Duties to Clients Guidelines

• Guidelines

  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.

Purpose

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.

1. How and when to discuss duties owed to your clients.
2. How to modify duties owed.

Guidelines

How and When to Discuss Duties Owed to Your Clients

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

Modify Duties Only When Necessary 

Duties owed to your client are fundamental to the agency relationship. As a fiduciary, you must proceed with great care when considering whether and how to modify your fundamental duties owed to your client.

When considering entering into an agency relationship, you should have a thorough discussion with a prospective client regarding the services you will provide and the duties you will owe, including any modifications to those duties that are proposed. Duties cannot be modified to the point where no agency relationship exists.

A client may want to limit their agency relationship with you, such as when contracting for a mere posting, and a modification of duties at the outset of your professional relationship may be required to facilitate the desired 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 client to ensure they are able to make an informed decision that is in their best interests. You may also wish to consider whether your client requires independent advice from another professional (e.g., lawyer, notary, accountant).

In other situations, you may need to modify your duties to the client, such as where you, as a strata manager engaged by a strata corporation, enter into a new service agreement to represent a unit owner as a rental property manager.

The details of the modified obligations must be documented, 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. The modification of duties must be documented in a written service agreement or, where no service agreement exists, in the Disclosure of Representation in Trading Services form.

When providing real estate services to a client, conflicts may arise from differences between your client’s interests and your own personal interests or professional obligations. You must remain aware of the potential for conflicts of interest to develop and proactively take reasonable steps to avoid them. Where a conflict of interest does arise despite your best efforts to avoid it, you must fully disclose the conflict in writing. See Conflicts of Interest Guidelines.

After entering an agency relationship, BCFSA expects licensees to use modification of duties sparingly and only where it is in the best interest of your client, such as where a modification is required in order to comply with other provisions in the Rules.

Where conflicts of interest arise in the course of an agency relationship, you must carefully consider how the conflict can be resolved in the best interests of your client. Modification of duties is only one potential option that is available to address the conflict. However, it may not be in your client’s best interest to modify the duties owed to them or the modification of duties that is required may make it impossible to fulfill your fiduciary duties. In these situations, the conflicts of interest are irreconcilable and can only be addressed by releasing your client and referring them to another licensee.

Relevant Cases

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 (will open in a new tab)

Case #2: Power of Attorney in Sale of Property

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 (will open in a new tab)

Managing Broker Considerations

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.

Applicable Section of RESA/Real Estate Services Regulation/Real Estate Services Rules

• 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

Definitions

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.

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