Fiduciary relationship

Key Takeaways

• A fiduciary relationship exists when one party places trust and confidence in another, and that party must then act with loyalty, good faith, and full disclosure for the first party's benefit.
• RCW 18.86.110 states that the duties in that chapter are statutory duties and not fiduciary duties, and that the chapter supersedes the fiduciary duties of an agent to a principal under the common law.
• The duties listed in RCW 18.86.030(1) are owed to the broker's principal and to all parties in the transaction, and they may not be waived.
• Washington did not abolish the common law. RCW 18.86.110 says the common law continues to apply to the parties in all other respects.

What It Means

A fiduciary relationship is one in which a person places trust and confidence in someone else, and that person must then act with loyalty, good faith, and full disclosure for the first person's benefit. Trustees, guardians, and attorneys work under that standard. Real estate Agency was built on it for most of the last century, and the concept is still taught because it explains why agency law exists at all.

The traditional model gave an agent broad authority to act on a principal's behalf and imposed an open-ended, high-trust obligation in return. It worked, but it left both sides arguing about where the line sat, since the standard came from case law rather than from a list anyone could read. Washington took a different road in 1996. A broker's obligations here now come from a statute that spells them out, which means a licensee can look them up instead of reasoning from doctrine.

The older idea still earns its place on the page. It is the baseline against which Washington's statutory duties are measured, and the vocabulary of trust, loyalty, and disclosure runs through the whole subject.

How It Works in Washington

In Washington a broker's obligations are statutory, not fiduciary, and the code says so directly. RCW 18.86.110 reads: The duties under this chapter are statutory duties and not fiduciary duties. This chapter supersedes the fiduciary duties of an agent to a principal under the common law. The common law continues to apply to the parties in all other respects. The change is targeted, not a wholesale rewrite of contract or tort law.

RCW 18.86.030(1) then lists what a broker owes their principal and all parties in a transaction, and states that those duties may not be waived: to exercise reasonable skill and care, to deal honestly and in good faith, to present all written offers, notices, and other written communications in a timely manner, to disclose all existing Material Fact items known to the broker and not apparent or readily ascertainable to a party, to account in a timely manner for all money and property received, to provide the pamphlet prescribed by RCW 18.86.120 and obtain an acknowledgment of receipt, and to make the written Agency Disclosure before the broker's principal signs an offer. RCW 18.86.030(2) balances the list: unless the parties agree otherwise, a broker owes no duty to inspect the property independently, to investigate a party's finances, or to verify a statement from a source reasonably believed to be reliable. License requirements sit with the Washington State Department of Licensing. The paperwork that now carries these duties is walked through in our guide to Washington's agency law and written services agreements, and the hardest version of the problem is covered in breaking down limited dual agency.

Example

Jenna represents Rick, who is selling a 1978 rambler in Spokane listed at $410,000. A neighbor mentions that the block flooded twice in the last five years. Under the old fiduciary model, Jenna would reason from loyalty and full disclosure about whether to speak up and to whom. Under RCW 18.86.030(1)(d) she does not have to reason about it: the flooding history is an existing material fact she knows and a buyer cannot readily see, so she discloses it to the buyer as well as to Rick, even though Rick is her principal. Rick asks her to keep it quiet and offers to sign something releasing her. That does not work, because RCW 18.86.030(1) says those duties may not be waived. The buyer reprices the offer to $392,000 and closes. Jenna's file holds the disclosure, the signed pamphlet acknowledgment required by RCW 18.86.030(1)(f), and the written agency disclosure required by RCW 18.86.030(1)(g), backed by her Written Services Agreement with Rick.

Common Mistakes and Exam Traps

• Washington brokers do not owe common-law fiduciary duties. RCW 18.86.110 says the duties in that chapter are statutory duties and not fiduciary duties.
• The statutory duties run to every party in the transaction, not only to the broker's own principal. An unrepresented buyer is still owed honesty, good faith, and disclosure of known material facts.
• The duties in RCW 18.86.030(1) cannot be waived, so a release clause in a services agreement does not remove them.
• Superseding the agent's fiduciary duties did not abolish the common law. RCW 18.86.110 says the common law continues to apply to the parties in all other respects.