REAL ESTATE AGENCY IN BRITISH COLUMBIA

Assumed seller sub-agency

-Prior to 1994, in line with the development of the MLS®, most residential real estate agents in British Columbia operated under the “assumed seller sub-agency” model

-all of the agents involved in the transaction, even those bringing the buyer into the transaction or working with the buyer, worked together to sell the listed property.

-the agent working with the buyer was known as the “selling agent/brokerage”

-In the listing contract, selling agents were referred to as “cooperating brokerages/agents”

-At law, the selling agent was assumed to be a sub-agent of the seller

-As a sub-agent of the seller, to compensate the selling agent for their efforts in assisting to sell the property, the listing agent would split or share the commission payable under the listing contract with the selling agent.

-Therefore, selling agents did not normally ask for any direct compensation from the buyer.

-as a sub-agent of the seller (rather than an agent for the buyer), the selling agent owed all agency duties to only the seller.

-The listing agent also owed all agency duties to the seller.

-very confusing for the typical buyer, who in most cases, mistakenly believed that the selling agent was the buyer’s agent and was acting in the buyer’s best interests.

Assumed buyer agency

-the industry in British Columbia and elsewhere across Canada adopted this new system in 1994

-the selling agent was assumed to be the agent for the buyer (rather than a sub-agent of the seller)

-selling agents owed their agency duties to the buyer

-even though they were still referred to as a cooperating agent in the real estate transaction, the selling agent worked exclusively for the buyer,

-the industry practice of the listing agent sharing or splitting its commission with the selling agent continued and still continues today (i.e., in many cases, a buyer will not directly pay any form of compensation to their agent).

Brokerage agency

a model of agency where the brokerage acts as the agent for the client, and as such, all of the brokerage’s licensees are considered at law to be agents for the client.

-In both the assumed seller sub-agency and assumed buyer agency models, the agent was not the individual licensee who acted for the client, but rather the brokerage under which the licensee was licensed.

-Under RESA, individual licensees provide real estate services on behalf of their brokerage.

-Therefore, the signatories and parties to the agency contract were the client (seller or buyer) and the brokerage.

-The consequence of the brokerage being the agent meant that all of the licensees within the brokerage were considered at law to be agents of the clients.

-a brokerage could not act for multiple clients within a single transaction without being in a conflict of interest, even if each client worked exclusively with different licensees within that brokerage.

A conflict of interest occurs whenever an agent’s duties to one party conflict with the agent’s duties to another party.

Limited dual agency

an agency relationship where a brokerage or licensee acts for multiple parties in a single trade in real estate (e.g., a buyer and a seller or two buyers), but because the duty of loyalty cannot be fulfilled to both clients, the clients agree to a limited form of agency representation

-involves treating both parties impartially (equally) and disclosing all relevant information to both (with some exceptions).

-rather than focusing on fulfilling the key fiduciary duty of loyalty to the client, where the agent advocates for the client so that the client obtains the best result, a limited dual agent focuses on following the instructions of each client, providing relevant information, and assisting the clients to enter into a binding trade in real estate.

-was also required when the same individual licensee wished to act for multiple parties in a transaction

-In reality, within a particular transaction where the brokerage was in a limited dual agency relationship with the seller and buyer, even though the brokerage (and the licensees involved) were supposed to be acting in a limited dual agency capacity (by providing equal service to both clients), this often did not occur in reality. Each licensee treated their own client as if in a sole agency relationship.

Designated Agency

a model of agency whereby the brokerage appoints one or more specific licensees to act as the sole agent(s) of the buyer or seller, and it is the designated agent who owes the fundamental agency duties to the buyer or seller, while the brokerage and its other licensees, do not.

-In June 2012, the industry moved away from brokerage agency and adopted designated agency.

-while the client still signs a services contract with a brokerage, the client agrees that the brokerage will appoint one or more specific licensees to act as the sole agent(s) of the client.

-The brokerage and its licensees, other than the designated agent(s), do not owe any agency duties to the client

-eliminates the conflict of interest that previously arose when two licensees within the same brokerage

-limited dual agency was permitted and still continued to be utilized by licensees if a single designated agent (or team of designated agents) wished to represent multiple adverse parties in a trade in real estate

-brokerages are free to offer their services through alternative models of agency, provided they comply with RESA.

Three key responsibilities a brokerage providing designated agency has

1. It must supervise the designated agent or agents to ensure they fulfill their duties to their client appropriately

2. It must not disclose any confidential information concerning a client to any other person unless authorized by that client or required by law

3. It must treat the interests of all clients in an even handed, objective and impartial manner

The Prohibition/Ban on Dual Agency

-Sometimes, limited dual agency was offered in situations where it was not appropriate

-While the definition of dual agency refers to the representation by the brokerage of multiple clients with conflicting interests in a single trade in real estate, the Rules clarify that dual agency does not occur if different designated agents within the brokerage act for each of the clients

-That is because the designated agency system shifts the obligation to fulfil all agency duties to the client from the brokerage and all the brokerage’s licensees to only the designated agent(s) of the client.

-the prohibition against dual agency prevents a single designated agent (or team of designated agents) from acting as an agent for two or more parties with conflicting interests in a trade in real estate.

-Despite this, licensees are permitted to provide limited trading services to consumers outside of an agency relationship → customer relationship (in contrast to a “client relationship”, whereby the licensee would be an agent of the consumer) → “no agency” relationship.

“No agency” relationship

-the licensee does not owe any agency duties to the consumer, who will be known as an “unrepresented party”

-the licensee will not be obligated to look after the unrepresented party’s interests above all else nor owe the unrepresented party the duty of confidentiality, among other things

-licensee must, in addition to providing the Disclosure of Representation in Trading Services form also provide the unrepresented party with the Disclosure of Risks to Unrepresented Parties

The Narrow Exception for Dual Agency in Remote Locations that are Under-Served by Licensees

-the trade in real estate must be in a remote location that is under-served by licensees and it is impracticable for the parties to be provided trading services by different licensees.

-The former Real Estate Council interpreted “remote” and “under-served” narrowly and strictly in keeping with the goal of imposing broad restrictions on dual agency → rare

-Before offering limited dual agency under the exception in section 64, ask yourself:

• Is there no way another licensee could provide the parties to the trade with independent representation?

• What steps have you taken to satisfy yourself that dual agency is the only available option?

-the licensee must first provide all parties with a prescribed disclosure form known as the Disclosure of Risks Associated with Dual Agency form

→ which must be signed by the managing broker

→ sets out generally why the brokerage believes the exception for dual agency is triggered, the duties owed to the parties by a dual agent, and the risks associated with a dual agency relationship

→ not a form or agreement that is prescribed by BCFSA

→ requires the consent of both clients; they must agree that the licensee acting for each of them will not owe either a duty of loyalty but rather will treat each equally when providing them with real estate servic

BCFSA Prescribed Standard Forms

-licensees must use the exact form as provided by BCFSA in the manner specified in RESA or the Rules, and must not alter the form in any way.

-Examples:

• the Disclosure of Interest in Trade form (under section 53 of the Rules);

• the Disclosure of Representation in Trading Services form (under section 54 of the Rules); and

• the Disclosure of Risks to Unrepresented Parties form (under section 55 of the Rules).

Other Standard Forms

- other standard forms that are made available to licensees by BCFSA (which are not mandatory) and other organizations (which may or may not be mandatory according to the rules of the organization).

-The largest provider in British Columbia of standard forms is BCREA

-BCREA has a Standard Forms Committee made up of trading services licensees, lawyers, and other individuals to oversee these standard forms and ensure that they remain accurate, relevant, and useful.

-generally distributed by the local real estate boards for their member REALTORS® through the WEBForms database.

-It created the Multiple Listing Contract and the Buyer’s Agency Exclusive Contract and the Buyer Agency Acknowledgement