How can I keep the identity of my client a secret?

QUESTION: I am working with an out-of-state client who has for many years specialized in the business of manufacturing and delivering Christmas presents. His operation has recently come under an existential threat from a competitor that has been moving aggressively into the one-day delivery business, and he is looking to buy or lease warehouse space in a number of strategic locations to shore up the business’s unique but somewhat anachronistic, low-tech overnight delivery system. To say that the chief executive of this enterprise is well-known would be a large understatement, and it is important that his identity remain a secret during the process of negotiating any transactions. My question is, can I make offers in the name of my real estate company on my client’s behalf to protect his identity? If not, do you have any other ideas?

ANSWER: Yes, you can make offers in your real estate company’s name on behalf of your client, but there are ethical, practical, and legal issues to consider. First of all, Standard of Practice 3-7 of the REALTOR® Code of Ethics requires REALTORS® who are seeking information from another REALTOR® concerning a listing to disclose whether their interest is personal or on behalf of a client. You don’t have to disclose the identity of your client, but you do have to disclose that you are acting on someone else’s behalf, and once you’ve disclosed that you are representing a client who doesn’t want his identity revealed, from a practical perspective it could have obvious impact on whether and how the owner will negotiate. In addition, a legal issue to consider is that under agency law, an agent who enters into a contract on behalf of a principal whose identity is not disclosed can be considered a party to the contract and subject to liability for its nonperformance. Although the agent could seek to recover damages incurred by the agent from his or her principal, that’s a position most agents would want to avoid.

Another idea would be for your client to form an LLC or corporation through which you could make offers without revealing the identity of its owner. This can be done quickly and at relatively little expense, and although certain basic information about the entity would be available on the Secretary of State’s website, the ownership of the entity would not be a matter of public record. Your agency agreement should be between your firm and the new entity, and the chief executive could designate a trusted employee to sign offers on the entity’s behalf. Your client should be advised to consult with an attorney and a tax professional if this idea is considered.

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