The Agency Series
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 the next several issues of Report from Council, noted real estate lawyer Bruce Woolley will explore aspects of agency, from the basics to more in-depth examinations of 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 will be essential reading. Look for one in each issue of Report from Council through 2019.
A good understanding of the basics of agency relationships can help licensees to avoid inadvertent breaches of their duties to their principal, that could end up as the subject of a lawsuit or an RECBC discipline proceeding.
Who’s Who in Agency Relationships
- An agent is a person who is given permission to act on behalf of another person.
- The principal is the person for whom the agent acts.
Sometimes licensees may wonder, “What am I authorized to do as an agent? “
To answer that, you’ll need to consider:
- What is in the agency agreement. This could be a multiple listing agreement or an exclusive buyer’s agency agreement. Those agreements set out in detail what the licensee is authorized to do, and what duties the licensee and the licensee’s related brokerage owe to the principal.
- What is customary for real estate agents. Agents can do what is customary in the profession and what is reasonably necessary to carry out the licensee’s duties, even if the customs and the acts reasonably necessary are not set out in the agency agreement. However, if the agency agreement does not allow a customary duty, then the agent must abide by the terms of the agency agreement.
Real estate agents have special legal duties known as fiduciary duties. The fiduciary duties include:
- the duty to avoid conflicts of interest,
- the duty of full disclosure and
- the duty of confidentiality.
These are duties of loyalty – the highest duties at law. It is very important to understand that the interests of the principal (the beneficiary of the duties) are dependent on the agent’s actions. As an agent with fiduciary duties, you are an advocate for your principal, not just a facilitator of the transaction. We will discuss the basics of fiduciary duties in further articles, as well as the concept of informed consent.
The agency relationship
Entering into an agency relationship is an important step for the principal. The principal must fully understand what the agency relationship involves, and the duties the agent owes to the principal.
If you intend to deal with a consumer as an unrepresented party, you must make this absolutely clear as soon as possible. We’ll discuss the disclosure obligations to clients (principals) and unrepresented parties in upcoming articles.