Broker Granted Second Chance to Show Full Consent to Dual Agency

On July 7, 2023, the D.C. Circuit Court of Appeals vacated an order granting summary judgment in favor of a landlord who was sued by a brokerage firm over an unpaid commission from an executed commercial lease.  The D.C. Circuit held that compliance with formatting specifications set forth in a dual agency disclosure statute was not mandatory in order to prove a client consented to dual agency.  

In June 2016, a landowner (“Landlord”) executed a broker agreement with a brokerage firm (“Broker”) to find a tenant for Landlord’s commercial property in Washington, D.C. The contract promised Broker a commission based on the lease’s value. 

Broker secured a prospective Tenant, and a cooperating broker also employed by Broker represented the prospective Tenant in the transaction.  Broker thus acted in a dual capacity representing both Landlord and Tenant when the parties entered the lease. The brokerage agreement between Landlord and Broker included a form disclosing that Broker would act as a dual agent for the transaction that substantially mirrored the Washington D.C. Brokerage Act’s model form, but the spaces on the form for the client and broker’s names and the signature lines for both parties were left blank.   

Section 42-1703(i) of Washington D.C.’s Brokerage Act authorizes dual representation in a transaction if the dual agency is disclosed in writing and only with the written consent of all clients to the transaction. The section explains that written consent and disclosure is “presumed” if the disclosure complies in effect with the model disclosure form included in the statute. Additionally, the statute permits a broker to provide a client with the model disclosure in combination with other disclosures or information as long as the disclosure is “conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box.” 

§ 42-1703(i). Disclosed dual or designated representation authorized. —

(1) A licensee may act as a dual representative only with the written consent of all clients to the transaction. Such written consent and disclosure of the brokerage relationship as required by this section shall be presumed to have been given as against any client who signs a disclosure as provided in this section.

(2) Such disclosure may be given in combination with other disclosures or provided with other information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following shall be deemed in compliance with this disclosure requirement. D.C. Code Ann. § 42-1703(i).

Despite the incompleteness of the model form included among the materials in the brokerage agreement between Broker and Landlord, the 12-year lease agreement executed by Landlord and Tenant contained a provision memorializing Broker’s representation as a dual agent and each party’s consent and authorization to the dual agency. The provision also stated that any potential conflict of interest claims would be waived. 

Following execution of the lease agreement, Landlord failed to pay Broker the $750,000 commission pursuant to the brokerage agreement. Broker filed a one-count lawsuit in the U.S. District Court for the District of Columbia against Landlord alleging breach of the brokerage contract to recover the commission. The Landlord moved for summary judgment, arguing that Broker was not entitled to the commission due to its failure to adhere to the required formatting specifications of the model dual agency disclosure form set out in D.C. code Section 42-1703(i)(2) in violation of the Brokerage Act.

Landlord pointed out how the provisions referencing dual agency in the 12-year lease agreement did not adhere to Section 42-1703’s dual agency disclosure formatting requirements (“conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box”) when provided with other information.  Landlord also argued how the spaces for the parties’ names and signatures remained blank in the disclosure and consent form included with the brokerage agreement. The D.C. District Court agreed and granted summary judgment to Landlord, finding Broker failed to provide the necessary disclosures for a dual representative as required by the Brokerage Act. In relieving Landlord of having to pay the commission, the court highlighted how the statute’s detailed provisions reflected the lawmakers’ intent to guard against fraud and deception. 

Broker appealed, and the D.C. Court of Appeals reversed the D.C. District Court’s decision awarding judgment to Landlord, concluding that strict adherence to the formatting specifications of Section 42-1703(i) when disclosing dual agency is not required to fulfill the requirements of the Brokerage Act. Instead, the court held that strictly following the whole of Section 42-1703(i) only triggers a presumption of written disclosure and consent to dual agency when the model form is utilized and signed according to the section’s specifications. The court reasoned that the term “presumed” in section (1) applied to the particularized disclosure specifications, and when followed, only triggers the presumption of consent and disclosure as more broadly required by the Brokerage Act. The court held that even without the benefit of that presumption, a broker can prove compliance through other avenues. 

In its order vacating the summary judgment and remanding the case back to the district court, the D.C. Circuit explained that despite failing to adhere to Section 42-1703(i)’s formatting specifications, Broker will have the opportunity to prove entitlement to the commission by showing whether it fulfilled the Brokerage Act’s requirements of obtaining truly informed consent following full disclosure of the dual nature of the relationship. 

Jones Lang LaSalle Brokerage, Inc. v. 1441 L Assocs., LLC, 72 F.4th 353 (D.C. Cir. 2023).