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BCFSA’s information is clear, concise, easy-to-read explanations of the requirements for real estate professionals under the Real Estate Services Act (“RESA”), Real Estate Services Regulation (“Regulation”), Real Estate Services Rules (“Rules”), and other applicable legislation.
This information is intended for use by real estate professionals, to support their understanding of the standards they must meet in the delivery of real estate services.
A conflict of interest is a situation where there is a substantial risk that your ability to represent a client would be negatively affected by your own interest or by your duties to another current client, a former client, or a third party.
When conflicts of interest exist, there is a risk that your ability to act in the best interest of your client will be negatively affected – either by your own interests or by the fact that you also owe a duty to another client or third party. The significance of the risk will depend on the specifics of the situation, but you should not underestimate the potential implications. Conflicts of interest can have serious repercussions if they are not avoided where possible or dealt with appropriately.
Conflicts can be both actual and perceived. An actual conflict is a conflict that objectively exists and can be recognized by all parties, such as when you are representing multiple clients with competing interests in the same transaction. A perceived conflict is one where a conflict may not in fact exist, but a reasonable person might think that it does.
As discussed below, the Real Estate Services Rules prescribe the duties that you owe to your clients. This includes an obligation to avoid actual and perceived conflicts of interest whenever possible. In situations where the conflict cannot be avoided despite your best efforts, you are required to disclose to your client the conflict in writing immediately and seek instruction.
Conflicts of interest can arise from a variety of sources. Common sources of conflicts of interest include secondary employment in the broader real estate sector, duties to multiple clients who have conflicting interests in a transaction and personal relationships.
Guidance on how to address conflicts of interest between multiple clients can be found here.
When it comes to addressing conflicts of interest, the Real Estate Services Rules state that your first obligation should always be to avoid the conflict whenever possible. If you are unable to avoid a conflict despite your best efforts, you must disclose the conflict in writing. The Real Estate Services Rules also prescribe requirements regarding how and when conflicts must be disclosed.
Please see Disclosures for more information.
Even when you believe your conduct does not create a conflict of interest, a prudent real estate professional will disclose the conflict if there is a possibility that their client may view it differently. This approach will ensure transparency and help build trust between you and your clients.
A common source of conflicts of interest for licensees is secondary employment that you may hold in the broader real estate sector. You may, for example, provide a range of non-real estate services (e.g. mortgage broker, contractor) that can give rise to conflicts of interest where you may have sensitive information about a property or a party to a transaction other than your client which would potentially benefit yourself and your client’s position if known to the client but which you may not be able to disclose.
RESA restricts anyone who already holds a license from claiming the exemptions from licensing provided in the Regulation. RESA requires that you must provide all real estate services – i.e. trading services, rental property management services or strata management services – through the brokerage with which you are licensed. Similarly, any remuneration earned for providing real estate services must be received through the brokerage with which you are licensed.
You should also remember that if you act on your own behalf in a transaction and an issue arises, your professional liability insurance provided through the Errors and Omissions Insurance Corporation will not be valid.
Relationships to third parties are also a common source of both real and perceived conflicts of interest. These conflicts include situations where you are dealing with third parties with whom you have personal relationships, such as a spouse, family partner or friend, or business relationship, such as a business associate (e.g. brokerage owner, business partner) or a current or former client.
For guidance on resolving conflicts of interest involving clients, see the guidelines on Dual Agency and Conflict of Interest when Acting for Multiple Clients.