Tip of the Month - April, 2021

Scope of Agency Authority

Source: Property Management & Managing Risk
 By: Robert C. Kyle & Floyd M. Baird, RPA/SMA

An Agent is either a general agent or a special agent, depending on the scope of the agent’s authority.  A general agent can act on behalf of the principal on a range of matters and can obligate the principal to any contracts signed by the agent that are within the scope of the agent’s duties.  On the other hand, a special agent is only authorized to represent the principal on a specific matter or transaction. Once that transaction is concluded, the agency is terminated.  A special agent has no authority to sign any contracts on behalf of the principal.  A property manager is usually a general agent, because of the variety of tasks to be performed.

Fiduciary Duties: An agent, whether specific or general, has certain duties that are imposed by agency law.  This is because an agent has a fiduciary relationship with his or her principal.  A fiduciary relationship is a confidential relationship that requires the highest degree of loyalty on the part of the agent.  Implicit in this fiduciary relationship are other duties as well.

Loyalty: the property manager must always put the property owner’s interest first, above his or her own interests.

Care: the property manager must exercise a reasonable degree of skill while managing the property.

Obedience: the property manager must carry out the property owner’s instructions. (If an owner demands that the property manager do something illegal or unethical, immediately terminate the relationship).

Accounting: the property manager must accurately report on the status of all funds received on behalf of or from the owner. Do not commingle funds. Commingling involves combining the owner’s funds with the property manager’s business or personal funds.

Disclosure: the property manager must keep the owner fully informed of all material facts regarding the management of the property.

If the property manager is careless in carrying out his or her duties, the property manager could be found negligent and be liable to the property owner for any damages.

This web page was updated on 03/29/2021.