Conflict of Interest (Rental Property & Strata Management) Information

• Information

  BCFSA’s information provides 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.

Background

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 or perceived. An actual conflict is a conflict that objectively exists and can be recognized by all parties. A perceived conflict is one that may or may not be a conflict but appears to be one in the mind of a client or a third party.

As discussed below, the 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 immediately in writing 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.

Duties to Clients

When it comes to addressing conflicts of interest, the 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 promptly and fully disclose the conflict to your client in writing. The Rules also prescribe how and when conflicts must be disclosed in certain situations, such as when you have a conflict between two clients.

Even when you believe your conduct does not create a conflict, a prudent real estate professional will disclose the conduct if there is a possibility that their client may view the situation differently. This approach will ensure transparency and help build trust between you and your clients.

Sources of Conflict of Interest

A common source of conflicts of interest for rental property and strata management licensees is referral fees and benefits received from third parties. For example, you may prefer to work with one service provider over another based on the fee or benefit that you expect to receive or your brokerage’s corporate affiliation with the service provider. Conflicts of interest may also arise if you have personal relationships to a services provider: for example, when your spouse, family partner or friend is an owner or employee of the service provider. Conflicts can also arise as a result of business relationships with a service provider: for example, when a business associate such as your brokerage owner or business partner, or a current or former client is an owner or employee of the service provider.

Another common source of conflicts of interest 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, appraiser) 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 but which you may not be able to disclose.

RESA restricts anyone who already holds a licence from claiming the exemptions from licensing provided in the Regulation. In other words, once you are licensed, RESA requires that you must provide real estate services – i.e. trading services, rental property management services or strata management services – through the brokerage with which you are licensed, even in circumstances an unlicensed person would be permitted to provide those services. Similarly, any remuneration earned for providing real estate services must be received through the brokerage with which you are licensed.

Forms to Disclose Conflicts of Interest

Where conflicts of interest arise, they must always be disclosed promptly and fully to your client in writing. In some situations, such as when you have a conflict between two clients, there are additional requirements regarding how and when they must be disclosed. Please see the guidelines on disclosures for more information.