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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.
These guidelines provide best practices for licensees regarding conflicts of interest when providing trading services.
To avoid any perception of a conflict of interest that doesn’t exist, anticipate situations that might place you into a perceived conflict and be transparent with your clients and colleagues, within the bounds of confidentiality.
Whenever you are in an agency relationship, you need to stay aware of situations where a conflict of interest might arise. It is your responsibility to recognize conflicts of interest when they do arise and to take prompt and appropriate action.
- Be proactive in anticipating and avoiding conflicts.
- Communicate early and often with clients about potential conflicts.
- Promptly provide clear written disclosure when conflicts arise.
Conflicts can arise at any point during an agency relationship. Many conflicts are easily identified well in advance. As a prudent real estate professional, you have a duty to take reasonable steps to avoid conflicts of interest. This can be done through proactive planning of your professional and personal activities.
Examples of common conflicts of interest that you can anticipate and avoid include:
- Conflicts of interest arising from secondary employment, such as working as a mortgage broker or contractor or performing other work in the broader real estate sector.
- Providing additional categories of real estate services (e.g. rental property management or strata management services), such as where you may have an interest in providing future rental property management services to a client who is considering acquiring an investment property.
- Buying your seller client’s property.
- Representing yourself in the sale of your own property to a client.
- Representing another party in a transaction involving your spouse, family partner or other “associate”.
- Loaning money to clients, thereby introducing your own financial interests into a potential transaction.
- Showing (or declining to show) properties to buyer clients where the share of commission offered by the listing brokerage does not meet your own expectations for remuneration.
You are strongly discouraged from actively courting and engaging in any of type of conflict of interest, including but not limited to the examples provided in the list above. You should not engage in any activity that constitutes a conflict of interest, where there is a high likelihood that you would not be able to fully act in your client’s best interest or have a personal interest in the transaction. In any situation where you identify a real or perceived conflict of interest, you should consult your managing broker.
While RESA does permit real estate professionals to engage in other employment that is not governed under the legislation, including in areas related to real estate, you should be aware that RESA requires that the remuneration you earn for providing real estate services (i.e. trading services, rental property management services or strata management services) must be received through the brokerage with which you are licensed. This means that the exemptions from licensing provided for in the Real Estate Services Regulation (“Regulation”) cannot be claimed by anyone who already holds a license under RESA.
Conflicts of interest can arise at any point during an agency relationship. Sometimes, conflicts can arise where there were none before. As a client changes their purchase or sale strategy, new information may alert you to the fact that a potential conflict is on the horizon and must be addressed.
A key means of avoiding conflicts of interest is to have transparent discussions with clients about potential conflicts of interest early and often. For example, the potential for a conflict of interest related to dual agency should be discussed at the outset of an agency relationship. The possibility of other types of conflicts of interest should also be discussed early in the relationship. On-going communication is also required to identify, at an early point, any unanticipated conflicts that may arise during course of the agency relationship.
For further information visit Agency Information.
Ensuring your clients are fully informed of both actual and perceived conflicts well in advance and having discussions about potential conflicts throughout the relationship will help to promote trust and transparency with your client and ensure that they are fully aware of facts about a potential transaction that may be material to their interests.
If, after taking reasonable steps to avoid the conflict of interest, a conflict still occurs, you must promptly disclose the conflict to your client. If it is not possible to completely avoid the conflict, you should discuss the situation with your client and present options for how to resolve the conflict. In some situations, you may not be able to maintain objectivity to fulfil your duties to your client and you may need to recuse yourself from continuing to act for them.
In deciding whether you can maintain sufficient objectivity to fulfil your duty to the client, it’s useful to think about the situation from the perspective of a third party who has the relevant knowledge and experience to understand and evaluate the appropriateness of your decision in an impartial manner. If such a person were to weigh all the relevant facts and circumstances in the situation, what would they likely conclude?
Some conflicts are required to be disclosed in writing on prescribed forms, others are not, however a prudent real estate professional should disclose all conflicts in writing. In some cases, you may not be able to resolve the conflict and will have to remove yourself from the transaction. For specific information on resolving conflicts involving representing multiple clients, see the guidelines for Addressing Conflicts of Interest when Acting for Multiple Clients.
When a client opts to permit you to modify your duties owed to them in order to address a conflict, appropriate amendments must be made to the service agreement or Disclosure of Representation.
The licensee offered to loan his clients the shortfall in funds in order to purchase Property A and as a means of enticing the clients to make an offer in excess of their budget. At no time did the licensee advise the clients that the loan offer on Property A may constitute a conflict of interest, nor did he suggest that the clients should obtain independent legal advice with respect to the loan offer, or appropriately document the loan offer as part of the offer to purchase. The client’s offer on Property A was not accepted.
The clients subsequently made an offer and received a counter-offer on Property B. The counter-offer was higher than their budget. In considering the counter-offer, the clients were still relying on the licensee’s previous loan offer associated with Property A. The clients accepted the counter-offer, but the licensee later reneged on the loan offer and the clients were left to find alternative financing.
The licensee was found to have created a conflict of interest by offering to lend money to the clients and become their creditor. By making such an offer, the licensee could not impartially carry out his duty to advise his clients about the benefits and risks of the loan terms, or the absence of loan terms. A loan would also provide the licensee with remuneration through loan interest, and increase his commission should the clients purchase a more expensive property than their original budget allowed.
Contraventions: Sections [Duty to act in the best interests of the client], [Duty to take reasonable steps to avoid a conflict of interest], [Duty to promptly and fully disclose conflicts of interest to the client], and [Duty to act honestly and with reasonable care and skill] of the Real Estate Services Rules (“Rules”).Read the full case
The licensee acted as the agent of the seller, and later also acted as the agent of the buyer in respect of the buyer’s assignment of the subject property. The licensee did not disclose to the seller his representation of the buyer/assignor. The licensee was found to have failed to avoid a conflict of interest by agreeing to represent the buyer/assignor and to promptly disclose the conflict of interest, which was material information, to both parties.
Contraventions: Sections [Duty to disclose to the client all known material information], [Duty to take reasonable steps to avoid a conflict of interest], and [Duty to promptly and fully disclose conflicts of interest] of the Rules.Read the full case
The licensee, while acting as the exclusive listing agent in regard to the assignment of a contract of purchase and sale of a property, decided that the property would be suitable for the licensee’s family and prepared an offer for her daughter. Prior to preparing the offer, the licensee did not disclose to her client that the offeror/assignee was her daughter. A few days later, on the same day that the offer was accepted, the licensee prepared a Disclosure of Interest in Trade Form and provided it to her client disclosing that the offeror/assignee was the licensee’s daughter. The licensee was found to have failed to take reasonable steps to avoid a conflict of interest by writing an assignment of contract of purchase and sale on behalf of the assignee/her daughter, and to promptly and fully disclose her conflict of interest to the assignor by not disclosing to the assignor that she was related to and acting on behalf of the assignee/her daughter.
Contraventions: Sections [Duty to act with reasonable care and skill], [Duty to act in the best interests of the client], [Duty to avoid conflicts of interest], and [Duty to promptly and fully disclose conflicts of interest] of the Real Estate Services Rules, among others.Read the full case
Brokerages need to have policies and procedures on how conflicts of interest will be addressed that are consistent with the Real Estate Services Rules. As a managing broker, you should be vigilant in identifying situations within your brokerage that could cause conflicts of interest to arise. These situations should be monitored on an ongoing basis to avoid conflicts where possible and mitigate or eliminate them when they cannot be avoided. Your brokerage’s related licensees should be adequately trained and properly supported to ensure that they understand the requirements and know how to avoid and address conflicts.
As a managing broker, you should pay particular attention to ensuring that:
- Designated agency is used as an effective means of avoiding potential conflicts of interest in respect of a trade in real estate;
- Confidential information is properly protected between licensees;
- Appropriate referral policies have been established and are enforced; and
- Transactions are appropriately evaluated and addressed when licensees engage in trading services on their own behalf, or for close friends or family.
It is also incumbent on you as a managing broker to properly address conflict of interest risk areas that involve your own duties. For example, when providing advice to two related licensees representing separate clients in the same transaction, you need to take particular care not to favour one side of the transaction through the advice or information that you provide. In addition, if you also provide trading services, you need to have a policy in place for dealing with any conflicts of interest that involve you directly. For example, you may want to establish a process to have an associate broker assist in situations where your direct involvement would create a conflict of interest.
As a managing broker, you must ensure that if representation is going to be initiated or continued despite a conflict, the real estate professional(s) involve – which may include you – promptly and fully disclose the conflict to the client(s) (preferably in writing). Depending on the nature of the conflict and whether a related licensee continues to represent the client, you may also need to modify the service agreements or provide a new disclosure of representation. In cases where the conflict results in a financial or in-kind benefit to the brokerage (such as earning a referral fee from a third party) additional disclosures are required.
You must also ensure that the Real Estate Services Rules and RESA are followed regarding keeping all proper documentation required in the brokerage file for the required amount of time.
- Section 30, Real Estate Services Rules, Duties to Clients
- Section 31, Real Estate Services Rules, Modification of Duties
- Section 51, Real Estate Services Rules, definition of “associate”
- Section 53, Real Estate Services Rules, Disclosure of Interest in Trade
- Section 54, Real Estate Services Rules, Disclosure of Representation in Trading Services
- Section 56, Real Estate Services Rules, Disclosure of Remuneration
- Section 65, Real Estate Services Rules, Addressing Conflicts of Interest When Acting for Multiple Clients
- Section 97, Real Estate Services Rules, Acquisition or Disposition of Real Estate by Licensee or a Spouse or Family Partner of a Licensee
- Section 2.5, Real Estate Services Regulations, Exemption for Employees of Developers
- Section 2, RESA, Application of Act
Trading services: means any of the following services provided to or on behalf of a party to a trade in real estate:
- advising on the appropriate price for the real estate;
- making representations about the real estate;
- finding the real estate for a party to acquire;
- finding a party to acquire the real estate;
- showing the real estate;
- negotiating the price of the real estate or the terms of the trade in real estate;
- presenting offers to dispose of or acquire the real estate;
- receiving deposit money paid in respect of the real estate
but does not include an activity excluded by regulation;
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
Associate: means, in relation to a licensee a person who is any of the following:
- in the case of an individual licensee,
- a spouse or family partner of the licensee,
- a trust or estate in which the licensee, or a spouse or family partner of the licensee, has a substantial beneficial interest or for which the licensee, spouse or family partner serves as trustee or in a similar capacity, or
- a corporation, partnership, association, syndicate or unincorporated organization in respect of which the licensee, or a spouse or family partner of the licensee, holds not less than 5% of its capital or is entitled to receive not less than 5% of its profits;
- in the case of a brokerage that is a corporation or partnership,
- a director, officer or partner of the brokerage,
- a shareholder of the brokerage who holds more than 10% of the voting shares of the brokerage,
- a trust or estate
- in which the brokerage, or a director, officer or partner of the brokerage, has a substantial beneficial interest, or
- for which the brokerage, or a director, officer or partner of the brokerage, serves as trustee or in a similar capacity, or
- a corporation, partnership, association, syndicate or unincorporated organization in respect of which the brokerage, or a director, officer or partner of the brokerage, holds not less than 5% of its capital or is entitled to receive not less than 5% of its profits;
Real estate services: means
- rental property management services,
- strata management services, or
- trading services