Realtors are held to a high standard of professionalism, and have a legal duty to act in the best interest of their clients. Acting in their clients’ best interest involves disclosing information to their client where appropriate, and avoiding conflict of interest. This article aims to explain some of the more common situations in which a realtor is obligated to disclose certain information to their clients, and how they are supposed to avoid conflicts of interest.
For more thorough details on realtors’ legal obligations, read the Real Estate Rules, which are publicly available on the Real Estate Council of BC’s website here.
What is “Fiduciary Duty”?
When a realtor becomes your agent, you enter a fiduciary relationship with them where the agent owes you a fiduciary duty. Under this relationship, the realtor is required by law to act solely for your benefit, even if that results in a detriment to themselves.
This duty is the driving force behind all of the rules governing how realtors are to engage with their clients and represent them.
As a client, there are certain things that realtors are obligated to disclose to you in order to fulfill their fiduciary duties. The specific duties are listed under the Real Estate Rules, Division 2.
Disclosure of Representation
Before a realtor can represent you in a real estate transaction, they must first disclose to you their duties and responsibilities, and provide you information on how to file a complaint about their conduct should they act unprofessionally. In BC, this disclosure is standardized and you can see a copy of the disclosure form here.
Disclosure of Interest
Realtors are required to disclose whether they, or someone they’re close to, are the one buying your property, or if they’re the one selling you the property. This disclosure must be made even if the property is being bought or sold by the realtor indirectly. This is an important disclosure because it indicates that the realtor has an interest in the subject of the deal.
Disclosure of Risks to Unrepresented Parties
In some real estate transactions realtors find themselves acting for one party while the other party remains unrepresented. In these situations, the realtor has to disclose to the unrepresented party that the realtor is limited in how they can help, as the realtor has a duty to their own client above everything else. The realtor has to recommend that the unrepresented party seek professional advice from someone else.
Disclosure of Remuneration
Understandably, realtors are required to disclose the amount they anticipate being paid as a result of the services they provide to their clients. This should be disclosed as a dollar amount calculated based on the value of the offer for purchase of the property.
If a realtor expects to receive, directly or indirectly, any sort of income other than what they are supposed to receive directly from a client, they are required to disclose the source, the amount, and any other relevant facts about this additional income. For example, if a realtor receives a kickback for referring their client to a mortgage broker, lawyer, home inspector, or bank, they are required to disclose that to the client.
Avoiding Conflict of Interest
Realtors are unable to represent the buyer and the seller in the same transaction. This is known as “dual agency” and has been prohibited since 2018.
If a realtor finds themselves with multiple clients involved in a single transaction, the realtor has to either choose a single client to represent, or opt out of representing anyone in that deal. If they decide to pick one of the clients to represent, the realtor needs to have all of the parties sign a written agreement which states:
- The parties acknowledge the realtor is terminating their relationship with all but one of them due to the conflict of interest;
- A description of the conflict of interest;
- That the realtor may have confidential information about them and is prohibited from disclosing any of it;
- That the realtor may be limited in their ability to advise their remaining client due to their duty to maintain confidentiality for their now former clients; and
- A recommendation that the realtor’s now former clients seek independent professional advice.
With rules and regulations being regularly updated by RECBC, it’s important for realtors to stay up-to-date with what their obligations are, and for clients to know what information they’re entitled to receiving.
At Kane Shannon Weiler LLP, our clients include realtors and property owners, and we’re equipped to assist with every aspect of real estate transactions from conveyancing to real estate disputes. Get in touch with us to speak to one of our real estate lawyers!
Note to our Readers: This is not legal advice. If you are looking for legal advice in relation to a particular matter, please contact us.
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