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Professional Standards Manual

Notice of Change: Information in this manual will be changing when new rules about disclosures and dual agency take effect on June 15, 2018. Please check back for up-to-date information about agency and disclosure obligations. Learn more about the new rules.

Trading Services

1. Practice Standards

(b) Agency

(i) Agency - Nature of the Relationship

The Agency Relationship 

An agency relationship can be defined as a relationship in which one person, the agent, is granted the authority to represent and act for another person, the principal, in dealings with others. There are two key parties to an agency relationship: the agent and the principal. An agent is a person authorized to act on behalf of another person; that person is called the principal. When acting on behalf of the principal in dealing with third parties, the agent is essentially making a promise or guarantee to those third parties that the agent has the appropriate authority from their principal to act. This is known as the warranty of authority. Ideally, the agency relationship is created by a written contract where the authority of the agent is clearly laid out.

Generally speaking, an agent has the power to bind (or commit) the principal to do certain things. For example, if the agent is empowered to sign a contract with a third party on behalf of the principal, the parties to the contract will be the principal and the third party. The agent is not a party to the contract (and will not have any rights or obligations under the contract). This is a very important concept to keep in mind. The authorities to bind another person to certain things, represent another person in dealings with others, and act on behalf of another person in dealings with others are powerful rights that the law takes seriously.

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, dual agency in very limited circumstances, 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, dual agency in very limited circumstances, 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.

(courtesy of UBC Sauder Real Estate Division Trading Services Licensing Course Manual)

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, in the very limited circumstances when clients agree to 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 be contained in a written service agreement (e.g. a listing contract, buyer agency contract, or dual agency agreement).

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.

 

Dual Agency

Dual agency is prohibited under section 5-16 of the Rules. However, there is a very limited exception in section 5-17(1) of the Rules. A brokerage may engage in dual agency in respect of a trade in real estate if:

  • The real estate is in a remote location;
  • The remote location is under-served by licensees; and
  • It is impracticable for parties to be provided trading services by different licensees .

Please refer to the Disclosures, section (h) for a discussion of the exception. This disclosure form under section 5-17 (Disclosure of Risks Associated with Dual Agency) is mandated by Council. The terms of the dual agency agreement are not mandated by Council, but the agreement must comply with RESA and the Rules.

Dual agency can occur in brokerage agency or in designated agency. In brokerage agency, both the brokerage and all of its licensees owe fiduciary duties to clients who enter into a service agreement with the brokerage. In designated agency, the service agreement provides that only the one of more licensees designated as the exclusive licensee(s) of the client owe fiduciary duties to the client. The brokerage does not owe fiduciary duties to the client.

Under brokerage agency, licensees of that brokerage who act for both the buyer/tenant and seller/landlord, or for competing buyers/tenants would be in a conflict of interest and so would the brokerage.

Under designated agency, as long as the buyer/tenant and the seller/landlord or the competing buyers/tenants have different designated agents, even thought those agents are in the same brokerage, there is no “dual agency” and therefore no conflict. Under designated agency, dual agency would only arise if the same designated agent tried to act for both the buyer/tenant and seller/landlord, or tried to act for competing buyers/tenants in the same transaction.

 

No Agency - Unrepresented Party

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 not be a client. 

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 limited real estate services, including entering into a fee agreement with the seller, without creating an agency relationship with the seller.

[updated 06/15/2018]

(ii) How an Agency Relationship Is Created

An agency relationship may be created by means of a written contract, orally or by conduct.

Where the client is the seller, typically the listing contract establishes the agency relationship. As indicated above, a licensee has a duty of undivided loyalty to a client. However, it is common for a licensee to act for more than one seller at a time and to act for more than one buyer at the same time they act for sellers. Therefore, the duty of undivided loyalty is typically limited in order to permit the licensee to act on behalf of other buyers and sellers at the same time. In order to do this without breaching their obligations, the service agreement should include limitations on the duties that the licensee will owe to their client. The British Columbia Real Estate Association standard form Multiple Listing Contract contains the limitations that permit licensees to conduct business with multiple sellers and buyers concurrently without being in breach of their duties to their clients.

When representing buyers, some licensees use a Buyer’s Agency Exclusive Contract. Where such a contract is used, the contract sets out the terms of the agency relationship. If a written contract is not used, the party to the trade may orally agree that the licensee is the client’s agent. Whether the agreement is oral or written, the licensee must still use written disclosure under section 5-10 of the Rules.  

In some cases, however, the courts have found that an agency relationship has been created as a result of the conduct of the parties. Such agency relationships are often referred to as ‘‘implied agency’’. A licensee acting on behalf of a person who is not otherwise represented may be found to be acting as the party’s agent if their actions would lead the party to believe that the licensee was acting as their advocate. An implied agency relationship may be found to exist, even where the licensee did not intend to act as the party’s agent. In any transaction which involves an unrepresented party, if the licensee does not intend to act in an agency relationship, it is very important for that licensee to confirm with that party that he or she is being treated as an unrepresented party, not a client. It is also important that the conduct of the licensee is consistent with such statements.

[updated 06/15/2018]

(iii) Documenting the Agency Relationship

Sections 5-8 and 5-10 of the Rules require that the nature of representation that a licensee is providing must be disclosed in writing. As indicated above, while the nature of the representation is normally documented with a seller/landlord by way of a listing contract, the use of written buyer’s agency contracts, particularly in residential real estate, has not been as common.

Section 3-3.2 of the Rules requires that there be an agreement between a brokerage and a client if the intention is that designated agents, not the brokerage and all its licensees, are to be responsible for the agency duties owed to the client. This agreement must either be a written service agreement or, if there is no written service agreement, preceded by written disclosure of the nature of the relationship. The disclosure in section 5-10 of the Rules is useful in disclosing both the nature of representation to be provided, and matters addressed in section 3-3.2, but prudent brokerages/designated agents will want to confirm the relationship with a buyer/tenant in writing at the earliest opportunity by completing a written buyer’s agency contract.

[updated 06/15/2018]

(iv) Teams and Agency

Some licensees operate as teams. Whether under designated agency or brokerage agency, members of these teams typically share information with respect to the various persons to whom they provide real estate services. That is the essence of the team concept.

As a result, these teams are not able to separate their agency relationships, whether under brokerage agency or under designated agency. For example, if John Smith and Wendy Chang are a team, John cannot act as designated agent for the seller and Wendy as designated agent for the buyer in relation to the same trade.

The team may be able to treat one or the other as an unrepresented party, so long as an agency relationship hasn’t already been established with that person. 


Q: I’m thinking about forming a team with several other licensees at my brokerage. It looks like we’ll be a big group - at least a dozen, and we’re wondering how we’ll handle contracts once we’re a team. Can we use the team name on contracts, or do we all have to be listed?


A: Congratulations on thinking ahead about some of the issues that team members need to be aware of. The full names of all team members must appear on every MLS Listing Contract between team members and clients, as well as Exclusive Buyer’s Agency Contracts, Buyer Agency Acknowledgement forms, and Contracts of Purchase and Sale. You cannot use the team name on these documents, because that name exists only for advertising purposes.

All the team members’ names must appear on contracts because the team is deemed to be collectively the Designated Agency for the client. This means that while confidential client formation may be shared between members, strict client confidentiality must be maintained from other licensees at the brokerage.

Since your team will be a large one, you may find there is not enough space on the forms for everyone’s full names. If this is the case, you should indicate in the space provided (such as the Agency Disclosure Section of the Contract of Purchase and Sale) that the names of all the designated Agents are included on an attached appropriately numbered schedule.

However, any team member can execute the documents. The signature of every team member is not required.

(this question and answer was featured in the December 2015 issue of the Report from Council newsletter)

[updated 06/15/2018]

(v) Commercial Trading Services and Agency

There are many differences between residential and commercial trades in real estate, one of the more common being that the parties involved in a commercial trade are often thinking about the investment value of real estate more so than its value as shelter. They may have either in-house or independent professional advisers, such as accountants and lawyers, assisting them in analyzing this investment value, and determining the best way to structure ownership and use to maximize that value. The relative sophistication of the parties may affect the types of services or level of advice expected from licensees. With this in mind, the nature of representation the brokerage and licensee are providing to the parties involved in a commercial trade in real estate, and what duties are owed to those parties by the brokerage and licensee, can sometimes be misunderstood.

In providing trading services, whether those services are related to commercial or residential real estate, it is important for the brokerage and licensee and the party to whom the services are being provided, whether that is the seller/landlord, or the buyer/tenant, or both, to understand the nature of the relationship between them because the duties and obligations of the brokerage and the licensee are determined by that relationship. 

(vi) Conflicts of Interest

When a licensee is engaged by a client to provide real estate services, certain duties are owed to that client:

  • Section 3-3(a) of the Rules requires licensees to ‘‘act in the best interests of the client’’.
  • Section 3-3(i) requires licensees to ‘‘take reasonable steps to avoid any conflict of interest’’.
  • Where a conflict of interest, which cannot be reasonably avoided, does exist, section 3-3(j) requires the licensee to ‘‘promptly and fully disclose the conflict to the client’’.

A fully informed client may then choose to allow the licensee to continue to act in that conflict by modifying or making inapplicable the obligations which can’t be fulfilled because of the conflict. 

 

Conflicts Respecting Current Clients

Conflicts of interest can arise with respect to current clients or former clients. Section 5-18 of the Rules gives guidance on these potential conflicts for current clients that would give rise to Dual Agency.

 

Addressing conflicts of interest when acting for multiple clients

5-18 (1) If the provision of trading services by a licensee to or on behalf of multiple clients in respect of a trade in real estate would constitute dual agency, other than under section 5-17 [dual agency in under-served remote location], the licensee must either:

(a) not provide trading services to any client in respect of that trade in real estate, or

(b) represent only one of the clients, as a client, in respect of that trade in real estate.

(2) A licensee must not represent a client under subsection 1 (b) unless the licensee has obtained written agreement from all clients in respect of the trade in real estate that meets the requirements of subsection (3).

(3) The written agreement referred to in subsection (2) must be in a form approved by the council and must include all of the following information:

(a) a description of the conflict of interest;

(b) a description of the duties and responsibilities the licensee will no longer have to the client with whom the licensee is terminating its client representation;

(c) a statement that the licensee may have confidential information about the client with whom the licensee is terminating its client representation, and that the licensee is prohibited from disclosing any of that information;

(d) a statement that the advice and information that the licensee may provide to the client that the licensee will continue to represent may be limited due to the licensee's ongoing duty to maintain the confidentiality of the information of the client with whom the licensee will terminate its client representation; and

(e) a recommendation that the clients seek independent professional advice in respect of that trade in real estate. 

 

The following discussion of conflicts respecting current clients and former clients is courtesy of UBC Sauder Real Estate Division Trading Services Licensing Course Manual.

To assist a licensees appropriately manage conflicts of interest when acting for multiple clients, section 5-18 of the Rules states that, if providing trading services to or on behalf of multiple clients in a real estate transaction would result in exception, the licensee has two options to manage the conflict:

  1. The licensee can decide not to provide the trading services to either client. In this case, the agent is “recusing” himself or herself from providing any further trading services to either party. Furthermore, the licensee cannot continue to work with either client as an unrepresented party, and should either refer the clients to separate licensees or instruct the clients to find separate representation themselves.
  2. The licensee can continue to represent only one client, if he or she obtains a written agreement to do so by all of the clients. In this case, the licensee is required to enter into an Agreement Regarding Conflict of Interest Between Clients with each client. This is a standard form agreement that has been created by the Council. This agreement must be obtained at the time the conflict arises, and must contain the following information:
  • A description of the conflict of interest;
  • A description of the duties and responsibilities the licensee will no longer have to the client with whom the licensee is terminating its client representation;
  • A statement that the licensee may have confidential information abut the client with who the licensee is terminating its client representation, and that the licensee is prohibited from disclosing any of that information;
  • A statement that the advice and information that the licensee may provide to the client that the licensee will continue to represent may be limited due to the licensee’s ongoing duty to maintain the confidentiality of the information of the client with whom the licensee will terminate its client representation; and
  • A recommendation that the clients seek independent professional advice in respect of that trade in real estate.


It is a licensee’s responsibility to ensure that all clients in the transaction fully understand the risks of entering into this agreement, and to recommend that all clients seek independent professional advice.

As A Licensee
The conflicts of interest that arise when your clients’ interests conflict can be a common occurrence, especially if you are a well-established licensee with many clients or practice real estate in a relatively small community. Your brokerage should have policies and procedures respecting how conflicts of interest will be addressed. These policies should be communicated with your clients at the outset of an agency relationship so that the correct expectations can be set.

For example, while you may agree to act for a particular buyer client, you may tell the client that, in the event that he or she becomes interested in a property in which you are the designated agent for the seller, you will ask the buyer if he or she will agree to find alternate representation because you will want to continue acting for the seller in listing the property. You may tell the buyer that, if this situation arises and he or she agrees to allow you to continue representing the seller, you will provide a referral to another licensee that can assist him or her.

Despite this conversation with the client, a licensee is always required to obtain a written agreement from all clients at the same time that the potential conflict arises. This means that the buyer (and the seller) in the example above must sign an Agreement Regarding Conflict of Interest Between Clients once the conflict arises.

 

 

Conflicts Respecting Former Clients

There may be times when a licensee is acting for a client in a transaction and is approached by a former client who is seeking representation in that same transaction.  The most common example of this conflict is where a licensee is listing property for sale and is contacted by a former client who is interested in that property. 

In this case, the licensee must first advise the former client that the licensee cannot represent him or her because the seller of the property is a current client of the licensee. Whether the licensee can continue acting for the current seller client requires an analysis of the confidential information that the licensee has with respect to the former client.

[updated 06/15/2018]

 

(vii) Conflicts of Interest Related to Licensees Buying and Selling Real Estate

Complications arise when a licensee attempts to act as a principal and as an agent for the other party in the same transaction. Not only can that licensee not be impartial and objective, but they are likely unable to meet another fundamental obligation of an agent: the duty to not allow their own personal interest to prejudice their client’s interest. Whether a licensee is selling their own property to a client, or buying their client’s property, there is a very significant risk that their own personal interest will be in conflict with, and therefore will prejudice, their client’s interest. 

In the case of D’Atri v. Chilcott, the Court found that the following principles are applicable where a licensee is buying a client’s property:

  • that the relationship between a real estate agent and the person who has retained him or her to sell their property is a fiduciary and confidential one;
  • that there is a duty upon such an agent to make full disclosure of all facts within the knowledge of the agent which might affect the value of the property;
  • that not only must the price paid be adequate, but the transaction must be a righteous one, and the price obtained must be as advantageous to the principal as any other price that the agent could, by the exercise of diligence on his principal’s behalf, have obtained from a third person; and
  • that the onus is upon the agent to prove that those duties have been fully complied with.

Expanding on these principles, the Court referred to other cases involving the obligations of a fiduciary when transacting with its own clients. In Brown et al. v. Premier Trust Co. et al. it was found that ‘‘the onus is cast on them to establish the perfect fairness and equity of the transaction. They must show that Dr. Brown (the client) entered into the transaction, not through the operation of any acts on the part of Holmes (the fiduciary), but ‘‘after full and sufficient deliberation, and with all the information which it was material for him to have in order to guide his conduct; and that he had either independent and disinterested advice, or as ample protection as such advice could have given him. In other words, they must show that they had given all reasonable advice against themselves that would have been given to Dr. Brown against a third party’’.

In Charles Baker Ltd. v. Baker and Baker, the Court found that ‘‘the onus is upon the agent to prove that the transaction was entered into after full and fair disclosure of all material circumstances and of everything known to him respecting the subject-matter of the contract which would be likely to influence the conduct of his principal. The burden of proof that the transaction was a righteous one rests upon the agent, who is bound to produce clear affirmative proof that the parties were at arm’s length, that the principal had the fullest information upon all material facts, and that having this information he agreed to adopt what was done.’’

Similar principles would apply where a licensee is selling their own property to a client.

If a licensee decides to take such a very significant professional risk, it would appear from the Brown case that one way to deal with this obligation that might reduce a licensee’s risk is to ensure the other party has the opportunity and time to obtain any and all independent advice they desire. This may include advice about value, the legal effect of terms or conditions, tax considerations, or any other matter about which the other party has questions. This may also result in the client deciding they want to be independently represented by a licensee engaged by another brokerage. Clients may choose to not allow a licensee to continue to represent them when that licensee is in a conflict of interest.

Buying a Property Listed by Your Related Brokerage

If a licensee decides to take a substantial professional risk and make an offer to buy their own listing or, in the case of brokerage agency, any property listed with their brokerage, they are advised as follows:

Before Negotiations: Prior to the commencement of any negotiations with the seller to purchase their property, advise their managing broker of their intentions. If their managing broker approves of proceeding with the proposed purchase, continue to involve the managing broker or their designate throughout the buying process.

Full Disclosure: Promptly and fully disclose their conflict of interest position to the seller as summarized above and confirm such disclosure in writing.

Option To Cancel Listing: Give the seller the option to cancel the service agreement (listing) and the opportunity to seek independent representation.

Withdraw as Representative: If the seller chooses not to cancel the service agreement, fully withdraw as the brokerage representative acting for the seller, with the managing broker or their designate then undertaking to act as an alternate representative of the brokerage when dealing with the seller.

Cease All Communication: Cease all direct communication with the seller. All contact with the seller should be indirectly through the managing broker or their designate.

Disclosure of Interest in Trade: Ensure that a ‘‘Disclosure of Interest in Trade’’ form is fully completed and presented to the seller, prior to the presentation of their offer. A clause should be included in the contract confirming their delivery of the required disclosure, e.g., The Seller acknowledges having received a signed ‘‘Disclosure of Interest in Trade’’ form which disclosed the licensee’s interest in the transaction before the receipt of this offer.

Condition Requiring Independent Advice : Make their offer subject to the Seller, on or before [a specific date which should ensure sufficient time is provided for the seller to obtain all required professional advice], receiving and being satisfied with, such professional advice as they deem appropriate, including but not limited to legal advice as to the terms and conditions of this Contract, appraisal advice as to the current fair market value of the Property and tax advice.

 

Selling a Licensee’s Real Estate Through Their Related Brokerage

If a licensee decides to take a substantial professional risk to sell their own property through their brokerage, they are advised as follows:

Before Listing the Property: Prior to listing their property through their brokerage, advise their managing broker of their intentions and continue to involve the managing broker or their designate throughout the selling process.

Appoint Brokerage Listing Representative: Do not act as the client’s designated agent for the listing, rather arrange for another licensee in their brokerage to act as the designated agent for the client. The designated agent engaged should take all steps that are customary when taking a listing, including measuring the property, obtaining a site plan and survey, checking title, checking the municipal file, preparing the listing contract, inputting property information into the Multiple Listing Service®, preparing all advertising and promotional material, etc.

Do Not Act for Buyers: The brokerage, if acting under a brokerage agency relationship, should, where possible, not act as agent for a potential buyer of the related licensee’s property. Should a buyer wish one of the brokerage’s licensees to act for them, such licensee should promptly and fully disclose the brokerage conflict of interest to the potential buyer and confirm such disclosure in writing. It is preferable that the listing representative for the brokerage (along with all other brokerage representatives) acts as agent for the seller only and no agency representation is provided to a buyer of the property. Any brokerage licensee who has entered into a buyer agency contract with a buyer who becomes interested in buying the property should offer the buyer the option to cancel such contract and give the buyer the opportunity to seek independent representation. This precautionary measure may not be necessary under designated agency so long as the buyer is able to have their own independent representation and no confidential information of either party is shared with the other

Do Not Communicate Directly with Buyer: Do not at any time communicate directly with the buyer. All communication with the buyer or the buyer’s agent should be indirectly through the listing representative for the brokerage.

Disclosure of Interest in Trade: Ensure that a ‘‘Disclosure of Interest in Trade’’ form is fully completed and presented to the buyer, prior to the presentation of the buyer’s offer. If an offer is received prior to having made the required disclosure, the prospective buyer must be given the opportunity to rescind their offer prior to you accepting it. It is not sufficient to accept the offer subject to the disclosure. The disclosure is required to be made before any agreement is entered into. A clause should be included in the contract confirming your delivery of the required disclosure, e.g., The Buyer acknowledges having received a signed ‘‘Disclosure of Interest in Trade’ form which disclosed the licensee’s interest in the transaction before the making of this offer.

Independent Advice: If the buyer does not have independent representation, the buyer’s offer should be made Subject to the Buyer, on or before [a specific date which should ensure sufficient time is provided for the buyer to obtain all required professional advice], receiving and being satisfied with, such professional advice as they deem appropriate, including but not limited to legal advice as to the terms and conditions of this Contract, appraisal advice as to the current fair market value of the Property and tax advice. 

[updated 06/15/2018]

(viii) Co-Listing Agency Obligations

What is the agency status of ABC Realty Ltd. and XYZ Realty Ltd. in the following scenario?

ABC Realty Ltd. is a small brokerage with only one licensee: Ms. Brown. They enter into a ‘‘standard’’ Multiple Listing Contract with Mr. Seller for the sale of his home. Ms. Brown is to go on vacation during the term of the listing. When the home has not been sold as Ms. Brown’s vacation approaches, Mr. Seller and ABC Realty Ltd. agree that a co-listing contract should be entered into with another brokerage so that marketing efforts would continue during Ms. Brown’s vacation. A listing amendment is created adding XYZ Realty Ltd. as a co-listing agent. There is nothing in the amendment to suggest that XYZ Realty Ltd.’s obligations are in any way different than the obligations of the original listing brokerage, ABC Realty Ltd. During Ms. Brown’s vacation, a licensee engaged by XYZ Realty Ltd. finds a buyer who is interested in making an offer to purchase Mr. Seller’s home.

Unless an amendment to the service agreement has expressly created different obligations, where two brokerages co-list a property for sale, they are acting in concert in marketing the property and would jointly owe all fiduciary and other obligations to the seller. It follows then that if one brokerage enters into a dual agency relationship with the seller and a buyer, the other brokerage should also be seen as being in dual agency.

To suggest otherwise would be to view the relationship of the two brokerages as simply being the equivalent of ‘‘cooperating’’ brokerages — a relationship already typically permitted by most brokerage’s listing contracts — and this arrangement would require no amendment to that contract. But the brokerages and the seller wished to create a closer relationship than this; they wished XYZ Realty Ltd. to market the property for sale during Ms. Brown’s vacation. The two brokerages jointly agreed to act in concert representing the seller as their client, and this was reflected in the listing amendment.

One might ask whether, through the listing amendment, XYZ Realty Ltd. was being appointed as a ‘‘sub-agent’’ of ABC Realty Ltd., even though that term was not used in the amendment. The result would likely be the same as the initial agent and the sub-agent would owe the same duties to the seller. 

See also Co-Listing Conundrum: How Does Designated Agency Affect Your Co-Listing Agreement? (Report from Council, December 2014)

[updated 06/15/2018]

 

(ix) Continuing Duty of Confidentiality

William Foster, a noted authority on real estate agency matters, suggests:

The fiduciary relationship of broker and client persists until the agency agreement expires or the purpose of the agency has been accomplished (i.e., the transaction has completed). Therefore, where a broker has obtained an offer that has been accepted by the client the fiduciary relationship remains in effect until the transaction is completed or the agency agreement terminates.

However, even when an agency agreement and, thus, the fiduciary relationship between broker and client has been terminated, some fiduciary duties persist thereafter - thus, for example, on termination of an agency relationship, brokers cannot use confidential information acquired while representing a client for their own or a third party’s benefit.

Two licensees were reprimanded by the Council for breaching a continuing duty of confidentiality to a seller they represented in the listing of the seller’s property.

The listing had expired and the plaintiff commenced a lawsuit against the seller which was related to the subject property. The lawyer acting for the plaintiff approached the licensees and requested that they provide affidavits containing information about the listing of the property.

The licensees claimed that the lawyer for the plaintiff made it clear to them that if they did not provide the affidavits voluntarily, he would either subpoena them as witnesses to give evidence before the judge, or he would obtain a court order pursuant to the Rules of Court compelling them to give their evidence.

The licensees provided the requested affidavits, as they believed that they had no choice in the matter.

The seller complained to the Council that the information in the affidavits was confidential. The Council found that there was a continuing duty of confidentiality on the part of the two licensees after the expiration of the agency relationship and that the licensees, by providing the affidavits, had breached their duty of confidentiality.

Licensees should be aware of the following guidelines with respect to the continuing duty of confidentiality:

1. Licensees should not volunteer to disclose confidential information about their clients at any time.

2. Before agreeing to provide any information to a lawyer or any other third party, licensees should advise the lawyer or third party that they intend to seek the consent of their clients to the disclosure of the information.

3. Licensees should obtain the consent of their clients in writing. If the client is not prepared to consent to the disclosure of the information, licensees should advise the lawyer or third party accordingly. The lawyer may then take legal steps to compel disclosure of the information either by issuing a subpoena to licensees to attend a proceeding as a witness or by obtaining a court order pursuant to the Rules of Court compelling the licensee to give their evidence.

4. Licensees may wish to obtain their own legal advice as to whether the disclosure of information consented to by their clients may result in a possible claim against licensees by another party.

5. Licensees should be aware that they are relieved from any duty of confidentiality owed to a client when communicating with the Council or the Real Estate Errors and Omissions Insurance Corporation in regard to a complaint or claim by virtue of section 123 of the Real Estate Services Act, which states as follows:

Communications privileged

123. (1) Subject to (2), all information supplied and all records and things produced to the real estate council, a hearing committee, the superintendent, the insurance corporation or the compensation fund corporation with respect to a licensee, a former licensee or an applicant for a licence are privileged to the same extent as if they were supplied or produced in proceedings in a court, and no action may be brought against a person as a consequence of the person having supplied or produced them.

(2) Subsection (1) does not apply to a person who supplied information or produced records or things maliciously.”

6. Licensees should also be aware that if acting as a dual agent in compliance with section 5-17 of the Rules in a transaction where the parties to a contract have entered into a dual agency agreement, that agreement may specifically modify the duty of confidentiality and provide that licensees have a duty to disclose information to both parties in a transaction, subject to certain exceptions. The licensee should carefully review the dual agency agreement for those confidentiality provisions and exceptions.

A brokerage that is providing trading services to a client who is disposing of real estate must disclose to all other parties to the trade, promptly but in any case before any agreement for the acquisition or disposition of the real estate is entered into, any material latent defect in the real estate that is known to the brokerage. Section 5-13 of the Rules contains a definition for ‘‘material latent defect’’. 

 

[updated 06/15/2018]

(x) Example of the Continuing Duty of Confidentiality

A seller has listed a property for sale with a brokerage and the seller advises the licensee handling the listing on behalf of the brokerage that there is a material latent defect affecting the property. The seller instructs the licensee not to disclose the latent defect to any potential buyer.

The licensee advises the seller of their obligation to disclose a known material latent defect under section 5-13 of the Rules and that, pursuant to section 3-3(b) of the Rules, they can only act in accordance with the lawful instructions of the client. The licensee’s brokerage subsequently withdraws from its agency relationship with the seller as the seller refuses to change their instructions in this regard.

Sometime later, the said licensee is approached by a potential buyer who is interested in buying the same property and wants the licensee’s brokerage to become their buyer’s agent to do so.

Can the licensee disclose this material latent defect to the buyer?

The answer to the question is ‘‘No’’. A licensee’s responsibility to maintain their client’s confidentiality continues beyond the termination of an agency relationship. The least risky course of action for the licensee may be to not represent this potential buyer; however, if the licensee wishes to provide agency representation they would first have to advise the buyer that they had previously represented the seller and that they cannot disclose confidential information obtained in that earlier relationship concerning such matters as:

  • seller’s motivation for selling;
  • personal information concerning the seller; or
  • the condition of the property,

and can only represent the potential buyer on the understanding that the licensee will not disclose any such information.

Essentially, the licensee must place the buyer in the position to make a fully informed decision as to whether the buyer wishes to be represented by the licensee’s brokerage in such circumstances.

The difficulty of reconciling the ongoing obligation of retaining a former client’s confidentiality with the obligation of full disclosure to a current client can be problematic. Licensees who face situations such as this should consult with their managing brokers, and consider obtaining independent legal advice before acting in a way that could expose them to a claim for breach of duty.