Maintaining Client File Confidentiality in the Real Estate Office

(Jeff Sorg – OnlineEd) – Oregon law requires that certain client information be maintained as confidential. The ability of associates in the same office or company to represent the seller and buyer in the same transaction as single agents with the full range of fiduciary obligations necessitates enhanced protection of client confidential information.

Every real estate office should clearly have policies and procedures in place that will fulfill the confidentiality requirements of both Oregon Revised Statutes and Oregon Administrative Rules. These confidentiality requirements can best be met by establishing two file systems:

  1. Client Files; and
  2. Transaction Files.

Client Files will start out as active and eventually become inactive. Generally, these files will contain such things as client contact information and profiles, financial information, a list of properties shown to the client and why they were liked or disliked, as well as other confidential client information.

Transaction Files contain all documents relating to the transaction itself. A single transaction file is necessary for each transaction reduced to writing – whether the transaction is accepted, rejected, expired, closed or failed to close.

The following are some of the more important issues that should be considered in developing file keeping procedures for client and transaction files:

  • The principal broker must maintain the active client files. If there is more than one principal broker in the office, then principal brokers should not have access to the active client files of any other principal broker.
  • Every principal broker should maintain active client file confidentiality by limiting access to the files and by providing secure locking storage facilities. If unlicensed personnel have access to the files to assist the principal broker in carrying out their duties, they should be instructed not to discuss the contents of the files with any other licensee, unless principal broker authorization is given.
  • Active client files should be maintained separately from inactive or closed transaction files. An active client file should be established once an agency relationship has been entered into with the client. All pertinent client information should be maintained in the active file.
  • The associate who established the agency relationship with the client may either maintain the active client files under the control of the principal broker or, with the principal broker’s permission, maintain a separate duplicate containing confidential information relating to the client or transaction. In either case, licensees in the office should not have access to the active client files of other licensees. If the licensee maintains the file, the licensee should ensure, at all times, that the files are secure and not available for examination by others in the office.
  • If there is any inadvertent or intentional violation of a client’s confidentiality by another licensee, this should be reported immediately to the principal broker and should be considered as grounds for licensee termination. In addition, the principal broker should immediately report the violation to the client. If the principal broker maintains the files in a central location, procedures should be in place to make sure that only the licensee who has the agency relationship with the client has access to the file.
  • All active client files should be marked or stamped Confidential.
  • The principal broker must maintain a secure file maintenance system for transaction files relating to the sale, purchase, lease option, or exchange of real property. These files are necessary for transactions that closed escrow and those that failed to close. Only licensees having an established agency relationship with the clients of a particular file should have access to that file. If unauthorized access does occur, the principal broker should be notified immediately. The principal broker has a duty to take disciplinary action, including termination of the offending licensee, and notify all clients who were subject to the unauthorized access.
  • Confidential client information should not be maintained in Transaction Files. Instead, all confidential client information should be maintained in Client Files. For storage purposes, both types of files are under the control of the principal broker. Most information provided by third parties to a transaction is not confidential information and should be filed in the Transaction File. All other information should be filed in the Client File.
  • Transaction and Client Files can be cross-referenced.
  • The preservation of client confidential information also means that discussion of any confidential client information with other licensees, office personnel, or third parties who should not have access to confidential client information is prohibited. Violations of this policy should be immediately reported to the principal broker for disciplinary action and immediate reporting to the clients who had their confidentiality violated.
  • All discussion concerning confidential information between agents and clients must be in an environment that allows for appropriate privacy. Conversations over speaker telephones, or with conference room or office doors open should not be permitted.
  • A system must be in place to protect the confidentiality of faxes and telephone messages. This means that confidential faxes should only be sent to a fax machine situated in a private environment.
  • The same office personnel or assistants cannot assist brokers who represent different clients to the same transaction.

The utmost care and attention should be given to make sure the fiduciary responsibility of confidentiality is preserved in real estate offices of all sizes. Clients and transactions can be damaged by the real estate broker’s failure to keep files and information confidential.

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For more information about OnlineEd and their education for real estate brokers, principal brokers, property managers, and mortgage brokers, visit www.OnlineEd.com.

  This article was updated on December 19, 2014. All information contained in this posting is deemed correct and current as of this date, but is not guaranteed by the author and may have been obtained by third-party sources. Due to the fluid nature of the subject matter, regulations, requirements and laws, prices and all other information may or may not be correct in the future and should be verified if cited, shared or otherwise republished.


Jeff Sorg

About the Author

Jeff Sorg is a co-founder of OnlineEd®, a Web-based vocational school founded in 1997 where he also serves as Corporate Secretary, Chief Operating Officer, and School Director. Sorg holds vocational instructor licenses in Oregon, Washington, California, and Nevada and has authored numerous pre-licensing and continuing education courses. Sorg was awarded the International Distance Education Certification Center's CDEi Designation for distance education in 2008. OnlineEd® provides real estate, mortgage broker, insurance, and contractor pre-license, post-license, continuing education, career enhancement, and professional development and designation courses over the Internet.