Conflicts of Interest
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 series of articles, noted real estate lawyer Bruce Woolley explores how agency affects the activities of teams, conflicts of interest, making referrals, sharing remuneration, 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.
As a real estate licensee, you are a “fiduciary”: a person in a position of trust. Fiduciaries have many duties, including the duty to avoid conflicts of interest. So what exactly is a conflict of interest?
In the case of Galambos v Perez (2009) the Supreme Court of Canada had this to say about conflicts of interest:
“A situation of conflict of interest occurs when there is a ‘substantial risk that the lawyer’s representation of the client would be materially and adversely affected by the lawyer’s own interest or by the lawyer’s duties to another current client, a former client, or a third person.”
This definition applies to all fiduciaries – whether lawyers or real estate licensees.
One of the most common conflicts of interest is where a licensee’s clients’ interests conflict with each other. This could arise where a licensee has been acting for two different buyers and now both buyers are interested in the same property. It could also arise where a licensee has a listing for a seller, and one of the licensee’s buyer clients becomes interested in the listed property.
The Rules now provide for what licensees should do if they find themselves and their clients in these situations.
Sections 5-16 and 5-17 of the Rules address the issue of conflicts of interest respecting existing clients by restricting dual agency to very limited circumstances (where a property is in a remote location, underserved by licensees, and where it is impracticable for the parties to find separate licensees). If all three of these conditions are met, the licensee can follow the provisions of section 5-17 of the Rules.
In circumstances where these conditions are not met, the licensee must address that conflict of interest by following the procedures set out in section 5-17 of the Rules. Basically, the licensee must either stop providing trading services to any client in the trade, or represent only one client in the trade by obtaining the appropriate agreement described in that section.
The provisions set out in sections 5-16 through 5-18 of the Rules are very similar to the rules governing lawyers. A lawyer must not represent opposing parties in a dispute — much like the restriction on dual agency for a real estate licensee whose clients have different interests. The principles are the same for all fiduciaries: you cannot ride two horses at the same time!
Learn more about managing conflicts of interest with these resources on RECBC’s Licensee Knowledge Base: