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Professional Standards Manual

Trading Services

1. Practice Standards

(b) Agency - View Entire Section

(II) Nature of the Relationship

When providing real estate services, the nature of the relationship that is created between the buyer/tenant or seller/landlord and the brokerage, including its related licensees, is important. The relationship may be either a sole agency, limited dual agency, or no agency relationship. These distinctions are important for both the brokerage (and its related licensees) and the buyer/tenant or the seller/landlord to consider, since the nature of the relationship that is established, whether sole agency, limited dual agency, or no agency, determines the duties and obligations of the brokerage and its related licensees, as well as the level of assistance and representation that the party will receive. Regardless of the type of relationship that has been established, under section 3-4 of the Rules, licensees must act honestly and with reasonable care and skill whenever they are providing real estate services.

Sole agency

There are different types of sole agency relationships. One type of sole agency, ‘designated agency’, occurs when the brokerage and the client agree that the brokerage will designate one or more licensees engaged by that brokerage to provide real estate services as sole agent for the client. In designated agency, the brokerage has contractual duties to the client but it is the designated agents who act as sole agent for the client. Another type of sole agency, the historical model of real estate agency, is referred to in this material as ‘brokerage agency’. In brokerage agency, it is the brokerage that is the agent of the client, and all licensees engaged by that brokerage automatically assume the same agency obligations as the brokerage in relation to that client. When the brokerage only represents one client in a particular transaction, this is referred to as ‘sole’ agency.

Section 3-3 of the Rules details the duties typically associated with brokerage agency, where a brokerage is the agent and all its related licensees assume the same duties in relation to the brokerage’s clients. In such circumstances, when they are engaged by a client to provide real estate services, the brokerage and its related licensees must:  

(a)   act in the best interests of the client;

(b)   act in accordance with the lawful instructions of the client;

(c)   act only within the scope of the authority given by the client;

(d)  advise the client to seek independent professional advice on matters outside of the expertise of the licensee;

(e)   maintain the confidentiality of information respecting the client;

(f)   without limiting the requirements of Division 2 [Disclosures] of Part 5 [Relationships with Principals and Parties], disclose to the client all known material information respecting the real estate services, and the real estate and the trade in real estate to which the services relate;

(g)   communicate all offers to the client in a timely, objective and unbiased manner;

(h)   use reasonable efforts to discover relevant facts respecting any real estate that the client is considering acquiring;

(i)     take reasonable steps to avoid any conflict of interest;

(j)   without limiting the requirements of Division 2 [Disclosures] of Part 5 [Relationships with Principals and Parties], if a conflict of interest does exist, promptly and fully disclose the conflict to the client.

A brokerage and client may agree to modify or make inapplicable one or more of these duties. This would happen, for example, when clients agree to limited dual agency, or other forms of limited duties arrangements.

Section 3-3.1 of the Rules identifies how such modifications are to be documented. The agreement to modify or make inapplicable duties must either be contained in a written service agreement (e.g. a listing contract, buyer agency contract, or limited dual agency agreement), or in a written disclosure (e.g. a Working With a REALTOR® brochure).

The agreement must identify what duties have been modified and how they have been modified, and what duties, if any, that have been made inapplicable.

Despite an agreement to modify these duties, the brokerage continues to have duties to supervise its related licensees and to not disclose confidential information.

Section 3-3.2 of the Rules identifies how the duties established by section 3-3 may be modified to create a designated agency relationship. In designated agency, the brokerage and the client agree that these duties – other than the duty shared with the designated agents to keep the confidences of the client, and the holding of money on behalf of the client – are the responsibility of the designated agents only. The brokerage and the client agree that no other licensees engaged by the brokerage have any of these duties to the client. The brokerage continues to have duties to supervise its related licensees and to not disclose confidential information, and it must treat the interests of all clients in an even handed, objective, and impartial manner.

Limited Dual Agency

Designated agency allows two clients who have engaged the same brokerage to have independent representation by their respective designated agents, eliminating the occurrence of ‘in-house’ limited dual agency where they wish to negotiate in relation to the same property. Designated agency does not eliminate the possibility of limited dual agency where the same licensee or licensees acting as designated agent(s) represent two clients who wish to negotiate in relation to the same property.

Where a brokerage, acting under brokerage agency, acts both for the buyer/tenant and for the seller/landlord, with their agreement, the nature of the relationship created by contract is one of limited dual agency. In brokerage agency, limited dual agency can occur when the same licensee engaged by the brokerage represents both the buyer/tenant and the seller/landlord, or when different licensees engaged by the same brokerage represent both the buyer/tenant and the seller/landlord. Before a brokerage may represent both the buyer/tenant and the seller/landlord, the buyer/tenant and the seller/landlord must consent to such a relationship. Before providing their consent, the buyer/tenant and the seller/landlord must be fully informed regarding the limits that will be placed on the agent’s (brokerage’s) duties and obligations to the buyer/tenant and the seller/landlord.

Where a limited dual agency relationship has been agreed to, it is not possible for the licensee (designated agent or the brokerage) to fulfill all of their duties to both parties. As a result, the duties are limited by contract (e.g. the Limited Dual Agency Agreement created by the British Columbia Real Estate Association) and the sole agent, whether the brokerage or its designated agents as the case may be, become limited dual agents, with their duties being limited as follows: 

  • the licensee must deal with the buyer/tenant and the seller/landlord impartially,
  • the duty of full disclosure is limited so that the licensee is not required to disclose what the buyer/tenant is willing to pay for the property, what the seller/landlord is willing to sell/rent the property for, or the motivation of either party, and
  • the licensee must not disclose personal information about the parties, unless authorized to do so in writing. 

Again, section 3-3.1 of the Rules identifies how such modifications are to be documented.

No Agency

A licensee may also agree with a buyer/tenant or a seller/landlord that they will provide real estate services to them but not act as an agent on their behalf in a transaction. In other words, there will be no agency representation. In such a case, the buyer/tenant or the seller/landlord will be the customer of the licensee, rather than a client. The section below entitled Obligations Related to Various Licensee Service Relationships describes the obligations that a licensee has when working with a person being treated as a customer, and the Working With a REALTOR® brochure also explains the services that a licensee can provide under a relationship that does not involve an agency.

Rather than acting as a limited dual agent, a licensee may choose to act as the agent of only one of the parties. The licensee can treat the other party, with their agreement, as a customer. The nature of the relationship does not affect the licensee’s ability to earn the remuneration to which it is entitled. It is not necessary for a licensee to act as a limited dual agent in order for the licensee to receive the full commission payable.

For example, a licensee that acts on behalf of a buyer in negotiations with a seller who is attempting to sell their home on their own can choose the nature of the relationship the licensee wishes to establish with the seller. If the seller agrees, the licensee can provide real estate services, including entering into a fee agreement with the seller, without creating an agency relationship with the seller.

A licensee should not simply assume that an agency relationship must be created, but should carefully consider the nature of the relationship they wish to establish prior to explaining the Working With a REALTOR® brochure to a buyer/tenant or a seller/landlord.

Adhering to the four ‘‘D’s’’ can prove helpful in fulfilling the disclosure requirements of section 5-10 of the Rules: 

  1. Decide which party you wish to represent and the nature of the representation, and obtain the consent of that party to do so;
  2. Disclose to all parties so they know who you are representing;
  3. Document the decision and disclosure; and
  4. Demonstrate actions that are consistent with what you have decided, disclosed and documented.