Chapter 2 of 524% of exam

New York License Law and Agency

This chapter covers New York's license law under Article 12-A of the Real Property Law, the agency relationships salespersons form, mandatory agency disclosure, and fair housing obligations. Agency is the single most heavily tested area, so learn the fiduciary duties and disclosure timing thoroughly. Because the Department of State periodically updates rules, forms, and protected classes, always verify current requirements.

Licensing Under Article 12-A

The New York Department of State (DOS), through its Division of Licensing Services, licenses and regulates real estate brokers and salespersons under Article 12-A of the Real Property Law. A salesperson works under a sponsoring broker and cannot act independently. Specific education, exam, and fee requirements can change over time.

The DOS administers real estate licensing
It issues licenses, sets standards, and disciplines licensees under Article 12-A.
A salesperson must have a sponsoring broker
The broker supervises the salesperson, who cannot operate on their own.
Salespersons are paid only by their broker
Accepting compensation directly from a buyer or seller is prohibited.
Requirements can change
Confirm current education, renewal, and continuing education rules with the DOS.

Agency Relationships and Fiduciary Duties

An agency relationship forms when a principal authorizes an agent to act on their behalf. The agent owes fiduciary duties to the principal while still dealing honestly with third parties. The acronym OLD CAR captures the core duties.

Obedience to lawful instructions
The agent must follow the principal's lawful directions and refuse illegal ones.
Loyalty places the principal first
The agent must put the client's interests above the agent's own.
Disclosure of material facts
The agent must share information relevant to the principal's decisions.
Confidentiality survives the relationship
The agent must protect the principal's private information even after it ends.
Accountability and reasonable care
The agent must account for funds and documents and act with competence and diligence.

Agency Disclosure and Dual Agency

New York requires licensees to disclose whom they represent so consumers can make informed decisions. The statutory agency disclosure form is presented early in the relationship. Dual agency and designated agency address situations where one firm is involved with both sides.

Provide the disclosure form at first substantive contact
This lets consumers understand representation before sharing confidential information.
Dual agency requires informed written consent
One broker representing both buyer and seller must have both parties' agreement.
Designated agents advocate for each side
A supervising broker may appoint separate agents for buyer and seller with written consent.
Buyer agency represents the buyer's interests
It is typically created through a written buyer-broker agreement.

Handling Client Funds and Prohibited Conduct

Brokers frequently hold money that belongs to others, such as earnest money deposits, and must handle it with strict care. Article 12-A and DOS regulations prohibit conduct that harms consumers or the profession's integrity.

Client funds go in a separate escrow account
Deposits must be kept apart from the broker's own money.
Commingling is prohibited
Mixing client funds with the broker's personal or business funds violates license law.
Conversion is a serious offense
Using client funds for personal purposes can lead to license revocation.
Misrepresentation and fraud are forbidden
Puffing is lawful opinion, but false statements of material fact are not.

Fair Housing Obligations

Federal, state, and local fair housing laws prohibit discrimination in housing. The federal Fair Housing Act protects seven classes, and New York State and localities add more. Agents must provide equal service and avoid illegal practices.

Federal law protects seven classes
Race, color, religion, national origin, sex, disability, and familial status are protected.
New York adds protected classes
State law includes age, marital status, sexual orientation, gender identity, and more; verify the current list.
Steering is illegal
Directing buyers to or from areas based on protected class violates the law.
Blockbusting is illegal
Inducing sales by exploiting fears about changing neighborhood demographics is prohibited.
Redlining is illegal
Denying loans or services in certain areas based on protected characteristics is banned.
Test your knowledge
Practice questions on New York License Law and Agency
Practice now →
← Previous
Principles of Real Estate
Next →
Real Estate Contracts

Last updated: July 2026

Report