Guideline on Dual Agency

Purpose

Licensees providing mortgage services have obligations under the Mortgage Services Act (MSA), Mortgage Services Regulation (Regulation), and Mortgage Services Rules (Rules) regarding agency and the use of dual agency. This guideline provides guidance to licensees on:

• understanding dual agency and when it is permitted 
• determining whether a dual agency exemption applies and 
• dual agency disclosure requirements 

Fore more information on agency and disclosure requirements, visit the BCFSA Mortgage Services Knowledge Base. 

Guideline 

Understanding dual agency and when it is permitted

Dual agency occurs when a mortgage services licensee represents more than one party in the same transaction. As a general rule, dual agency is prohibited except in limited circumstances because it is a clear conflict of interest. Dual agency is an inherent conflict of interest because the licensee owes duties to multiple parties in the same transaction whose interests may not align. As a result, the licensee’s ability to act solely in the best interests of each client may be impaired.

It is important to note that dual agency does not occur when two brokers from the same brokerage represent different parties in the same transaction, provided the brokerage has formally designated them as agents for the different parties under a designated agency model.

Because of the inherent conflict of interest, mortgage brokers may act in a dual agency capacity only when the clients are:

1. Located in a remote or under-served area, where it is impracticable for the parties to obtain mortgage services from different brokers or 
2. Affiliated within the meaning of the Business Corporations Act, or are related parties as defined in the Rules.  

Determining whether a dual agency exemption applies

Whether a dual agency exemption applies depends on the facts of the specific situation. When assessing whether dual agency is necessary, licensees should consider factors such as:

• whether other mortgage brokers or brokerages are available nearby that could provide competent representation 
• whether the transaction requires specialized knowledge or expertise (for example, a construction or development mortgage) that is not readily available from a different broker or brokerage 
• whether the transaction is time-sensitive or urgent 
• whether there are other practical constraints that limit the ability to engage another mortgage services licensee 

These factors are not exhaustive. Brokers and brokerages must exercise professional judgement and consider any other relevant factors or circumstances when determining whether a dual agency exemption applies.

Dual agency disclosure requirements

Before engaging in dual agency, a mortgage broker must disclose to each client:

• the risks associated with dual agency and 
• the broker’s duties and responsibilities in a dual agency relationship 

To satisfy these requirements, mortgage brokers must use BCFSA’s prescribed Form 8 – Disclosure of the Risks of Dual Agency.  This form is used to explain the risks of dual agency to clients and document the reason dual agency is necessary.  The form must be signed by the principal broker and submitted to BCFSA.  

Modifying licensee duties 

In addition to completing Form 8, the brokerage must also enter into a written agreement with each client to modify the duties owed by the brokerage and its licensees. While the rules do not prescribe a specific form for this agreement, it must be made in writing before the brokerage acts under the modified duties.

Modifying duties is necessary because, in a dual agency relationship, a broker owes obligations to multiple clients whose interests may not align. As a result, it may not be possible for the broker to provide the full scope of duties that would otherwise be owed to each client. The written agreement ensures that clients are aware of these limitations, understand how the brokerage’s duties have been modified, and consent to the brokerage acting under those modified obligations.

The modification of duties may be documented in one of two ways

1. in a written service agreement or 
2. by amending the Form 1 – Disclosure of Representation where no service agreement exists 

The written agreement or amendment must clearly describe

• which duties under section 38 have been modified 
• how those duties have been modified and 
• which duties no longer apply 

Modifying licensee duties does not relieve the brokerage of its supervisory obligations. The brokerage remains responsible for overseeing licensee conduct and ensuring that all applicable duties owed to clients are fulfilled. The brokerage must also ensure confidential client information is not disclosed unless authorized by the client or required by law.

Principal broker considerations

Principal brokers play a key role in helping their brokerage identify, manage, and disclose potential dual agency situations, including determining whether an exemption applies. Because dual agency is generally prohibited and can create risks for clients, principal brokers must ensure appropriate oversight and controls are in place within the brokerage.

As the individual responsible for the brokerage’s day-to-day operations, the principal broker must provide effective supervision of mortgage brokers, employees, and anyone acting on behalf of the brokerage. Principal brokers should

• ensure licensees understand their obligations to avoid dual agency unless a permitted exemption applies 
• encourage licensees to address dual agency related concerns as early as possible 
• maintain appropriate oversight of the services being provided by licensees, particularly in complex or higher-risk transactions 

Policies and procedures 

Principal brokers should establish and maintain policies and procedures that help licensees identify potential dual agency situations and determine when an exemption may apply.

They should also ensure that licensees receive appropriate training on these policies and apply them consistently in practice. Consistent application of policies across the brokerage helps promote fair treatment of clients, supports regulatory compliance, and ensures similar situations are handled in a consistent manner.

Applicable section of Mortgage Services Act, its Regulations, or the Mortgage Services Rules    

MSA Rules

s. 76 [Restriction on dual agency]

s. 77 [Dual agency in under-served remote location]

s. 78 [Dual agency for affiliates or related parties]