Fiduciary Duties: Working in Your Client’s Best Interests
A clear understanding of agency – your duties and responsibilities, your client’s duties and responsibilities – is essential for good practice as a real estate licensee. In this issue of Report from Council, and in issues throughout 2019, noted real estate lawyer Bruce Woolley explores aspects of agency. Learn how agency affects the activities of teams, conflicts of interest, making referrals, sharing revenue, and more. Whether you are an experienced licensee looking for a refresher on agency or a new licensee still establishing your practices, these articles are essential reading.
The term “fiduciary” is an important concept for real estate licensees. In the case of Ocean City Realty, the BC Court of Appeal made it clear that the relationship between a real estate licensee and his or her principal is invariably construed as a fiduciary relationship. Fiduciary duties can arise even when there is no agency contract, when the party to a real estate transaction places trust or confidence in a licensee.
Fiduciary duties arise in circumstances where a person (the licensee) has been entrusted to look after the best interests of someone else (the principal).
Stop and think about that. You are in the same legal position as a doctor or lawyer. Make sure that your principal’s interests are respected.
As a fiduciary, your duties include:
- the duty of confidentiality,
- the duty of loyalty,
- the duty to avoid conflicts of interest, and
- the duty of full disclosure.
Those duties can be modified by the Rules made under the Real Estate Services Act. For example, section 5-18 of the Rules, Addressing conflicts of interest when acting for multiple clients, gives licensees a specific road map to follow when dealing with conflicts respecting current clients.
The duty of confidentiality continues to death. Other fiduciary duties do not cease on execution of the contract of purchase and sale. In Baillie v Charman, the BC Court of Appeal opined that the duties continue up to the date when the sale completes.
The BC Court of Appeal has made it absolutely clear that the onus is on the licensee to prove that the transaction was entered into after full and fair disclosure of all material circumstances and of everything known to the licensee respecting the subject matter of the contract which could be likely to influence the conduct of the principal. The burden of proof that the transaction was a righteous one rests upon the licensee. To put that in its plainest terms, the licensee must be able to prove that he or she met their fiduciary obligations. If that proof is not before the court, the licensee will be found to be in breach of the licensee’s fiduciary duties.
A fiduciary is not an intermediary or a facilitator. A fiduciary is an advocate for the client’s best interests. A fiduciary does not let his or her own interests conflict with those of the principal. When you act as a licensee, you may want to imagine your principal standing right next to you, hearing every word you speak and hearing every bit of information you receive. Your actions and words should demonstrate to your principal that you truly have their best interests at heart.