Industry Standards & Ethical Practices Flashcards

CRECI standards require that a commercial professional disclose a personal financial interest in a property they are recommending to a client:

Answer: Always, before the client makes any decision based on the recommendation

Any personal financial interest in a recommended property must be disclosed immediately and fully before the client relies on the professional's recommendation.

The ethical principle that prohibits a commercial broker from acquiring property listed by their firm without client knowledge and consent is rooted in the duty of:

Answer: Loyalty — specifically the prohibition on self-dealing

Self-dealing — purchasing a client's listed property for personal gain without full disclosure — violates the duty of loyalty because the broker's interests conflict with the client's.

Which of the following actions by a commercial broker would constitute misrepresentation rather than mere puffery?

Answer: Stating that the building's HVAC system was replaced in 2020 when it was replaced in 2015

Stating a specific, verifiable false fact (HVAC replacement year) is misrepresentation, while vague superlatives about investment quality or location are puffery.

Under the ethical standards applicable to CRECI professionals, commingling refers to:

Answer: Improperly mixing client trust funds with the broker's personal or operating funds

Commingling — mixing client escrow funds with the broker's own funds — is an ethical violation and frequently a basis for license revocation.

A tenant-rep broker negotiating a lease for a client discovers that the landlord's building has an unresolved ADA compliance issue. The broker's ethical obligation is to:

Answer: Inform the tenant-client so they can factor it into their decision

The tenant-rep broker must inform their client of the ADA issue because it is a material fact that could affect the client's occupancy, liability exposure, and negotiation position.

Under CRECI ethical guidelines, a commercial professional who receives a subpoena for client records should:

Answer: Notify the client and seek legal counsel before producing records

Upon receiving a subpoena, the professional should notify the client and consult legal counsel; compliance with valid legal process may ultimately be required but should not occur blindly.

A commercial broker who earns compensation from both the buyer and the seller in the same transaction without disclosing this arrangement to both parties is:

Answer: Violating the ethical duty of disclosure and potentially committing fraud

Receiving undisclosed compensation from both sides of a transaction violates the duty of disclosure and may constitute fraudulent concealment of a material conflict of interest.