Kentucky Agency Law: Complete Guide for the Real Estate Exam
Master Kentucky agency relationships, fiduciary duties, disclosure requirements, and dual agency rules for the PSI real estate sales associate exam.
Agency law is a major topic on both the national and Kentucky state sections of the PSI exam. Understanding Kentucky's specific agency framework, disclosure requirements, and dual agency rules is essential for passing the state section.
Agency Relationships in Kentucky
Seller's Agency Created by a listing agreement. The listing agent (Sales Associate affiliated with a broker) owes full fiduciary duties to the seller: loyalty, confidentiality, obedience, disclosure, accounting, and reasonable care.
Buyer's Agency Created by a written buyer agency agreement. The buyer's agent owes full fiduciary duties to the buyer.
Dual Agency When one licensee or brokerage represents both buyer and seller in the same transaction. In Kentucky: - Requires written informed consent from both parties - Agent cannot reveal one client's confidential information to the other - Agent's advocacy role is limited when serving as dual agent
Designated Agency One agent within the brokerage represents the buyer; another represents the seller. The managing broker may serve as the dual agent while designated agents provide full representation to their respective clients.
Agency Disclosure Requirements
Kentucky law requires licensees to disclose their agency relationship at first substantive contact with a consumer. The disclosure must:
- Be in writing
- Identify who the licensee represents
- Be provided before any confidential information is exchanged
- Be acknowledged by the consumer
Failure to make timely agency disclosure is a violation of KRS Chapter 324 and KREC regulations.
Duties to Clients vs. Customers
In Kentucky, the distinction between a client (represented party) and a customer (non-represented party) determines what duties the licensee owes.
| Duty | Client | Customer | |------|--------|----------| | Loyalty | Yes | No | | Confidentiality | Yes | No | | Full fiduciary | Yes | No | | Honest dealing | Yes | Yes | | Material defect disclosure | Yes | Yes | | Accounting | Yes | Yes |
Even without a representation agreement, licensees owe customers honesty and disclosure of known material property defects.
"Sales Associate" and Supervision
Kentucky uses the term Sales Associate for entry-level licensees. A Sales Associate must work under the supervision of a licensed Principal Broker or Associate Broker. The supervising broker is responsible for the Sales Associate's conduct and is vicariously liable for many licensee violations.
Common Exam Scenarios
Scenario: A Kentucky Sales Associate shows a buyer a home. The buyer asks if the Sales Associate can represent them. The Sales Associate hasn't signed an agency agreement yet. What is the current relationship?
Answer: The buyer is a customer (non-represented party). No agency exists until a written buyer agency agreement is signed.
Scenario: A listing agent learns from the seller that they'll accept $20,000 below asking price. The buyer's agent asks the listing agent what the seller's bottom line is. Should the listing agent disclose this?
Answer: No — this is confidential seller information protected by the duty of loyalty and confidentiality. The listing agent cannot share the seller's bottom line with the buyer's agent.
Scenario: A Kentucky brokerage is representing both the buyer and seller in the same transaction. One agent represents the buyer, another represents the seller. Both clients have consented in writing. What type of agency is this?
Answer: Designated agency. Each client receives full representation from their designated agent, while the managing broker holds dual agent status.
Practice Kentucky agency questions at [CARealestate.com/states/kentucky](https://carealestate.com/states/kentucky).
Ready to test your knowledge?
Start with 5 free CA real estate exam questions — no signup required.
Take the Free Quiz →