Licensees Have a Duty to Avoid All Conflicts of Interest

Real estate professionals in B.C. perform essential duties for their clients. A conflict of interest arises when a real estate professional is unable to fulfill their client obligations due to the competing interests of another party. This can happen in real estate sales, or rental property and strata management. Here are just some examples of conflicts of interest to be avoided:

• Both the home seller and buyer want to be represented by the same real estate professional. 

• This is called dual agency and is only permitted in rare circumstances when certain criteria are met.  
• A variation of this can occur when two buyers represented by the same real estate professional want to make offers on the same property. It would be impossible for a licensee to act in the best interest of both buyers since their interests compete. 

• A consumer wants to buy a property owned by their real estate professional…and vice versa, a real estate professional wants to buy their client’s listing.

• It is an indefensible conflict for a real estate professional to represent a buyer for a property they own or to act as a buyer and purchase a property they have listed for sale. 
• The real estate professional would be unable to put their client’s needs ahead of their own desire to sell their property for as much as possible or buy a property for the lowest price. 

• A strata lot owner (e.g. condo or townhouse owner) wishes to hire a rental property manager to manage their strata lot unit, who is licensed with the same brokerage that provides strata management services on behalf of their strata corporation.

• Part of a strata manager’s duties are to enforce the bylaws of a strata corporation at the direction of their client’s governing body, the strata council.  
• The enforcement of strata bylaws could contrast with the needs of the strata lot owner who may wish to protect the interests of their tenant who, for example, may be falsely accused of violating the strata’s noise bylaws by the strata council. The brokerage may find it difficult to act in the best interest of their rental property management client when receiving instructions from their strata council client to enforce the noise bylaw against their tenant, including the application of fines against the owner’s strata account, despite the tenant’s claim they were not contravening the bylaw.   
• In this situation, the brokerage may wish to modify its duties to the rental property management client, the strata lot owner, in accordance with section 31 of the Real Estate Services Rules (“Rules”) by designating them as a secondary client, while maintaining the strata corporation as its primary client. By modifying the duties in this way, the brokerage would owe all the duties set out in section 30 of the Rules to the strata corporation client, and limited duties when providing rental property management service on behalf of the strata lot owner.   

• A potential home buyer discovers that they are the former client of the listing real estate professional of a property that they are interested in buying.

• The listing real estate professional has confidential information about their past clients, so a conflict arises because they must maintain confidentiality and respect their clients’ personal information, past and present.  
• This scenario may be challenging to avoid in smaller B.C. communities  

• A strata lot owner asks an employee or licensee of a brokerage managing their strata corporation to represent their proxy vote at the upcoming AGM.

• When an employee or licensee of a strata management brokerage which manages a strata corporation acts as a proxy for individual strata lot owners at the strata’s general meetings, there is a perceived conflict of interest, especially since a proxy holder could vote at their own discretion if the strata lot owner appoints them under a ‘general proxy’ on the proxy form and delegates their voting rights for a prescribed period of time. 
• For example, if a vote includes an increase in management fees in the strata’s proposed annual operating budget, or a wind up the strata corporation, it may be a conflict for the brokerage to allow its employee or licensee to hold a strata owner’s (non-client) proxy at the brokerage’s client’s AGM or SGM.  In Section 30 of the Rules, the duty of the brokerage and its related licensees to the strata corporation client is to take reasonable steps to avoid any conflict of interest. The managing broker can prepare for such a conflict by creating a brokerage policy that prohibits proxy voting for strata lot owners of strata corporations being managed by the brokerage. 

First and foremost, your duty is to avoid a conflict of interest, as best you can. If a conflict proves unavoidable, then you and your brokerage must take steps to address it. When any conflict is identified by a consumer or your real estate professional, they must immediately notify the client (and the managing broker) of the conflict and provide potential solutions to address or avoid it.

Check out our guide to spotting conflicts of interest

BCFSA has prepared a guide to help consumers spot and avoid conflicts of interest by real estate professionals. You can find it on our website at Consumer Guide to Conflict of Interest and invite your licensees to share it with clients. For more information on proxy voting and conflicts of interest, visit Voting for Clients at a Strata AGM and Conflict of Interest (Rental Property & Strata Management) Guidelines.