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Professional Standards Manual

Trading Services

1. Practice Standards

(b) Agency

(i) Agency Disclosure

Section 5-10 of the Rules outlines the information which must be disclosed by a licensee about the nature of that licensee’s relationships with parties in a trade in real estate.  Section 5-10 of the Rules provides that:

Before providing trading services to or on behalf of a party to a trade in real estate, a licensee must disclose the following to the party:

(a) the nature of the representation that the licensee will provide to the party,

(b) as applicable,

(i) that the licensee, or a related licensee, is or expects to be providing trading services to or on behalf of any other person, in any capacity, in relation to the same trade in real estate,

(ii) that the licensee, or a related licensee, is or expects to be receiving remuneration relating to trading services referred to in subparagraph (i) from any other person, and

(iii) the nature of the licensee’s relationship or the relationship of the related licensee, with any person referred to in subparagraph (i) or (ii).

Effective July 1, 2013, section 5-8 of the Rules requires the nature of the representation that a licensee will provide to a party to be disclosed in writing. This disclosure must be made before providing trading services so that consumers understand the nature of the relationship being proposed by a licensee before they begin to share confidential information with that licensee.

If, during the course of providing real estate services, there is any substantive change to the nature of the licensee’s representation, the licensee must promptly disclose the change in writing as well.

One way for a licensee to meet this disclosure requirement is to provide potential sellers/landlords and buyers/tenants, at first substantial contact, with a copy of the Working With a REALTOR® brochure developed by the British Columbia Real Estate Association (available through real estate boards/associations). This brochure explains a variety of relationships that consumers may have with a brokerage and its related licensees. The brochure also describes:

  • the duties that a brokerage and its related licensees owe to a client, be that client a seller/landlord or a buyer/tenant;
  • limitations on these duties should a brokerage or a related licensee be given consent to act for more than one client in relation to the same trade in real estate;
  • how, with the agreement of a client, a brokerage may designate one or more licensees to act as designated agents to provide real estate services to or on behalf of a client; and
  • the types of services a customer might normally expect to receive when there is no agency relationship.

This information may assist licensees to describe the nature of the relationship being proposed, and to obtain the seller’s/landlord’s or the buyer’s/tenant’s informed consent to the relationship to be established.

It is important to stress that the seller’s/landlord’s or the buyer’s/tenant’s informed consent is required before a brokerage or any of its related licensees acts on their behalf. Obtaining informed consent before acting is also necessary if a brokerage or any of its related licensees wishes to alter an existing relationship; for example, to move from acting on behalf of only one party to a trade to acting as a limited dual agent on behalf of both parties.

 

(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. 
(iii) Obligations Related to Various Licensee Service Relationships

The following chart outlines the various obligations that a brokerage and/or its related licensees have depending on the nature of the relationship that is established. It should be noted that brokerages and their clients and customers may agree to modify or make inapplicable one or more of these obligations.

The ‘TO CLIENT DESIGNATED AGENCY’ column outlines the duties of a licensee who has been designated by their related brokerage to provide real estate services as a designated agent to or on behalf of a client. Under designated agency, it is the designated agent who has these duties while the brokerage, through its managing broker, has certain contractual duties; i.e. the brokerage must

  • handle all monies received in accordance with the Real Estate Services Act
  • supervise their related designated agents to ensure they fulfill their duties to their respective clients,
  • treat the interests of clients in an even handed, objective and impartial manner, and
  • not disclose any confidential information concerning the clients to any other person unless authorized to do so by the client, or required by law.

The ‘TO CLIENT BROKERAGE SOLE AGENCY’ column describes the obligations that a brokerage and all of its related licensees owe to their clients in a brokerage agency relationship when acting as a sole agent.

The ‘AS LIMITED DUAL AGENT’ column describes the duties that a brokerage under brokerage agency, or a designated agent under designated agency, would have to both clients if those clients have agreed that the brokerage or the designated agent, as the case may be, are able to act on their behalf as a limited dual agent in relation to the same trade.

The ‘TO CUSTOMER NO AGENCY’ column outlines the duties in a relationship in which there is no agency representation. A licensee’s obligations to customers are the same regardless of the relationship the licensee may have with the other party to the transaction. For example, a brokerage or a designated agent may act as a sole agent on behalf of one party (e.g. a seller) while treating the other party (e.g. the buyer) as a customer. In that example, they would have the duties identified under the ‘TO CLIENT’ column (either the BROKERAGE SOLE AGENCY or the DESIGNATED AGENCY column, as the case may be) with respect to the seller, and the duties identified under the ‘TO CUSTOMER NO AGENCY’ column with respect to the buyer.

  SOLE AGENCY    

GENERAL OBLIGATIONS

TO CLIENT DESIGNATED AGENCY TO CLIENT BROKERAGE AGENCY AS LIMITED DUAL AGENT TO CUSTOMER NO AGENCY
1. Perform mandate Yes Yes Yes No
2. Obey instructions Yes Yes * No
3. Act in person Yes Yes Yes No
4. Honesty Yes Yes Yes Yes
5. Act in impartial, objective manner No No Yes No
6. Exercise care and skill Yes Yes Yes Yes
7. Disclose information concerning:        
  7.1 Other party’s maximum/minimum price or terms Yes Yes No No
  7.2 Other party’s motivation Yes Yes No No
  7.3 Material defects in the seller’s property Yes Yes Yes Yes
  7.4 Buyer’s financial ability to complete transaction Yes Yes No No
  7.5 Other confidential information obtained from other party Yes Yes No No
8. Provide confidential advice on any or all relevant matters Yes Yes No No
9. Help negotiate and draft favourable terms Yes Yes No No
10. Recommend relevant ‘‘experts’’ (appraisers, surveyors, inspectors, etc.) Yes Yes No No
11. Present, in a timely manner, all offers, counter-offers, etc. Yes Yes Yes Yes
12. Convey in a timely manner all information that party wishes to have communicated Yes Yes Yes Yes
13. Keep fully informed regarding the progress of the transaction Yes Yes Yes Yes
FIDUCIARY OBLIGATIONS        
14. Loyalty Yes Yes No No
15. Avoid all conflicts of interest        
  15.1 Not act for both parties Yes Yes N/A No
  15.2 Not make secret profit Yes Yes Yes No
  15.3 Not buy client’s property Yes Yes N/A No
  15.4 Not sell own property to client Yes Yes N/A No
  15.5 Not act for parties whose interests conflict Yes Yes N/A No
16. Not misuse confidential information Yes Yes Yes No
17. Disclose all personal (brokerage’s) conflicts of interest Yes Yes Yes No
STATUTORY DUTIES        
18. To account Yes Yes Yes Yes
19. Other miscellaneous statutory duties Yes Yes Yes Yes
VICARIOUS LIABILITY        
20. Client vicariously liable for misconduct of brokerage Yes Yes ** No
NON-AGENCY SERVICES (May also be provided in agency relationships)        
21. Provide real estate statistics, including general market information, etc. Yes Yes Yes Yes
22. Provide standard form contracts and other relevant documents Yes Yes Yes Yes
23. Act as a scribe in the preparation of standard form contracts, etc. Yes Yes Yes Yes
24. Provide the names of ‘‘experts’’ (appraisers, surveyors, inspectors, etc.) Yes Yes Yes Yes

 

* Yes if no conflict of interest
** Not known at the present time

(iv) 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 an Exclusive Buyer’s Agency 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. Where the agreement is oral, the licensee should obtain the client’s agreement that they are permitted to act for other buyers and sellers and that they will not disclose confidential information obtained through other agency relationships.

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 a customer, not a client. It is also important that the conduct of the licensee is consistent with such statements.

(v) Documenting the Agency Relationship

Sections 5-8 and 5-10(a) of the Rules, when taken together, 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 Working with a REALTOR® brochure 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.

(vi) 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 a customer so long as an agency relationship hasn’t already been established with that person. Otherwise, the team will have to seek the consent of both clients to act as limited dual agents.

(vii) 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. The preceding table of obligations applies equally to commercial trading services relationships.

(viii) 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. 

(ix) Conflicts of Interest - Limited Dual Agency

Whenever a licensee attempts to act for more than one party whose interests conflict, a potential conflict for the licensee can arise. While the law does not prohibit acting for more than one party, it is not possible for a licensee to act as the agent for more than one client whose interests may conflict without being in breach of their fiduciary duties (see Sole agency above) to each client. Accordingly, a licensee wishing to act for more than one client whose interests may conflict must first obtain the informed consent of both parties before acting on their behalf.

In this context, informed consent means that the licensee must disclose to both parties, in a timely manner:

  • the nature of the conflict of interest that would arise if the licensee were to represent both parties; and
  • what is being proposed by the licensee and the implications of giving their consent.

The above disclosure must occur before the licensee begins to act for both parties and before any potential conflict of interest has arisen.

A common conflict that arises is where a licensee is representing both the seller and the buyer in the same transaction. These situations are the ones that generally come to mind when the term ‘‘limited dual agent’’ is used.

Under designated agency, a brokerage and its clients agree that different licensees engaged by that brokerage may be designated to act as sole agents on behalf of clients whose interests may conflict. When different licensees are designated to act on behalf of different clients who are negotiating the same transaction, dual agency is avoided. The conflicts of limited dual agency continue to exist, however, if the same designated agents are acting on behalf of a seller and a buyer in relation to the same transaction, or acting on behalf of two buyers who are interested in buying the same property.

If operating under brokerage agency, this conflict exists either when two different licensees engaged by the listing brokerage work with the seller and the buyer respectively, or when one licensee (or a team of licensees) engaged by the listing brokerage to act on behalf of the seller/landlord is the same licensee (or team of licensees) who brings the buyer/tenant to the trade, i.e. a double-ender). It is important to remember that under brokerage agency practice, when a licensee engaged by a brokerage lists a property for sale, the brokerage is appointed as the agent of the seller, and all of the brokerage’s related licensees assume the agency obligations of the brokerage in relation to that seller. Similarly, under brokerage agency, when a licensee engaged by a brokerage acts as a buyer’s agent, the brokerage is appointed as the agent of the buyer, and all of its related licensees assume the agency obligations of the brokerage in relation to that buyer.

In order to act as a limited dual agent, a licensee (whether the brokerage in brokerage agency or the designated agent in designated agency) must have the agreement of the two clients as to how the duties owed to those clients are to be modified or made inapplicable. Under section 3-3.1 of the Rules, this agreement must either be in a written service agreement, such as a Limited Dual Agency Agreement, or preceded by written disclosure. The agreement must indicate the duties that have been modified and how they have been modified, and the duties that have been made inapplicable.

Licensees who are members of real estate boards, and access WebForms® should be aware that there are now two Limited Dual Agency Agreement forms available, one for use when a licensee wishes to enter into a limited dual agency agreement with a seller and a buyer [the Limited Dual Agency Agreement (Buyer/Tenant and Seller/Landlord) form], and the other for use when a licensee wishes to enter into a limited dual agency agreement with two different buyers who are each interested in making an offer on the same property [the Limited Dual Agency Agreement for Competing Buyers/Tenants form].

Licensees must also keep in mind that the definition of a ‘‘trade in real estate’’ includes a transaction for the leasing of real estate. If a brokerage acts for both the landlord and the tenant, particularly in the arranging of commercial leases, the brokerage may wish to act as a limited dual agent. Designated agency is, of course, an alternative to ‘in-house’ limited dual agency in commercial transactions as well as residential transactions.

There are many other situations where a licensee may be involved in more than one aspect of a trade in real estate and wishes to act as a limited dual agent. Whenever a brokerage is involved in more than one aspect of a trade in real estate, the situation can give rise to conflicts of interest. For example, a brokerage that provides strata management services to a strata corporation might be asked by the owner of a strata lot within that strata corporation to list the strata lot for sale. As an agent for the strata corporation, the strata manager may have access to information that is confidential to the strata corporation and is not intended to be shared with individual strata lot owners or potential buyers (e.g., specific details concerning current legal action, including settlement negotiations, hardship cases, or concerns regarding a rogue strata lot owner). The strata manager has an obligation to keep the confidence of the strata corporation. Yet, as an agent for the seller of the strata lot, that same brokerage would have a duty to disclose all known facts that may affect or influence the seller’s decision.

Another example could be where a licensee is acting as an agent for a seller and as a mortgage broker for a buyer in the same trade. That licensee may become aware of personal, confidential information regarding the buyer that would be of interest to the seller.

Additionally, licensees are occasionally in a position where they act as an agent for various buyers, all of whom wish to make an offer on the same property. Under designated agency, a brokerage, with the agreement of these buyers, may appoint different licensees as the designated agents to act on behalf of these buyers who are interested in purchasing the same property. With proper practice, including not sharing the confidential information of their respective clients, designated agents engaged by the same brokerage are able to avoid many of the conflicts that can arise under limited dual agency with respect to these types of ‘in-house’ transactions.

Whenever a licensee attempts to act for more than one party in a trade as a limited dual agent, the licensee is in a potential conflict of interest. In every case, the licensee must disclose the conflict to their clients and obtain the informed consent of their clients before acting or continuing to act on their behalf.

The disclosure must be timely, and, where possible, made before either client has disclosed confidential information to the licensee. This is important because one of the most significant challenges for a licensee in limited dual agency, where there are two clients, is the conflict between the obligation to disclose to each client all known material information respecting the real estate services, the real estate itself, and the trade in real estate [subsection 3-3(f) of the Rules], and the obligation to maintain the confidentiality of information respecting each client [subsection 3-3(e) of the Rules]. Often, the confidential information of one client would be material to the interests of the other client. Without these clients agreeing to modify these conflicting obligations, the licensee is placed in the untenable position of being obliged to disclose information they are obliged not to disclose. In other words, they are not able to fulfill their obligation of undivided loyalty to both clients at the same time.

In order to comply with the disclosure requirements of section 5-10 of the Rules, appropriate disclosure of the limited dual agency relationship must be made at the first reasonable opportunity and, where possible, made before either client has disclosed confidential information to the agent. Those agents not using the Working With a REALTOR® brochure for this purpose must ensure that they are using an appropriate alternative that provides complete and accurate disclosure of the relationships.

Both clients have to be fully aware of the existence of a limited dual agency relationship. The courts are increasingly imposing an obligation on the limited dual agent to inform both clients of the ‘‘full implications of representation by a limited dual agent’’. This obligation has been extended by the courts to disclosure of the implications and benefits of sole representation, and the parties’ entitlement to choose sole representation. The courts have held that clients have the right to make a fully informed choice as to the nature of the representation they wish to receive.

Although, generally speaking, the informed consent of the client to a limited dual agency relationship is sufficient, there are some cases where a brokerage practicing brokerage agency should not represent both parties in a trade. In those circumstances where a licensee related to a brokerage is acquiring or disposing of property on their own account or when the licensee is providing real estate services to an associate (as defined in section 5-7 of the Rules), the licensee should not also be acting for the other party. In such circumstances, a licensee could not remain objective or neutral.

Even though a licensee has complied with section 5-9 of the Rules, which requires disclosure of their interest in the trade, the licensee should also resist creating a conflict of interest by agreeing to have their related brokerage, if operating under brokerage agency, also represent the other party. In such circumstances, so long as an agency relationship has not been created with the other party, the licensee and their related brokerage may wish to treat the other party as a customer instead of entering into a limited dual agency relationship. In this way conflicts may be avoided.

This conflict may not exist under designated agency if the other party is able to obtain independent representation through their own designated agent, and if the client’s confidential information has not and will not be shared with the licensee who is acquiring or disposing of the real estate or a licensee who is representing that licensee.

It is important for licensees to keep in mind, however, that the determination of the relationship or a change in the relationship must be agreed to by the client/customer. A licensee who wishes to change from one type of relationship to another must first obtain the informed consent of their client/customer. Making such a change is not simply a matter of the licensee advising the client that the relationship has changed. 

(x) Duty of Disclosure by a Limited Dual Agent

Limitations to a licensee’s usual duties and obligations may be agreed to that permit the licensee to represent clients who have conflicting interests. As noted above, under section 3-3.1 of the Rules, this agreement must either be in a written service agreement, such as a Limited Dual Agency Agreement, or preceded by written disclosure. The agreement must indicate the duties that have been modified and how they have been modified, and the duties that have been made inapplicable.

When acting as a limited dual agent for a buyer and a seller, the licensee’s duty of full disclosure is modified to allow the licensee to keep information in three areas confidential:

  • the price or other terms a client is willing to accept or pay (other than what is contained in the offer);
  • the motivation of either client; and
  • either client’s personal information.

The licensee is also required to deal impartially with both clients, and must disclose to the buyer any known material latent defects affecting the property (see section 5-13 of the Rules).

Licensees entering into limited dual agency contracts with clients often do so by using the Limited Dual Agency Agreement made available by their real estate board. In order to avoid potential misunderstandings, and prior to acting as a limited dual agent, licensees should review with each party the limitations placed on a licensee’s usual duties by this contract.

In cases where a licensee is acting as a limited dual agent in a situation other than for a buyer and a seller, the limitations with respect to disclosure by the licensee will change. For example, where the licensee is both the strata manager and the listing agent, the limitation may be that the licensee will not disclose the personal or otherwise confidential information about either the strata corporation or a strata lot owner unless authorized in writing. Similarly, when a licensee is both the agent for the seller and the mortgage broker for the buyer, the limitation may be that the licensee will not disclose any personal information to the seller about the buyer.

An important point for brokerages and their related licensees to keep in mind is that their clients must agree to the limitations placed on a licensee’s usual duties before the licensee acts as a limited dual agent.

Additionally, licensees must keep in mind that the limited dual agent is still the agent of both parties and, subject to the limitations agreed to by the clients, must ensure that full disclosure respecting the subject matter of the contract is made to both clients. In addition, any action taken by the licensee in regard to the trade must be consented to by both parties.

As a limited dual agent, a licensee who is acting on behalf of both clients should remember the key elements to correct conduct as a limited dual agent:

  • impartiality;
  • disclosure; and
  • consent.

Limited dual agents have a duty to treat the buyer and the seller impartially, and other than the exceptions set out in the Limited Dual Agency Agreement, they must disclose everything material to both the buyer and the seller.

Remember, the test of what is material is an objective one and if such information is not disclosed, the licensee may face disciplinary and/or civil action.

One of the leading cases regarding disclosure is the decision of the B.C. Court of Appeal in Ocean City Realty v. A&M Holdings Ltd.

In that case, the Court of Appeal stated that:

The duty of disclosure is not confined to these instances where the agent has gained an advantage in the transaction or where the information might affect the value of the property or where a conflict of interest exists. The agent certainly has a duty of full disclosure in such circumstances, they are commonly occurring circumstances which require full disclosure by the agent. However, they are not exhaustive.

The obligation of the agent to make full disclosure extends beyond these three categories and includes ‘‘everything known to him respecting the subject matter of the contract which would be likely to influence the conduct of his principal, or ... which would be likely to operate on a principal’s judgment’’. In such cases, the agent’s failure to inform the principal would be material non-disclosure.

The Court of Appeal emphasized that an agent cannot arbitrarily decide what would likely influence the conduct of their principal and thus avoid the consequence of non-disclosure. If the information pertains to the transaction with respect to which an agent is engaged, any concern or doubt that the agent may have can readily be resolved by disclosure of the facts to their principal.

(xi) 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. Where the client is a party to a Limited Dual Agency Agreement, it must be established, on the particular facts and circumstances of each case, that the client gave their informed consent to that relationship.

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. 

(xii) The Conflict in Brokerage Agency of Representing Two Buyers Who Want To Buy the Same Property

A second example of a licensee acting for two clients with potentially conflicting interests is where the same brokerage represents two buyers who are interested in buying the same property. This conflict may be avoided under properly practiced designated agency. Under designated agency, the brokerage and each competing buyer agree that the brokerage may designate one or more different licensees engaged by the brokerage to separately represent each buyer as their designated agent. The designated agents are able to fully represent the interests of their respective buyer clients, while the brokerage must treat the interests of the competing clients in an even handed, objective and impartial manner, and not disclose any confidential information concerning any of the clients to any other person unless authorized to do so by the client or required by law. The brokerage, through its managing broker, must also supervise its designated agents to ensure they are fulfilling their obligations to their respective clients.

If, however, the same licensee has the consent of competing buyers to act as a designated agent on their behalf, this would be an example of limited dual agency and there would be a similar limitation of duties necessary as described above. The use of a Limited Dual Agency Agreement for Competing Buyers/Tenants form would be appropriate to document the consent of the competing buyers to the limitation of duties.

Under brokerage agency, the brokerage is the agent of the client and all of the brokerage’s related licensees assume the agency obligations of the brokerage, so there is a conflict in licensees engaged by the same brokerage acting as agents for different buyers when those buyers become interested in buying the same property. Under brokerage agency, this conflict is essentially the same whether it is one licensee trying to represent two competing buyers, or two licensees engaged by the same brokerage trying to represent two competing buyers. How can the brokerage, being the agent, act in the best interests of both buyers at the same time?

The situation may be a bit less complicated if the brokerage has entered into written buyer agency contracts, or some other form of buyer agency acknowledgment agreement, with each of these competing buyers. In the ‘‘standard’’ Exclusive Buyer Agency Contract, a buyer agrees that it is not a conflict for the brokerage, or its designated agents as the case may be, to act as an agent for other buyers. There is similar wording in ‘‘standard’’ listing contracts vis-à-vis the brokerage or its designated agents, as the case may be, representing other sellers. There is also a clause that states the brokerage or its designated agents is not required to disclose confidential information obtained through any other agency relationship. The Buyer Agency Acknowledgement form available through WebForms® also addresses these issues.

If a licensee has not entered into a written contract with respect to these limitations of duties it would otherwise have, the safest approach may be for the licensee to seek the consent of both clients to only act for one of these competing buyers, perhaps the one to whom they first showed the subject property, and suggest the second buyer seek representation from another licensee. The licensee still requires the agreement of the buyer they will be representing that the licensee is not required to disclose any confidential information they may have acquired as a result of acting for the competing buyer. This would avoid the conflict and allow the licensee to continue to act in the best interests of the first buyer.

If that is not a reasonable step, the licensee must promptly and fully disclose the conflict to both buyer clients. This would be a prudent thing to do, even if the licensee has the written agreement, through an Exclusive Buyer Agency Contract or otherwise, to represent other buyers.

Licensees must remember that it is the client’s right to decide whether it is prepared to continue to allow the brokerage or any of its related licensees to represent them in a conflict such as this. If both buyers are prepared to allow the brokerage or its related licensees to represent them in their respective negotiations, and there is no written buyer agency contract or acknowledgment, the brokerage and each buyer client must agree in writing how the duties under section 3-3 of the Rules are to be modified or made inapplicable. For example, in brokerage agency, the brokerage’s and its related licensees’ duty of absolute loyalty would need to be modified. Presumably neither buyer would want the brokerage to disclose the terms of their offer to the other, which the brokerage would otherwise be obliged to do under its obligation to disclose to each client everything it knows about the trade in real estate.

The need to detail these limitations of duties for licensees acting for two buyers is just as important in this situation as it is when a licensee is acting for a seller and a buyer in the same trade. Real estate boards have created a “limited dual agency” agreement for licensees representing competing buyers.  If it is not common practice for a brokerage and its related licensees to enter into written buyer agency contracts with their buyer clients, brokerages should obtain independent legal advice to assist in preparing an appropriate contract respecting limitation of duties for use by its related licensees when they are working with competing buyers under a brokerage agency relationship.

(xiii) 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 limited dual agency relationship with the seller and a buyer, the other brokerage should also be seen as being in limited 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)

(xiv) 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 when acting as a limited dual agent in a transaction where the parties to a contract have entered into a limited dual agency agreement, that agreement specifically modifies the duty of confidentiality and provides that licensees have a duty to disclose information to both parties in a transaction, subject to three exceptions as follows:

(a) the brokerage will not disclose that the buyer/tenant is willing to pay a price or agree to terms other than those contained in the offer, or that the seller/landlord is willing to accept a price or terms other than those contained in the listing;

(b) the brokerage will not disclose the motivation of the buyer/tenant to buy or lease or the seller/landlord to sell or lease unless authorized in writing by the buyer/tenant or the seller/landlord; and

(c) the brokerage will not disclose personal information, not otherwise necessarily disclosed in the transaction documentation, about the buyer/tenant or the seller/landlord to the other party unless authorized in writing.

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’’. 

(xv) 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.