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Superintendent’s Rules:  Information for Real Estate Licensees

 

The Superintendent of Real Estate introduced new Rules for real estate licensees that will:

  • Increase transparency for consumers around licensee remuneration, in particular, how remuneration is to be divided between a listing brokerage and cooperating brokerage.
  • Ensure licensees inform consumers of the duties and responsibilities owed to both clients and unrepresented parties before working with consumers.  
  • Inform consumers of the risks of dealing with a licensee who is representing another party to the transaction.
  • Prohibit dual agency, the practice of acting on behalf of both the buyer and seller on the same deal, except in extremely limited circumstances.

The new Rules will come into effect on June 15, 2018.

The Council has developed some answers to questions that licensees may have about these new Rules, and will continue to provide further information ahead of the implementation date.

Please read through the questions and answers below carefully.  If  you have questions that aren’t addressed here, let us know by submitting your question using our online form

For more information:

 


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Frequently Asked Questions

Disclosure of Representation in Trading Services and Disclosure to Unrepresented Parties

 

The Superintendent has created a new Rule, requiring licensees to make a disclosure to consumers about whether or not the licensee can represent the party as a client, before providing any trading services except exempted activities, e.g. hosting an open house or providing factual responses to general questions.

The disclosure must be made in writing in a form approved by the Council. This rule comes into effect on June 15, 2018.

The Council is developing new forms that licensees will use to make these disclosures, along with materials to help licensees understand how to comply with the Rules. 

 

Show/Hide AnswerWhen the new rules come into effect after June 15, 2018, do I have to make a disclosure to a consumer who is already working with a licensee?

Q: Do I have to make a disclosure to a consumer who is already working with a licensee once the new Rules take effect on June 15, 2018?

 

If you are dealing with a consumer who is accompanied by a licensee, you will not be required to make the disclosure required under section 5-10 of the Rules.

If you are dealing with a consumer who is not accompanied by a licensee, you must make the disclosure required under section 5-10 — even if that consumer is currently in a client relationship with a licensee. For example, imagine you are hosting an open house. While there, you are approached by a potential buyer who begins asking you questions that could lead to them telling you confidential information, and they are represented by a licensee but are not currently accompanied by that licensee. In that case, you must make the disclosure required under section 5-10 of the Rules.

 

Show/Hide AnswerWhat about open houses?

Q: I am the designated agent of a seller and I plan to host an open house on or after June 15, 2018. I will be distributing an information sheet to each potential buyer who enters the property. The info sheet has basic facts about the home (e.g. it was built in 1920 and has new electrical and upgraded plumbing). Since the exemption in section 5-10 only applies when I am either “hosting an open house” or “providing factual responses to general questions,” will I need to make the disclosures required under section 5-10 and 5-10.1 before handing out this information sheet?

 

No. When hosting an open house, you can greet consumers as they enter and hand them an information sheet about the property without having to make the disclosures required under sections 5-10 and 5-10.1 of the Rules. If a party approaches you at the open house and asks you general questions about the property, you can answer those questions.

However, if you find yourself getting into a more substantial discussion with a party at the open house, you should pause the discussion and make the disclosures required under sections 5-10 and 5-10.1 of the Rules. The goal is for you to be as frank and up-front as possible with unrepresented parties.

You must proactively disclose, at the earliest opportunity, that you are:

  • acting for the seller, and 
  • obliged to share with the seller any confidential information provided to you by an unrepresented party.

 

Show/Hide AnswerWhat about phone calls?

Q: I am the designated agent for a seller. When the new Rules take effect on June 15, 2018, if I receive a phone call from a potential buyer who is unrepresented, and who is interested in my seller client’s property, at what point should I make the disclosures required under sections 5-10 and 5-10.1?

 

You can provide factual responses to general questions posed by the unrepresented buyer about your seller client’s property without making the 5-10 and 5-10.1 disclosures.

However, if you find yourself getting into a more substantial discussion, you should advise the unrepresented buyer that before you can continue the conversation, you are required to make certain disclosures to them.

If the unrepresented buyer is willing to provide you with an e-mail address, you can:

  • end the phone call
  • e-mail copies of the 5-10 and 5-10.1 disclosure forms and
  • continue your phone conversation once the unrepresented buyer has reviewed the disclosures and you have answered any questions about the disclosures.

Otherwise, you will need to meet with the unrepresented buyer in person to provide copies of the 5-10 and 5-10.1 disclosure forms.

You can also advise the unrepresented buyer on the phone that if they begin working with a licensee, you would be happy to speak with their licensee.

 

Q: After the new Rules come into effect on June 15, 2018, if I  receive a “general enquiry” telephone call from a consumer who wishes to discuss the benefits of working with a licensee, at what point during the call am I expected to make the disclosure required under section 5-10?

 

If you are speaking with an unrepresented party who is interested in engaging you, and you are available and interested in working with them, you may have a lengthy general conversation about:

  • The types of services you could offer them;
  • Agency, and the duties associated with agency;
  • Important decisions for consumers;
  • How you are remunerated;
  • Your duty to avoid conflicts of interest; and
  • Your duty to fully disclose any conflicts of interest that arise.

At the end of that phone call, you should make the disclosure required under section 5-10, and confirm in writing, based on the person’s instructions, whether you will be in a client relationship with the party, or whether that party will continue to be unrepresented.

This can be done either by email, or in person. 

 

Show/Hide AnswerChanging relationships and disclosure requirements

Q: I have been dealing with a buyer on or after June 15, 2018 as an “unrepresented party”, per the consumer’s request. I made the required disclosure under section 5-10. The buyer now wishes to become my client. Am I required to make a further disclosure if the nature of my relationship with a party is changing?

Yes. If you are moving to an agency relationship after treating a consumer as an unrepresented party, you must make a further disclosure under section 5-10 confirming that, going forward, you will be acting as their agent.

 

Show/Hide AnswerWill “double-ending” a deal still be permitted once the new Rules come into effect on June 15, 2018? 

 

Q: Assuming all appropriate disclosures are made under the new rules (per 5-10, 5-10.1, and 5-11.1), is “double-ending” a deal (i.e. a listing brokerage earning 100% of the commission if the buyer is unrepresented) still permitted once the Rules come into effect on June 15, 2018?

Yes, it is still permitted. However, licensees should remember that dealing with unrepresented buyers creates significant risks for:

• the licensee;
• the unrepresented buyer; and
• the licensee’s client.

While the Superintendent’s new rules restrict the practice of dual agency, they do not restrict the practice of “double-ending” (i.e. a listing brokerage earning 100% of the commission if the buyer is unrepresented).

 

 

 

Disclosure of remuneration in service agreement and disclosure to sellers of expected remuneration

 

The Superintendent has added a new disclosure that licensees must make to seller clients for every offer that is presented. The disclosure will ensure that sellers are fully informed of the expected remuneration that the brokerage(s) will receive if the client accepts that offer. The disclosure must include how the commission will be shared, if at all, and inform the seller of any other remuneration the licensee will receive or expects to receive as a result of the trade. 

The Council is developing a Disclosure to Seller of Expected Remuneration Form, along with materials to inform licensees about how to comply with these new requirements.

 

Show/Hide AnswerWhat about existing agreements?

Q: Will service agreements entered into prior to June 15, 2018 need to be brought into compliance with section 5-1(4) of the Rules once the new Rules take effect on June 15, 2018?

No. Section 5-1(4) of the Rules only applies to service agreements entered into on or after June 15, 2018.

 

Q: I am the designated agent for a seller. I receive an offer on my client’s property late in the evening of June 15, 2018. When I present the offer to my client on the morning of June 15, 2018, am I required to make the disclosure required by section 5-11.1 of the Rules?

Yes. Every offer that is presented to a seller by the seller’s licensee on and after June 15, 2018 must be accompanied by a disclosure to sellers of expected remuneration in accordance with section 5-11.1 of the Rules.

 

Show/Hide AnswerWhen should the disclosure be made?

Q: How is the disclosure of expected remuneration required after June 15, 2018 to be made where a number of offers and counteroffers are going back and forth between the parties?

 

A licensee acting for a seller must make a disclosure of expected remuneration in respect of each “offer to acquire real estate” that is prepared on behalf of a buyer and presented to the seller by the seller’s licensee.

While not strictly required by section 5-11.1, Council recommends that, for the sake of consistency and transparency, a seller’s licensee also make the disclosure of expected remuneration to the seller in respect of any counter-offer being made by the seller or the buyer.

 

Q: Four licensees have called me to ask to present offers to the seller of one of my listings on or after the new Rules come into effect on June 15, 2018. I will not see the offers in advance of the presentation to my seller or have knowledge of the prices to be offered. I know that in addition to the disclosure of remuneration already made on the listing agreement, I have to provide the seller with a disclosure of the expected remuneration that my brokerage would potentially earn for each offer that is presented. Can I make that written disclosure to the seller, in relation to each offer, after the buyers’ agents have presented the offers, but before the acceptance of any offer?

 

Yes, provided that you present a Disclosure to Seller of Expected Remuneration Form for each offer before a seller’s acceptance of any offer.

If any of the buyers make a counter-offer, you must make a new disclosure based on the buyer’s countered price before the seller accepts any offer.

If the seller makes a counter-offer to the price of any of the offers, Council recommends that you make a new disclosure based on the countered price.

 

 

Show/Hide AnswerWhat if sellers wish to renegotiate commission?

Q: I have presented an offer to my sellers and provided them with a Disclosure to Seller of Expected Remuneration Form as required after June 15, 2018. My sellers now want to renegotiate the amount of commission they had agreed to in the listing agreement. What are my obligations?

 

Section 5-11.1 of the Rules requires you to provide the seller with a Disclosure to Seller of Expected Remuneration Form.

Once you have satisfied that obligation, the question of whether you, with the authority of your brokerage, choose to renegotiate the commission payable to your brokerage, is a contractual matter that does not fall under the jurisdiction of the Council.

 

 

Show/Hide AnswerWhen should the disclosure be made?

Q: How is the disclosure of expected remuneration to be made once the new Rules take effect on June 15, 2018 where a number of offers and counteroffers are going back and forth between the parties?

 

A licensee acting for a seller must make a disclosure of expected remuneration in respect of each “offer to acquire real estate” that is prepared on behalf of a buyer and presented to the seller by the seller’s licensee.

While not strictly required by section 5-11.1, Council recommends that, for the sake of consistency and transparency, a seller’s licensee also make the disclosure of expected remuneration to the seller in respect of any counter-offer being made by the seller or the buyer.

 

Q: Four licensees have called me to ask to present offers to the seller of one of my listings on or after June 15, 2018. I will not see the offers in advance of the presentation to my seller or have knowledge of the prices to be offered. I know that in addition to the disclosure of remuneration already made on the listing agreement, I have to provide the seller with a disclosure of the expected remuneration that my brokerage would potentially earn for each offer that is presented. Can I make that written disclosure to the seller, in relation to each offer, after the buyers’ agents have presented the offers, but before the acceptance of any offer?

 

Yes, provided that you present a Disclosure to Seller of Expected Remuneration Form for each offer before a seller’s acceptance of any offer.

If any of the buyers make a counter-offer, you must make a new disclosure based on the buyer’s countered price before the seller accepts any offer.

If the seller makes a counter-offer to the price of any of the offers, Council recommends that you make a new disclosure based on the countered price.

 

 

Show/Hide AnswerDo I have to make this disclosure if I am acting for the lessor of a property? 

Q: Once the new Rules take effect on June 15, 2018, is the designated agent for the lessor of a property required to make the disclosure of expected remuneration contemplated in Rule 5-11.1?

 

No. However, all the other disclosures required under the new Rules (i.e. 5-10, 5-10.1, 5-17) apply to licensees acting for lessors and lessees.

Rule 5-11.1 creates obligations for licensees acting for sellers of property. Licensees acting for lessors of property are not required to make the disclosure of expected remuneration.

 

 

Dual Agency

 

The Superintendent has created new Rules that generally prohibit the practice of dual agency, except in the rarest of circumstances. The Rules come into effect on June 15, 2018. The Council will develop and distribute to licensees information and educational materials to help them understand how they should adapt their business practices to comply with the new Rules.

 

Show/Hide AnswerWhat about existing agreements?   

Q: I entered into a dual agency agreement with two clients prior to June 15, 2018. The parties have not yet entered into a contract of purchase of sale. Can I continue to act as a dual agent for these clients after Rule 5-16 comes into effect on June 15, 2018?

Yes. You can continue to engage in dual agency if you are doing so pursuant to a dual agency agreement that was signed prior to June 15, 2018.

 

Q: I entered into a dual agency agreement with two clients on February 1, 2018. The parties entered into a contract of purchase and sale before June 15, 2018 but it has a completion date after June 15th. Can I continue to act as a dual agent for these clients after Rule 5-16 comes into effect?

Yes. You can continue to engage in dual agency if you are doing so pursuant to a dual agency agreement that was signed prior to June 15, 2018.

 

Show/Hide AnswerWhat does “remote” and “under-served” mean?

Q: What constitutes a “remote location that is under-served by licensees” for the purpose of Rule 5-17(1)?

 

The terms “remote” and “under-served by licensees” are not defined in the Rules. Council’s position is that these terms should be interpreted narrowly and strictly, in keeping with the Superintendent’s goal of imposing broad restrictions on dual agency.

It is important to remember that in order to fall within the exception set out in section 5-17(1) of the Rules, all three criteria must be satisfied: 

  1. the real estate must be in a remote location, 
  2. the remote location where the real estate is located must be under-served by licensees; and
  3. it must be impracticable for the parties to be provided trading services by different licensees.

If a licensee or a managing broker is unsure if the exemption applies to their circumstances, it is recommended that they seek legal advice regarding the specific details of their transaction. 

 

 

Show/Hide AnswerWhat does “impracticable” mean?

Q: What does “impracticable” mean in Rule 5-17(1)?

Impracticable means “not capable of being done.”

Impracticable is different than simply “inconvenient.”

Before offering limited dual agency under the exception in section 5-17(1), ask yourself:

  • Is there no way another licensee could provide the parties to the trade with independent representation?
  • What steps have you taken to satisfy yourself that dual agency is the only available option? 

If a licensee or a managing broker is unsure if the exemption applies to their circumstances, it is recommended that they seek legal advice regarding the specific details of their transaction.

 

 

Small Brokerages & Teams

 

 

Show/Hide AnswerWhat about small brokerages?      

Q: I work at a small office with one managing broker and one representative. Once the new Rules take effect on June 15, 2018, can my office, through designated agency, act for a buyer and seller in a single transaction? 

No. 

A small office must, at a minimum, have a managing broker and at least two other licensees in order to represent both a buyer and seller in a transaction through designated agency. 

Any office practicing designated agency, regardless of its size, must also have information barriers in place to ensure that client information is appropriately isolated and protected. 

 

Q: I am licensed as a representative and work in a small office. My managing broker is my mother, and the other representative working in my office is my husband. On or after June 15, 2018, can my husband and I, through designated agency, act for a buyer and seller in a transaction? 

 It depends. It may be acceptable if you have the informed consent of both clients, and as long as you ensure that: 

  • The confidential information of each client is protected; and 
  • You and your husband each exercise independent professional judgment, and act in the best interests of your clients. 

If you are the designated agent for the seller, and a close relative of yours is the designated agent for the buyer, you and the other designated agent are both in a conflict of interest. Each of you must disclose this conflict to your respective clients so they can decide whether they wish to seek different representation.

Even if your respective clients consent to you and your husband acting as their designated agents in the transaction, doing so will expose you, your husband, and your brokerage to significant risk. You and your husband should carefully document all aspects of the transaction, and be prepared to have your conduct in the transaction scrutinized at a later date.

 

Q: I am the managing broker of a small brokerage. Once the new Rules take effect on June 15, 2018, can I act as a designated agent for a client while also acting as my licensee’s managing broker in the same transaction?

No. You cannot act as a designated agent for the buyer while also acting as your licensee’s managing broker for the transaction.

It would not be appropriate for you to act as designated agent for the buyer while also supervising your licensee (the designated agent for the seller.) To do so would create a conflict between your duty as managing broker to treat the interests of all clients of the brokerage in an impartial and even-handed manner, and your duty as a designated agent to put your client’s interests ahead of all others. Instead, you can either:

  • With the buyer’s consent, designate another licensee of the brokerage to represent the buyer; or 
  • Act as designated agent for the buyer, but delegate your duties as managing broker in respect of the transaction to another licensee of the brokerage. For a more detailed explanation of how this may be done, see the Brokerage Standards Manual.

 

Q: I am a licensee at a brokerage in a town of 2,000 people. There are two licensees at my brokerage: myself and my managing broker. While acting as the designated agent for a seller, an unrepresented buyer asks me if I can represent her in making an offer to purchase my seller client’s property. Once the new Rules take effect on June 15, 2018, will I qualify for the exemption to the rule prohibiting dual agency?

Unless you and your managing broker can make a strong argument that all three conditions for the exemption to the rule prohibiting dual agency are satisfied, you should not consider providing limited dual agency.

You need to ask yourself the following questions:

  • Is my town remote? 
  • Is it also underserved by licensees? 
  • Would it be impracticable (i.e. impossible) for another licensee to represent the buyer? For example, is there no other licensee in my town, or in another community, who could provide independent representation to the buyer?

Unless you and your managing broker can make a strong argument that all three conditions are satisfied, you should not consider providing limited dual agency. The Council will be examining any disclosures of limited dual agency very closely, to make sure that consumers are protected.

 

Show/Hide AnswerWhat about teams? 

Q: When the new Rules come in to place on June 15, 2018, how will teams be affected by the changes to dual agency?

In most cases, the members of a team are considered to be collectively the designated agent of a client. 

Accordingly, anything that an individual designated agent is required to do under the Rules, a team (acting collectively as a designated agent) is required to do as well.

 

Q: I am the member of a real estate team. The members of my team are the designated agents for the seller of a property. An unrepresented buyer wishes to make an offer to purchase my team’s seller client’s property. Once the new Rules come into effect on June 15, 2018, can my team deal with the unrepresented buyer?

 

With appropriate disclosures, the Team can deal with an unrepresented buyer. However, the Team should:

  • Encourage the unrepresented buyer to seek independent representation from another licensee; and
  • Consider the risks of working with unrepresented parties.

Working with unrepresented parties exposes licensees to risk:

  • If the licensee is not careful, they may slip into an implied agency relationship with the unrepresented party. Then the licensee will be in an undisclosed dual agency situation, and dual agency is prohibited.
  • Even if the licensee deals with the unrepresented party in an appropriate and professional manner, if the unrepresented party subsequently claims that the licensee gave them advice, or induced them to remain unrepresented, it will be a “he said, she said” scenario.

Any time a licensee deals with an unrepresented party, the licensee should be very cautious and document in writing all discussions with the unrepresented party.

 

Q: I am a member of a real estate team. The members of my team are the designated agents for the seller of a property. An unrepresented buyer approaches me and asks if I can be his designated agent and represent him in making an offer to purchase my team’s seller client’s property. Once the new Rules come in to place on June 15, 2018, can I stop acting as a designated agent for the team’s seller client, and begin acting for the buyer as his sole designated agent?

 

No. You should encourage the buyer to seek independent representation.

 

You cannot end your agency relationship with the seller and begin acting for the buyer as his designated agent, even with the consent of the seller and buyer, because:

  • In ending your agency relationship with the seller, you would be preferring your own interests and the interests of the buyer to the interests of the seller; and
  • You would likely have received confidential information from the seller that would be directly relevant to the buyer’s position in the ongoing transaction. Thus, your ability to advise and represent the buyer would be impaired by your inability to disclose the seller’s material confidential information.

 

 

Current & Former Clients 

 

 

Show/Hide AnswerWhat about current clients? NEW – JANUARY 11

Q: I am the designated agent for a seller. A buyer I am representing under an exclusive buyer’s agency agreement wants to make an offer to purchase my seller client’s property. What should I do after the new Rules come into effect on June 15, 2018?

You should not continue to act for either client in this scenario. You should refer your buyer client and your seller client to get independent professional advice (i.e. another licensee).

You cannot act for both clients in this scenario (even with their consent) because it would amount to dual agency, which is prohibited.

If an unanticipated conflict arises between two existing clients, a licensee should not resolve the conflict by keeping one client and referring the other client to another licensee, because:

  • you would be preferring your own interests and the interests of the client you are keeping to the interests of the client you are referring out; and 
  • you would likely have received confidential information from your departing client that would be directly relevant to your continuing client’s position in the ongoing transaction. Your ability to advise and represent your continuing client would be impaired by your inability to disclose your departing client’s material confidential information.

 

Q: I am the designated agent for a seller. A potential buyer with whom I have been dealing for several weeks as an unrepresented party wants to make an offer on my seller client’s property. What should I do after the new Rules come into effect on June 15, 2018?

You should carefully consider whether you have created an implied agency relationship with the buyer. If you are, you should refer both your seller client and the buyer to other licensees.

In the weeks you have been dealing with the buyer as an unrepresented party, have you provided the buyer with advice, received confidential information, or otherwise dealt with the buyer in a manner that could reasonably have led the buyer to believe he is your client?

If you are not in an implied agency relationship with the buyer, you may continue dealing with the buyer as an unrepresented party. You can provide the buyer with limited assistance in making an offer to purchase your seller client’s property, provided you made the required disclosures to the buyer. But keep in mind that dealing with unrepresented parties creates risks for consumers and for you, the licensee.

If you are in an implied agency relationship with the buyer, then you cannot assist the buyer in purchasing your seller client’s property. Doing so would amount to dual agency, which is prohibited.

If an unanticipated conflict arises between two existing clients (regardless of whether one of those client relationships was created by implied agency rather than an express agency agreement)is in an “implied” agency relationship with you), you should not resolve the conflict by keeping one client and referring the other client to another licensee, because:

  • you would be preferring your own interests and the interests of the client you are keeping to the interests of the client you are referring out; and 
  • you would likely have received confidential information from your departing client that would be directly relevant to your continuing client’s position in the ongoing transaction. Your ability to advise and represent your continuing client would be impaired by your inability to disclose your departing client’s material confidential information.

 

Q: I am the designated agent for a seller. I showed the seller’s property to an unrepresented buyer who now wants me to show them other homes in the area. What should I do after the new Rules come into effect on June 15, 2018?

Before showing your seller client’s property to the unrepresented buyer, you should have advised the buyer that you could not offer him agency as you are already the designated agent for the seller. You should also have provided the buyer with the required disclosures.

You may wish to refer the buyer to another licensee who can show him other homes in the area. If there is any possibility that the buyer is going to want to revisit the possibility of purchasing your seller client’s home, you may not wish to take the buyer on as a client.

Let’s say that you begin acting as the buyer’s agent, or you show him other homes and an implied agency relationship develops. Then the buyer decides that he wishes to make an offer on your seller client’s property. You would be unable to continue acting for either the seller or the buyer.

If an unanticipated conflict arises between two existing clients (regardless of whether one of those clients is in an “implied” agency relationship with you), you should not resolve the conflict by keeping one client and referring the other client to another licensee, because:

  • you would be preferring your own interests and the interests of the client you are keeping to the interests of the client you are referring out; and 
  • you would likely have received confidential information from your departing client that would be directly relevant to your continuing client’s position in the ongoing transaction. Your ability to advise and represent your continuing client would be impaired by your inability to disclose your departing client’s material confidential information.

 

 

Q: I am the designated agent for two buyers who are interested in making an offer on the same home. What should I do after the new Rules come into effect on June 15, 2018?

You should stop acting for both of the buyers and refer each of them to separate designated agents.

You cannot act for both clients in this scenario (even with their consent) because to do so would amount to dual agency, which is prohibited by Rule 5-16.

If an unanticipated conflict arises between two existing clients, a licensee should not resolve the conflict by keeping one client and referring the other client to another licensee, because:

  • you would be preferring your own interests and the interests of the client you are keeping to the interests of the client you are referring out; and 
  • you would likely have received confidential information from your departing client that would be directly relevant to your continuing client’s position in the ongoing transaction. Your ability to advise and represent your continuing client would be impaired by your inability to disclose your departing client’s material confidential information.

 

Q: Last month, I made a listing presentation to a seller, but I wasn’t awarded the listing. Now, I have a buyer client who wants to make an offer on the property that was the subject of my unsuccessful listing presentation. What should I do after the new Rules come into effect on June 15, 2018?

You may be able to represent your buyer client in making an offer on the seller’s property, depending on the circumstances.

If, before making your listing presentation to the seller, you

  • disclosed to the seller that you would be treating him as an unrepresented party; and 
  • warned the seller that as he was not in an agency relationship with you, you would be under no obligation to protect any of his confidential information;

then you may be able to represent the buyer in making an offer on the seller’s property.

If you were not clear with the seller about the nature of your relationship, and allowed the seller to provide you with confidential information in the course of your listing presentation without warning him that you would not be obliged to keep it confidential, then acting for the buyer against the seller in this transaction may put you at risk.

 

Show/Hide AnswerWhat about former clients? NEW – JANUARY 11

Q: I am the designated agent for a seller, and I have been approached by a former client who is interested in my seller’s property. What should I do after the new Rules come into effect on June 15, 2018?

 

First, you should advise your former client that you cannot represent her as a client because you are already the designated agent for the seller. Give your former client the disclosures required under section 5-10 and 5-10.1 of the Rules.

Then, consider whether you can continue acting for your current seller client in the circumstances. Have you received confidential information from your former client that will impair your ability to act for your seller client?

If you are satisfied that you can continue to act for your current seller client, you should tell your current client that:

  • The potential buyer is your former client, and
  • Any confidential information you received from your former client while acting as her agent, you will not be able to disclose to your current client — even if it is material to the present transaction.

You cannot act for your former client in this scenario because it would amount to dual agency, which is prohibited. With appropriate disclosure to your current seller client, and with his permission, and after making appropriate disclosures to your former client, you may be able to deal with your former client as an unrepresented buyer.

However, before you continue acting for your current seller client you should think carefully about the confidential information you received from your former client while acting as her agent. You cannot disclose this information to your current seller client. Will that impair your ability to represent your seller client in the sale of his property?

Before acting for a client whose interests are opposed to one of your former clients, you should consider:

  • How long it has been since you acted for the former client? 
  • Was the confidential information you received from the former client specific to a particular transaction? Or was it generally relevant to all transactions involving that client? 
  • Was the past transaction involving your former client connected to the present transaction in which you are seeking to act against your former client?

If you continue to act for your current seller client, you cannot share with him any confidential information you received from your former client while you were acting as her agent. You are no longer in an agency relationship with your former client, but your obligation to protect her confidential information continues.