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Brokerage Standards Manual

Managing Broker Duties

2. Supervision

(b) Supervision under Designated Agency

In designated agency, the brokerage and its clients agree that one or more licensees engaged by the brokerage will be designated to act as sole agents on behalf of each client. In this agency model, it is the designated agents who have the primary agency duties of undivided loyalty, obedience, and confidentiality to their client (see section 3-3 of the Rules). When compared to brokerage agency where all licensees engaged by a brokerage assume the agency obligations of the brokerage in relation to each of its clients, designated agency allows for clients to continue receiving full representation in in-house transactions where different designated agents separately represent their respective clients. Under brokerage agency, this transaction typically becomes one where the brokerage and its related licensees become limited dual agents, with the consent of the clients, and the clients’ interests are treated impartially.

In designated agency the brokerage’s responsibilities are to:

  1. supervise the designated agents to ensure they fulfill their duties to their clients
  2. not disclose any confidential information concerning any of the clients to any person unless authorized by the client, or required by law,
  3. treat the interests of the clients in an even handed, objective and impartial manner, and
  4. establish the information barriers necessary with respect to keeping client information confidential – see ‘Protection of Client Information under Designated Agency’ below.

It is the responsibility of the managing broker to ensure the brokerage remains neutral throughout any transactions where two or more clients have competing interests. The managing broker needs to provide even-handed supervision of the designated agents. This applies to transactions where designated agents engaged by the brokerage represent:

  1. a seller and a buyer negotiating in relation to the same trade in real estate,
  2. two or more buyers interested in purchasing the same property. or
  3. two or more sellers offering their property for sale

If a designated agent engaged by the brokerage asks the managing broker for assistance with respect to a specific Contract of Purchase and Sale, it would be advisable for the managing broker to review the contract and go through a set of standard questions. A brokerage may develop a “due diligence” checklist and provide it to all licensees engaged by the brokerage to guide them when representing sellers or buyers. The managing broker could refer to this checklist and ask the appropriate questions to ensure the designated agent has addressed all the issues that need to be addressed. In addition, the managing broker may direct the designated agent(s) to reference information such as the Professional Standards Manual, the Brokerage Standards Manual, the brokerage’s own policy and procedures manual, or any checklists the brokerage may have for writing offers or counter offers.

The managing broker may also provide information or advice on issues of mutual interest to both clients. For example, upon reviewing the Contract of Purchase and Sale, the managing broker may notice it does not address the issue of financing when it is clear the buyer will need to obtain a mortgage to complete the transaction. The managing broker can draw this deficiency to the attention of the designated agent representing the buyer and provide advice that a condition related to financing be included in the contract. The managing broker must disclose the fact such advice was provided to the designated agent representing the seller. The managing broker must not provide confidential advice to either designated agent because that would undermine the impartiality of the brokerage’s role.

Without giving advice to either designated agent, the managing broker can also give general information and provide alternatives to address issues that have been brought to their attention. For example, the managing broker can explain to a designated agent the difference between a term and condition in the contract.

A  managing broker may be given a set of facts related to a specific transaction and be asked whether a particular clause drafted by the designated agent properly addresses the issue they are trying to address in the Contract of Purchase and Sale. Again, the managing broker can assist with the drafting of a clause in the Contract of Purchase and Sale to achieve the desired intent but they cannot advocate on behalf of either party. Ultimately, the designated agents must represent their respective clients, advocate on their behalf, and assist the clients in resolving any issues that arise during the negotiating process.