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May 4, 2018

Managing Conflicts of Interest

Avoiding conflicts of interest and working in the best interests of your clients are two of the most important duties of a real estate licensee. Each week throughout the month of May, Real Advice is providing tips and guidance on how you can fulfill these duties under the rules coming into effect on June 15, 2018.

Conflicts of interest can happen between your clients when, for example:

  • Two or more of your buyers are interested in making an offer on the same property,
  • One client wishes to make an offer on another client’s property, or
  • A prospective tenant wants to offer to lease your landlord-client’s property.

When the Superintendent of Real Estate’s rules take effect on June 15th, you won’t be able to continue representing both clients in these situations because that would amount to dual agency. However, under a rule announced by the Superintendent on April 27, licensees will now have two options to manage situations where to continue acting for both clients would amount to dual agency:

  1. Refer each client to other real estate licensees to represent their interests in the transaction, or
  2. If both clients agree, continue acting for one client and refer the other client to another licensee. Before this can happen, both clients must read and sign a mandatory agreement required under section 5-18 of the Rules. RECBC is developing this agreement, which will be available before June 15.


New and Updated Online Resources

Preparing for Change, a Professional Matters webinar with Maureen Coleman.
In this webinar, the first of a monthly series for managing brokers, Professional Standards Manager Maureen Coleman reviews issues that managing brokers will need to consider ahead of the introduction of new rules in June: records management, supervision, training, and more.

Real Estate Rules Coming into Effect June 15, 2018 Newly updated with rules published by the Superintendent on April 27: section 5-18, subsection 5-11.1 (3)

Real Estate Rules Now updated with the English Language Proficiency Requirement (section 2-6.1) published by the Superintendent on April 27.

Look for more guidance on how to manage conflicts in future issues of Real Advice and in the Professional Standards Manual.

Answers to Your Questions

Since the launch of the Real Advice e-newsletter, licensees have been sharing their questions about the Superintendent’s rules with us. We welcome your feedback as we transition to the new agency and disclosure rules.

This week’s questions about conflicts of interest were raised during last week’s Professional Matters webinar for managing brokers with Manager of Professional Standards, Maureen Coleman.

Can two licensees within the same brokerage deal with clients on the same trade?

Yes, provided the brokerage practices designated agency.

The situation is different if the brokerage practices brokerage agency. Under brokerage agency, all of the clients of the brokerage are represented by all of the licensees of the brokerage. That means two licensees at the brokerage could not represent separate clients with conflicting interests on the same transaction – it would be dual agency, which is prohibited after June 15. Brokerages practicing brokerage agency will likely need to develop referral networks with other brokerages to deal with conflicts that would amount to dual agency.

Can two licensees who are family members and work at the same brokerage represent separate clients on the same transaction?

If you are the designated agent for the seller, and a spouse or close relative of yours is the designated agent for the buyer, you and the other designated agent are both in a conflict of interest.

Each of you must disclose this conflict to your respective clients so they can decide whether they wish to seek different representation.

It may be acceptable for you and your relative to each represent clients in the same transaction if you have the informed consent of both clients, and as long as you ensure that:

  • The confidential information of each client is protected; and
  • You and your relative each exercise independent professional judgment, and act in the best interests of your clients.

Even if both of your clients consent to you and your family member acting as their designated agents in the transaction, doing so will expose you, your relative, and your brokerage to significant risk. You should carefully document all aspects of the transaction, and be prepared to have your conduct in the transaction scrutinized at a later date.

Do referral fees that are made within the same brokerage need to be disclosed to the client?

You have a duty to disclose remuneration and material information to your client. If you are the designated agent for a buyer who was referred to you for a fee payable to another licensee in your brokerage, you would need to disclose to that buyer that you are paying a referral to the licensee who made the referral under section 3-3(f).

If you are a listing agent and the designated agent for the seller, and you anticipate receiving a referral fee from the designated agent for the buyer, who is also in your brokerage, you must disclose that to your seller client using the Disclosure of Remuneration.

If I need to refer a client to someone else, can I refer them to another licensee in my brokerage? Or do I have to refer them to another brokerage altogether

Provided your brokerage is practicing designated agency, you could refer them to any licensee provided you have proper confidentiality barriers in place to protect your client’s information. You must not disclose confidential information concerning a client to another licensee in the same brokerage (or another brokerage) who does not represent that same client.

Brokerages should adopt policies, procedures and enforcement mechanisms with respect to acceptable, effective information barriers to protect the confidential information of their clients.

When you refer an unrepresented party to another licensee, that licensee has the same duties to that person they take on as a client as you do to your client. That includes undivided loyalty, acting in their best interest, avoiding conflicts of interest, maintaining confidentiality and disclosing material information.