Fiduciary duty refers to the legal and ethical obligation that certain individuals or organizations (often brokers, advisors, agents, or trust managers) have to act in the best interest of their clients or beneficiaries. The obligation can include managing assets, providing professional advice, disclosing relevant information, and generally conducting business in a way that prioritizes the client’s interest over their own.
There are several specific types of fiduciary duties, including:
- Duty of Care: This requires the fiduciary to exercise the level of care, diligence, and skill that a reasonably prudent person would under similar circumstances. In real estate investment, this may involve thoroughly researching properties, markets, and investment vehicles before making recommendations.
- Duty of Loyalty: This mandates the fiduciary to act solely in the interest of their client or beneficiary, avoiding conflicts of interest and not profiting from their position unless the client consents.
- Duty of Good Faith and Fair Dealing: The fiduciary is expected to act honestly and with the utmost good faith, including making all relevant disclosures and not misleading the client.
- Duty of Confidentiality: This compels the fiduciary to protect the client’s sensitive information unless the client has given permission or the law requires disclosure.
Failure to meet these duties can lead to legal consequences and damage the fiduciary’s professional reputation. It’s important to note that fiduciaries in real estate investment may have different obligations depending on the specifics of their role and their jurisdiction’s laws.