

Section 175.5 requires the broker to disclose that interest to all parties before buying the property for a client.

Selling property in which the broker has an interest

Section 175.6 requires the broker to make the interest known to the purchaser before the sale.

Disclosure is not a casual hint. It should identify the true position clearly enough for the affected person to evaluate the conflict and obtain independent advice.

Secret compensation and management profits

Section 175.7 requires a broker to make clear for which party the broker is acting. A broker may not receive compensation from more than one party without the broker client's full knowledge and consent.

In property management, section 175.3 prohibits a broker from accepting a commission, rebate or profit on client expenditures without the client's full knowledge and consent. A hidden vendor markup or undisclosed rebate is therefore a loyalty and regulatory problem.

Compensation does not by itself decide agency. The exam asks separately who the broker represents and whether the additional payment was disclosed and consented to.

Net listings are prohibited

A net listing promises the seller a specified net amount and allows the broker to keep the difference between that amount and the sale price. Section 175.19 prohibits brokers from entering a net listing contract.

The problem is structural: the broker's compensation grows by creating the largest possible spread, which invites a conflict with the duty to obtain and communicate the best lawful result for the seller.

Misrepresentation

Misrepresentation can arise from an affirmative false statement, a half-truth, a misleading omission or conduct that creates a false impression. For exam purposes, a material fact is one that could reasonably affect the party's decision, value assessment or ability to perform.

Examples include:

• stating that a roof is new without support
• advertising an unapproved bedroom as lawful
• claiming an offer exists when it does not
• changing an answer about flood history
• hiding the agent's ownership interest
• stating that financing is approved when only a preliminary discussion occurred
• using edited images or descriptions to create a materially false impression

The agent should distinguish verified fact, client-provided information, professional opinion and estimate. Attribution is useful, but repeating a claim known to be false is not cured by saying the seller supplied it.

Duties to the customer still matter

A seller's agent does not owe the buyer undivided loyalty, but section 443's form says the seller's agent should exercise reasonable skill and care, deal honestly, fairly and in good faith, and disclose known facts materially affecting the property's value or desirability except as otherwise provided by law.

The buyer's agent has corresponding duties when dealing with the seller, including honest, fair and good-faith conduct and disclosure of facts about the buyer's ability or willingness to perform that are not inconsistent with fiduciary duties to the buyer.

The next article examines client and customer duties in depth. The immediate lesson is that “not my client” never means “I may mislead this person.”

Material defects and confidential motivations are different

Avoid treating every fact as confidential merely because disclosure could weaken the client's position.

• A seller's minimum price is usually confidential negotiation information.
• A known fact materially affecting property value or desirability may trigger a disclosure duty, subject to law.
• A client's protected characteristic or discriminatory preference is not a lawful basis for service.
• A stigmatized-property question follows New York's specific statutory rules, not a general instruction to reveal everything.

When the categories conflict, stop and obtain broker and legal guidance. A salesperson should not invent a disclosure rule at the property.

Advertising can misrepresent too

Title 19 NYCRR section 175.25 requires brokerage advertising to be properly authorized, accurately identify the brokerage and license type, and comply with detailed content rules. Digital posts, emails, signs and business cards can all qualify as advertising.

A misleading ad can create consumer harm before any conversation occurs. Verify price, status, property features, photos, license titles and required brokerage identification before publication. A salesperson or team advertises listed property only through the associated broker's authority and approval.

Consequences

A breach can create more than one consequence:

• loss or forfeiture of commission
• Department discipline under Article 12-A
• damages or another civil remedy
• termination of the agency or brokerage agreement
• return of money or secret profit
• reputational and transaction harm

The consequence depends on the duty, agreement, intent, harm and governing law. Resist the urge to assume every error produces every remedy. Also avoid assuming the absence of monetary damages saves a disloyal broker's commission.

A five-step exam method

1. Identify the client and agent.
2. Name the duty involved.
3. Find the conflict, false statement, omission or mishandled property.
4. Ask what disclosure, consent, verification or refusal was required.
5. Separate civil, contractual and licensing consequences.

Worked scenarios

Scenario 1: seller's bargaining limit

A seller privately tells the listing agent that $700,000 is the minimum acceptable price. The agent tells a buyer without permission.

The agent has disclosed confidential negotiation information and breached the duty owed to the seller.

Scenario 2: unlawful instruction

A landlord directs the agent to reject applicants because of a protected characteristic.

The agent must refuse. Obedience applies only to lawful instructions.

Scenario 3: broker buys through an LLC

A broker secretly controls an LLC that offers on the broker's listing.

The indirect structure does not remove the conflict. The broker must clearly disclose the true position before acquiring the interest.

Scenario 4: undisclosed vendor rebate

A property manager selects a repair company that returns part of the invoice to the manager. The owner does not know.

The hidden benefit violates the management-profit rule and loyalty duty.

Scenario 5: invented competing offer

A salesperson tells a buyer that another offer has been received to force a higher bid, although no other offer exists.

That is a material misrepresentation, not negotiation strategy.

Scenario 6: second payment

A seller's broker accepts money from the buyer without the seller client's full knowledge and consent.

Section 175.7 prohibits compensation from more than one party without the required client knowledge and consent.

Scenario 7: personal property sale

A broker markets a property the broker owns but does not tell the buyer.

Section 175.6 requires disclosure of the broker's ownership interest to the purchaser.

Scenario 8: unverified square footage

A licensee copies a square-foot figure from an old advertisement and presents it as verified.

The licensee should identify the source, verify when appropriate and avoid converting uncertain data into a factual claim.

Common misconceptions

“Loyalty means doing whatever the client asks”

No. Duties operate within law and actual authority.

“Disclosure cures every conflict”

No. Some conduct also requires informed consent, and some arrangements, including net listings, are prohibited.

“Only a direct purchase is self-dealing”

No. Section 175.4 expressly covers direct and indirect interests.

“No damages means the broker keeps the commission”

Not necessarily. New York cases recognize commission forfeiture for a loyalty breach without proof of damages.

“Confidentiality allows a licensee to lie”

No. Protect confidential information without making a false statement.

“A customer is owed no duties”

No. Honest, fair, careful and good-faith dealing still applies, along with required material disclosures.

Frequently asked questions

What fiduciary duties does a New York real estate agent owe?

Reasonable care, undivided loyalty, confidentiality, full disclosure, obedience and a duty to account.

What is self-dealing in real estate?

It is conduct in which the agent's personal interest conflicts with the client's interest, such as a hidden purchase, ownership interest, secret profit or compensation arrangement.

Can a New York broker buy the broker's own listing?

The broker may not directly or indirectly buy or acquire an interest without first making the broker's true position clearly known to the listing owner.

Can a broker receive compensation from both sides?

Section 175.7 allows compensation from more than one party only with the broker client's full knowledge and consent. Representation and dual-agency consent must also satisfy their own rules.

Are net listings legal in New York?

No. Title 19 NYCRR section 175.19 prohibits brokers from making or entering net listing contracts.

What is a material misrepresentation?

It is a false or misleading statement, omission or act concerning a fact important enough to affect a reasonable transaction decision.

Must an agent obey an instruction to conceal a defect?

No. Obedience covers lawful instructions. The licensee must follow New York disclosure law, protect lawful confidences and avoid false statements.

Can a broker lose a commission for breaching loyalty?

Yes. New York courts recognize forfeiture of commission for a broker's breach of undivided loyalty, even when separate damages are not shown.

What to study next

Review actual, apparent and unauthorized authority, then study client duties versus customer duties. Use the Law of Agency study guide for complete lessons and practice.

Sources and verification notes

This article was checked on August 27, 2026. It explains current New York exam principles and licensee duties. Actual disclosure, commission and liability disputes depend on the agreement and complete facts and require legal advice.

1. New York State Department of State, 77-Hour Real Estate Salesperson Curriculum. Fiduciary duties, confidentiality, conflicts, compensation, property interests and misrepresentation objectives.
2. New York Real Property Law section 443. Client fiduciary duties, customer-facing duties, residential disclosures and dual-agency consent.
3. New York State Department of State, Real Estate License Law, March 2026. Current regulations 175.1 through 175.7, 175.19, 175.21, 175.23 and 175.25.
4. G.K. Alan Associates, Inc. v Lazzari, 2007 NY Slip Op 06019. Duty of loyalty, adverse interests, undisclosed conflicts and the faithless-agent rule.
5. Douglas Elliman LLC v Tretter, 2011 NY Slip Op 03713. Undivided loyalty, dual-agency analysis and commission forfeiture without proof of damages.
6. Worldnet Real Estate, Inc. v Suchow, 2005 NY Slip Op 05494. Broker's best-interest duty and commission issues following alleged disloyal conduct and termination.

This article provides general educational information. It is not legal advice.