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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.
This guideline will help you understand the importance of service agreements and other contracts and outline what information must be included in all written service agreements.
- Drafting a service agreement while acting in the best interest of your client.
- Ensuring your client has provided informed consent.
- Understanding the risks of drafting custom clauses.
- Assigning strata management service agreements.
- Dealing with a client who does not want to enter into a service agreement.
- Understanding the benefits of a buyer agency agreement.
A real estate professional providing real estate services on behalf of a brokerage for a client must act solely in their client’s best interest. One of the ways to ensure your client understands what services you are able to provide, and what they in turn must pay and do in the relationship, is to enter into a written service agreement, such as a listing contract or management agreement. Your client has the right to waive the requirement for a written service agreement. However, it is prudent that you explain the risks they may face in doing so.
A prudent real estate professional will meet with their client to determine what services the client is looking for and what, if any, concerns they want to ensure are addressed in the agreement (e.g. helping the client find a property that was never used to grow cannabis illegally, determining how often a landlord wants the residential property management to view the units, or if as, a strata manager, you are expected to take minutes at an annual general meeting). When you do this before drafting a service agreement accurately, you ensure the service agreement reflects your client’s intentions.
One of the key elements of the service agreement will be the remuneration being paid for the services you render on behalf of your brokerage. Whether this is a rental property management agreement, strata management agreement, or trading services agreement, discussions pertaining to remuneration should be had before an agreement is signed.
Your client must understand how much they are being charged, and as a prudent real estate professional, you should also outline any potential or anticipated costs they may incur, such as for a property inspection before the service agreement is signed.
While you have a duty to avoid conflicts of interest, the potential for unavoidable conflicts may arise. You should ensure your client understands what conflicts may be encountered and any brokerage policy that may be in place to address to them. Remember that a client cannot agree in advance how they will respond to a conflict if an unavoidable conflict arises.
In some instances you, your brokerage, and your client may deem it necessary to modify the agreement because the nature of the services being offered have changed, new services are being added, or some services previously contracted for are being eliminated. Whenever there is a change to the agreement, it must be amended in writing and signed by all parties.
Please read the regulatory information on remuneration for more information on disclosure requirements and information related to competition law.
One of the primary ways to act in your client’s best interest is to ensure that they understand the benefits and risks to any decision they are making. Informed consent is granted when your client grants you permission to do something with full knowledge of the possible consequences of that decision. For example, in the case of trading services, if acting for a seller after you’ve asked yourself whether the indented marketing best serves your client’s interests and not your own, fully explain the benefits and drawbacks to each marketing approach. You can find more information on the duties you owe to your clientsLearn more about duties owed to clients
Not only should your client read the entire contract they are considering signing, they should also understand the terms of the agreement and the obligations owed by all parties under the agreement.
This means that you, as the real estate professional, should review the contract with your client, allow them to ask for clarification when they are unsure about a particular term, and even suggest they get legal advice if necessary. While most service agreements are drafted with simplified language, some concepts can be difficult for an unsophisticated consumer to comprehend. Your client may need to take some time before signing the agreement and should never be pressured into doing so. This obligation is especially important for consumers who may be vulnerable. You need to ensure the person who is signing the agreement comprehends what they are signing.
Conflicts such as if a brokerage provides multiple services (e.g. a strata manager who is also a rental manager for a strata lot in the complex) may impact how your service agreement is drafted. Any time potential conflicts might impact the services you are going to provide, you must ensure your client understands the potential conflict and gives informed consent.Learn more about Conflict of interest
It is important that real estate professionals understand the purpose behind each terms and clause in any agreement they use to be able to properly explain it to their clients and recognize if a term or clause should be changed to better reflect their client’s best interests in the circumstances. Most real estate professionals use standard form service agreements. These agreements are created by lawyers who understand the language required to reflect the interests of the parties when they enter into those agreements.
Some sectors, however, such as commercial real estate, strata management and rental property management, typically have their own service agreements drafted by their brokerage’s lawyer.
You must ensure clauses and terms added or changed in a standard service agreement are drafted appropriately. Speak with your managing broker to find out whether the brokerage has pre-drafted clauses that you may use, or whether the nature of the term you want to use requires a lawyer to draft it. Drafting ineffective clauses that could put a consumer at risk violates your obligation to act in your client’s best interests. Courts will also often interpret vague or confusing clauses in favour the person who did not draft it, your client. This may put your brokerage at risk. This is one reason why it is important to inform your managing broker any time you want to add terms to a service agreement.
Depending on the terms of a service agreement, you and your brokerage may have the contractual right to assign a service agreement to another licensed brokerage. However, you must ensure that prior to doing so, you have fulfilled your brokerage’s obligations under the Real Estate Services Rules (“Rules”) by informing your strata corporation clients of your intent.
The Rules require you and your brokerage to disclose all known material information respecting the real estate services to your clients. It is strongly recommended that this disclosure be made to your client in writing at the earliest possible date. Clients should be provided with clear information about how the assignment will transfer the strata corporation’s documents, records, and accounts to the new brokerage.
The contract assignment (if permitted under the service agreement) between the two brokerages should be made in writing and include the date the assignment is to take effect.
The Rules allow clients to waive the need for a written service agreement. This can impact both the client and the real estate professional in a negative way.
If a client you are working with raises an objection to a written service agreement that would normally be required under the Rules, first try to determine what the basis for the objection is. Sometimes clients feel that if they do not sign a written agreement, they are not bound by anything and can change the terms of the relationship at will. A prudent licensee may decide not to work with such a client or send them an email outlining some of the important details about your relationship.
You may explain that the service agreement outlines what services you and your brokerage will provide. Without a service agreement, it can be difficult for the client, should a complaint arise, to prove that you or the brokerage agreed to a particular service. For example, a rental property management brokerage may offer monthly cleaning as part of the management fees. Without a service agreement, a brokerage may not be able to prove that such a service was supposed to be included in the fees being paid to the brokerage.
If the client is adamant about not signing a service agreement, it would be prudent to send them an email outlining their objections and having them respond and acknowledge it. This acknowledgement should be saved in the brokerage file. Having a service agreement is in the best interest of a client, therefore not being able to prove that it was the client who waived their right to one could put you at risk of sanction should a complaint get filed.Learn more about disclosures
Trading services real estate professionals are familiar with listing agreements, but service agreements between real estate professionals and buyer clients are becoming more common. While not mandatory, buyer agency agreements allow you to be clear and transparent with your clients about what services you and your brokerage will be offering, and how remuneration will be determined and what amount will be earned by the brokerage.
Buyer agency agreements allow a buyer client to highlight terms that are important to them and may reflect legal instructions requiring you to look into issues such as deaths on a property, or whether a property has been used to grow cannabis legally or illegally. A client may also want to include terms that limit their relationship with you so a certain geographic area in the province, allowing them to work with another real estate professional in a different area at the same time.
Like listing agreements, buyer agency agreements protect you, your brokerage, and your clients. While buyer agency agreements do not have requirements for mandatory content, your managing broker must approve the services you are proposing to offer. Your fiduciary obligations must be fulfilled, regardless of whether a buyer agency agreement exists.
Many real estate professionals and brokerages who offer trading services use standard form service agreements. Some brokerages, such as those dealing in commercial transactions, rental property management, or strata management services, have custom service agreements drafted by their lawyers.
If your brokerage does not use a standard form contract, it is prudent to ensure that any service agreement you do use is drafted by or reviewed by a lawyer to ensure it is binding and reflects the intention of the brokerage. It is also prudent to ensure that your real estate professionals advise you in advance of any additional terms they are changing or adding to the service agreement as there could be legal ramifications incurred by the brokerage if the terms are not drafted appropriately and/or inconsistent with the other provisions of the agreement. These clauses must reflect your client’s intentions. Brokerage policies and procedures should facilitate this.
You must also ensure that any service agreement you use contains the mandatory content as required under RESA.
- Section 30, Real Estate Services Rules, Duties to clients
- Section 31, Real Estate Services Rules, Modification of duties
- Section 43, Real Estate Services Rules, Written service agreements required in some cases
- Section 50, Real Estate Services Rules, Representations as to service agreements
- Section 54, Real Estate Services Rules, Disclosure of Representation in Trading Services
- Section 91, Real Estate Services Rules, Electronic records
Service agreement: means an agreement between a brokerage and a client under which a licensee provides real estate services to or on behalf of the client.