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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.
Fiduciary obligations exist in many circumstances where a consumer places their trust and confidence in another party and where that party must then act in the consumer’s best interest. The duties outlined in the Real Estate Services Rules (“Rules”) all stem from fiduciary duties owed to consumers under common law.
Some of the duties owed under the Rules begin with mandatory disclosures that must be reduced to writing while others are not.
This guideline will help you understand how to discuss these duties with your clients, how to best ensure your clients understand what duties are owed to them, and how they can modify those duties when needed.
- How and when to discuss duties owed to your clients.
- How to modify duties owed.
Part of acting in your client’s best interest is providing them with all the information they need to make a timely and informed decision about who they want to hire and what services they want. Discussions around the duties owed under an agency relationship should occur prior to the outset of the relationship before any service agreement is executed to assist the consumer in making that decision.
It is important that your client understand each of the duties owed to them and how these may impact the relationship you have. For instance, the duty of confidentiality is one that is most often expected from your client.
Different brokerage models can also impact how confidential information is shared. Under designated agency, no other real estate professional at your brokerage can have access to your client’s information. However, under brokerage agency, they all will have that access. Knowing how their information will be shared, and what impact that may have on your client (e.g. two real estate professionals at the same brokerage will not be able to represent a buyer and seller in a transaction) may influence their decision with whom they want to enter into an agency relationship.Learn more about confidential information
Fiduciary duties owed to your client are fundamental to the agency relationship. When your client permits or requests a modification of duties, they must understand the benefits and inherent risks involved. You must always have a full discussion with your clients, so they are able to make an informed decision that is in their best interests. Duties cannot be modified to the point where no agency relationship exists.
When you represent a client and an issue arises that can be resolved by modifying the duties you owe, you must first explain how the problem may impact your client and your agency relationship. For instance, you have an obligation to only act within the scope of authority granted to you. If you are a strata manager and are only permitted to approve third party contracts up to $1,000 on behalf of the strata corporation, your clients, if a large project is pending, may extend the authority granted to you to approve larger expenditures after discussing the pros and cons of that decision with you.
There are also other times when a reduction in the duties you owe may be beneficial to your client. Perhaps you are working in an under-served and remote location where dual agency is the only viable option, or perhaps the consumer on the other side of a transaction is a past client of yours who has provided you with confidential information which require modifications to your agency relationship. Modifications may even be necessary if you are a strata manager for a strata corporation and want to represent a unit owner as a rental property manager. Whatever the reason, modifying the duties you owe to a client may be preferable to them as a means of addressing a conflict instead of terminating their relationship with you.
Once you disclose a conflict to your client, and the risks of the conflict are understood, your client may agree to allow you to modify the duties and obligations owed to them. This modification must be reduced to writing in an amended service agreement, or where no service agreement exists, in the Disclosure of Representation in Trading Services form.
The details of the modified obligations must also be recorded and agreed to and must include information on which duties are being modified. You must be clear as to which duties have become inapplicable as a result of the modification.
Remember that once duties have been modified, as the transaction unfolds, further reductions or additions to the duties owed may be necessary. Ongoing conversations with your client are important to ensure that you are always providing the services your client expects. If further modifications are necessary, these too must be documented as set out above.
Case #1: Duty to Disclose Information About Property that Was Not the Subject of Contract of Purchase and Sale
The real estate professional failed to advise her client that a housing unit the client had expressed interest in (“Property A”) was available before the client concluded a contract of purchase and sale on a different housing unit (“Property B”). A sale on Property A had failed while the client was negotiating terms of sale on Property B. There was evidence that the real estate professional knew of her client’s preference for Property A, that she knew that Property A became available before the subjects were removed on the sale of Property B, and that she failed to advise her client that Property A was available for purchase.
The real estate professional stated that her client was not legally able to walk away from the sale of Property B and therefore the real estate professional was actually working in her client’s interests to facilitate that sale. However, regardless of whether the client could have cancelled the sale agreement on Property B, the real estate professional still had a duty to notify her client of the availability of Property A.
Contraventions: Sections 30(f) [Duty to disclose all known material information] and 33 [Duty to act with reasonable care and skill] of the Rules, among others.Read the full case
[Note: This is an FST decision. Application to BCSC for judicial review pending.]
The real estate professionals entered into a multiple listing contract with one of the owners of the property (“Seller A”). The property was owned by Seller A as joint tenant with their spouse (“Seller B”). Seller A explained that they had a power of attorney (“POA”) that allowed them to trade in the property on behalf of Seller B. In fact, the POA was provided by Seller A to Seller B, and not the other direction, and therefore it did not allow Seller A to trade in the property on behalf of Seller B. The real estate professionals looked at correspondence from Seller A’s lawyer and the POA, took pictures of the documents, but did not obtain copies for the deal file. At no time did the real estate professionals recommend that Seller A obtain legal advice regarding the POA. Seller A’s lawyer attempted to obtain Seller B’s consent for the sale of the property, however, Seller B did not have the capacity to sign required legal documents. As a result of the inability of Seller A to rely on the POA to trade in the property without the involvement of Seller B, the sale of the property could not be completed.
The real estate professionals were found to have failed to take sufficient care to ensure they were dealing with either all the registered owners of the property or a person who had the legal authority to sell the property, and to advise Seller A to obtain legal advice about using a POA to transact in the property on behalf of Seller B, among other things.
Contraventions: Sections 30(d) [Duty to advise the client to seek independent professional advice on matters outside of the expertise of the real estate professional] and 33 [Duty to act with reasonable care and skill] of the Rules, among others.Read the full case
As a managing broker, you are expected to supervise the activities of your real estate professionals to ensure that the duties and obligations of the brokerage are carried out in accordance with RESA, the Real Estate Services Rules, and Real Estate Services Regulation (“Regulation”).
A robust policies and procedures manual explaining the expectations of real estate professionals is important. Outline how the brokerage expects real estate professionals to adhere to the duties owed to the clients and what the approved processes for modifying the obligations are. Ensure that any modification of duties is recorded in the service agreement or disclosure of representation and that it is retained in the brokerage file.
You should also ensure that your real estate professionals understand that some modifications of duties require additional disclosure forms to be completed.
Ongoing training at the brokerage or through BCFSA or local trade associations will also keep real estate professionals up to date when it comes to emerging issues or trends that could impact how they provide all the required duties to their clients.
- 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
Client: means, in relation to a real estate professional, the principal who has engaged the real estate professional to provide real estate services to or on behalf of the principal.
Strata corporation: means a strata corporation within the meaning of the Strata Property Act and includes a section within the meaning of that Act
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 real estate professional for the trade in real estate.