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Agency Guidelines

Agency Guidelines

Guidelines
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Acting for Buyers Checklist

Examples of considerations you should think about when entering into agency relationships with buyers.

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Acting for Sellers Checklist

Examples of considerations you should think about when entering into agency relationships with sellers.

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  • Guidelines

    BCFSA’s Guidelines provide a practical application of the information and give suggested best practice guidance to assist real estate professionals. These guidelines provide BCFSA’s interpretation of RESA and all other applicable legislation.

    In addition, BCFSA’s Guidelines may be a useful information source for the general public looking for information about standards of conduct for real estate professionals.

Purpose

These guidelines will assist you in understanding the different forms of agency that a brokerage and individual real estate professional can enter into with a consumer. It is important to remember that consumers place their confidence and trust in you as their agent and as their agent there are a number of obligations you must be aware of.

  1. Understand how an agency relationship is created and terminated.
  2. Understand how to discuss agency with a consumer or prospective client.
  3. Understand how to modify duties owed to a client when the relationship changes.
  4. How to avoid and mitigate the risks of unintentional implied agency.
  5. How past clients can impact your ability to provide all duties owed to your current clients.
  6. How agency affects teams.

Guidelines

Understand How an Agency Relationship Is Created and Terminated

Agency relationships can be created in a number of different ways, the most common being agency by express agreement. Agency by express agreement occurs when the agent and the principal explicitly agree to the agency relationship. The agreement can be oral or written; however, it is recommended that all of a real estate professional’s agency relationships be created by express written agreement.

In fact, under the Real Estate Services Rules (“Rules”), a written service agreement, which most commonly takes the form of an agency agreement, is required in many cases when providing real estate services.

This requirement can be waived by the prospective client. However, a real estate professional should think critically about accepting such waivers and seek further advice from their managing broker.

As important as understanding how an agency relationship is created is understanding how one can be terminated.

In most circumstances, your agency relationship will end once your contract with the client expires or when the transaction you have been hired to do has been completed and you’ve met all your obligations. Agency can also be terminated by mutual agreement (i.e., by cancelling the contract early). Be aware that the duty to maintain the confidentiality of a client’s information lives on past the end of the agency relationship. So just because you’re no longer acting as your client’s agent, you are not free from all obligations.

Learn more about confidentiality

Understand How to Discuss Agency With a Consumer or Prospective Client

It is important to always ensure that your clients, or potential clients, have all the information they need to make an informed decision about who they want to work with before entering into an agency agreement. This includes the need to discuss agency, and how the agency relationship works and what duties are owed under the relationship. The topic of agency can be difficult to understand, so it is important that you clearly explain the terms of the agency relationship before you enter into one.

There are many factors that can impact the type of agency relationship you can offer. For example, factors such as your brokerage model, whether you are part of a team, or how the consumer’s confidential information may be shared, and the types of real estate services being provided, should be considered.

Beyond explaining the particulars of the agency relationship being proposed, explaining potential obstacles that could impact and change the agency relationship through the course of your work is important. Dual agency, when permitted, and working with a past client on the other side of a transaction, are just a couple of examples that could require you and your client to modify your agency relationship by adjusting the duties owed to them.

Learn more about dual agency

Understand How to Modify Duties Owed to a Client When the Relationship Changes

If a situation arises where it becomes necessary to modify your obligations to your client, or, if there is no service agreement, a new Disclosure of Representation form must be created to outline the changes. Modification of duties may happen if your client wants you to share confidential information with another client, or when you need to limit the duties you owe to your client to address a conflict of interest. If you and your client determine that a modification of duties is in the client’s best interest, you must ensure they understand any potential risks that may result from the changes. Only when your client fully understands the impacts of modifying the duties owed should they be signing any amendments to the service agreement or disclosure of representation.

How to Avoid and Mitigate the Risks of Unintentional Implied Agency

Clear communication with each and every consumer is key to ensuring that everyone understands what information you can provide when you are not acting as a consumer’s agent, and what services can only be provided after an agency relationship has been created.

Whether at an open house or meeting with a consumer who is considering engaging your services, you must be cautious that you do not inadvertently create an implied agency relationship with an unrepresented party. This includes advising potential sellers what their home may be worth or soliciting confidential information from a consumer about their motivation to purchase or sell a property.

Despite your best intentions, if you inadvertently create an implied agency relationship, all obligations owed to clients under the Real Estate Services Rules are required. A failure to meet your fiduciary obligations could result in discipline and could expose you to other legal risks.

Aside from taking steps to encourage unrepresented parties to seek their own representation, risk mitigation involves setting the appropriate expectations in the relationship with an unrepresented party through:

  • Early, Open, and Clear Disclosure: From the very outset of the relationship with the unrepresented party, the real estate professional must make it clear that any services provided to the unrepresented party will occur outside of an agency relationship. This discussion should coincide with the delivery of the applicable disclosure forms relating to the agency relationship (i.e., the Disclosure of Representation in Trading Services Form, the Disclosure of Risks to Unrepresented Parties Form, and the Disclosure for Residential Tenancies). The real estate professional must take steps to ensure that the unrepresented party understands what it means to be in a no agency relationship with a real estate professional (e.g., no fiduciary duties, such as the duty of confidentiality, are owed).
  • Consistency: A real estate professional’s conduct must be consistent with their disclosures and conversations with the unrepresented party about the limits to their relationship. Later conduct that contradicts earlier communications, such as the giving of advice to the unrepresented party or encouraging the unrepresented party to disclose confidential information, could result in a finding of implied agency.
  • Documentation: A real estate professional should ensure that all disclosures are made and retained, and that any significant correspondence with the unrepresented party is in writing. Keeping a transaction folder (hard-copy or electronically) can help to consolidate all relevant information.

How Past Clients Can Impact Your Ability to Provide All Duties Owed to Your Current Client

Of all the agency obligations and duties owed to a client, confidentiality is the only one that extends forever. This can impact an agency relationship where it is discovered that a past client is either being represented by another brokerage or is unrepresented on the other side of a transaction from your current client.

Because you are not able to share confidential information about your past client, even if it will help your current client, it may be exceedingly difficult to act in your current client’s best interest. For example:

  • You had previously listed a home for a client and knew the details of the financial hardship your seller client was facing. After the listing expired, the seller relisted with a new brokerage. Now you have a buyer client interested in purchasing that property. Because of your ongoing duty of confidentiality owed to the seller, you are unable to provide your current buyer client with information about the seller’s financial position that could help them get the property at a potentially lower price.

When past clients create a conflict of interest and/or impact your ability to represent your current client, you will need to promptly disclose the conflict to your current client. You must then explain the options available to your client. In some cases, the conflict may be so great that you will be unable to represent your client any further. In some cases, you may be able to modify your agency relationship with your current client to address the conflict. You should discuss this with your managing broker.

How Agency Affects Teams

Teams represent themselves to their clients as a single entity and members of teams are assumed to share information with respect to the various persons to whom they provide real estate services. As a result, teams are not able to separate their agency relationships by having different team members represent clients with competing interests. For example, if John Smith and Wendy Chang are a team, John cannot act as designated agent for the seller and Wendy as designated agent for the buyer in relation to the same trade. This is because it is assumed that what one team member knows, the other also knows.

When entering into any service agreement, or making any disclosures, all members of a team must be identified. Every team member owes all fiduciary obligations outlined in the Real Estate Services Rules to that client, whether they are actively working with them or not.

FAQ on Teams and Agency

Relevant Cases

Case #1: Implied Agency

The licensee was listing agent for the seller of the property. A prospective buyer (“Buyer”) contacted the licensee about the property. The Buyer wanted the licensee to prepare an offer for the property. After discussion, the licensee and the Buyer agreed to enter a “customer” relationship (i.e. the licensee would deal with the Buyer as an unrepresented party). On the same day, the Buyer told the seller he intended to build a new house on the property.

A few days later, the Buyer signed a disclosure document indicating that the Buyer had a customer relationship with the licensee. The effect of establishing such a relationship with the Buyer was to preclude the licensee from offering agency services, including such matters as recommending or suggesting a price to the Buyer, and from negotiating on the Buyer’s behalf.

Over the course of the transaction, the licensee proceeded to advise the Buyer about the amount of his offer and other aspects of the transaction including the reasonableness of the seller’s asking price, the opportunities associated with building a new house on the property, and the licensee’s negotiations with the seller to reduce the price to Buyer. In doing so, the licensee provided services associated with a client rather than a customer relationship despite what had been represented in the Working with a Realtor (Designated Agency) brochure.

The licensee also provided inaccurate responses to the Buyer’s questions regarding the title to the property and failed to address the status of the tenant on the property in the offer.

The licensee was found to have:

  • Failed to take reasonable steps to avoid a conflict of interest when she established an implied client relationship with the Buyer of the property while also in a client relationship with the seller,
  • Failed to act with reasonable care and skill in connection with her knowledge about the title to the property including when she responded to the Buyer’s inquiry about the existence of an easement on the property; and
  • Failed to act with reasonable care and skill when she failed to include a provision in the contract which addressed the status of an existing tenant at the property when she knew or ought to have known that there was a tenant at the property and that the status of the tenant needed to be addressed in the contract.

Contraventions: [Duty to take reasonable steps to avoid conflict of interest] and [Duty to act honestly and with reasonable care and skill]

Read the full case (will open in a new tab)

Case #2: Implied Agency

The licensee (“Licensee A”) was a customer of a prospective buyer of a property (the “Buyer”), who regularly provided hair salon services to Licensee A. While getting his hair cut by the Buyer, Licensee A introduced a condominium investment opportunity to the Buyer, advising her that it was a profitable investment that had great pre-sale prices.

Licensee A provided the Buyer with information regarding the investment opportunity, including

  • The approximate price for the unit (including the possibility of a $30,000 price adjustment, an early bird incentive);
  • That the Buyer could sell the unit or assign the contract for the unit before the completion date with the developer’s consent;
  • That Licensee A would represent the Buyer in the transaction and take care of all the paper-work as the Buyer’s understanding of written English was minimal and she required assistance;
  • Information related to the reputation of the developer;
  • Current market conditions; and
  • That pre-sale contracts have been known to be assigned prior to completion for a profit.

The Buyer decided to make an offer on the unit.

Licensee A provided the Buyer with the contract of purchase and sale and certain disclosure documents, including an Agency Disclosure Form and a Working with a Realtor form, that named another licensee (“Licensee B”) as the Buyer’s agent. In fact, Licensee B was the developer’s agent.

After execution of the contract of purchase and sale, but before the completion of the transaction, Licensee B discovered that the Agency Disclosure Form was incorrect and sent a notice to Licensee A stating that Licensee B was acting for the developer and that Licensee A was the Buyer’s agent.

Licensee A later claimed that he never received the notice. Licensee A told the investigators that it was his understanding that he was not acting as the Buyer’s agent for the transaction, and so he did not provide a detailed explanation to the Buyer of the terms of the contract of purchase and sale or any other documents related to the purchase of the property prior to the Buyer’s execution of the documents.

The Buyer said she had not spoken to nor heard of Licensee B at the time she signed the documents for the purchase of the property and that throughout all her communications and meetings with Licensee A, his actions led her to believe that he was acting as her agent.

Licensee A was found to have:

  • Failed to disclose the nature of the representation he would be providing to the Buyer; and
  • Failed to act in the best interests of his client, the Buyer, when he:
    • Failed to explain the content of the contract of purchase and sale;
    • Failed to property explain the $30,000 price adjustment that was promised to the Buyer; and
    • Failed to go through with the Buyer and explain all forms related to the Buyer’s purchase of the property.

Contraventions: Sections [Duty to act in best interests of client], [Duty to act with reasonable care and skill], and [duty to disclose nature of representation] of the Rules

Read the full case (will open in a new tab)

Managing Broker Considerations

Managing brokers and brokerage owners play an active role in determining whether to operate under designated agency or brokerage agency. If opting to operate under designated agency, a trading services brokerage needs to ensure that all confidential client information is kept from all other real estate professionals at the brokerage.

Based on your brokerage model, you must ensure that your real estate professionals understand the obligations owed by the brokerage and themselves when entering into an agency relationship. These considerations should also be made when dealing with past clients and unrepresented parties to a transaction. A robust policy and procedures manual will ensure your real estate professionals know the importance of agency obligations and what the expectations are when licensed with your brokerage.

Keeping the brokerage policy and procedures manual current is also important. As real estate trends change, you may find that policies addressing new issues that were not previously common is prudent. Reviewing these changes and how they may impact an agency relationship with real estate professionals licensed to your brokerage will also develop enhanced competency among your real estate professionals.

FAQs on issues for small brokerages

Applicable Section of RESA/Real Estate Services Regulation/Real Estate Services Rules

  • Section 30, Real Estate Services Rules, Duties to Clients
  • Section 31, Real Estate Services Rules, Modification of Duties
  • Section 32, Real Estate Services Rules, Designated Agency
  • Section 43, Real Estate Services Rules, Written Service Agreements Required in Some Cases
  • Section 49, Real Estate Services Rules, Representations as to Service Agreements
  • Section 63, Real Estate Services Rules, Restrictions on Dual Agency

Definitions

Designated agent: means one or more licensees designated by the licensee’s or licensees’ related brokerage as the exclusive licensee or licensees, of all of the licensees related to that brokerage, to provide real estate services to a client of the brokerage in respect of a trade in real estate;

Dual agency: means the representation, in respect of a trade in real estate, by the brokerage of the following:

  1. both the seller and the buyer as clients;
  2. both the lessor and the lessee as clients;
  3. both the assignor and the assignee as clients;
  4. 2 or more buyers, lessees or assignees, as the case may be, as clients who have conflicting interests in respect of the trade in real estate;

Client: means, in relation to a licensee, the principal who has engaged the licensee to provide real estate services to or on behalf of the principal

Unrepresented party: means, in respect of a trade in real estate, a party to the trade in real estate who is not a client of a licensee for the trade in real estate.

Strata lot owner: means a person who is the owner, as defined in the Strata Property Act, of a strata lot

When providing real estate services, the nature of the relationship that is created between the buyer/tenant, seller/landlord, or strata corporation and the brokerage, including you as the real estate professional, is important. The relationship may be either a one client agency relationship, dual agency (in restricted circumstances), or no agency relationship. These distinctions are important for both the brokerage and the buyer/tenant or the seller/landlord to consider, since the nature of the relationship that is established determines the duties and obligations of both you and the brokerage. Regardless of the type of relationship that has been established, under the Rules, you must act honestly and with reasonable care and skill whenever you are providing real estate services. You must also ensure that prior to providing any real estate services you provide the required disclosures.

Learn more about disclosures