4.6 Consumer Protection
4.6.1 Salespersons and Brokers Are Permitted to Represent Both a Buyer and a Seller in a Single Real Estate Transaction
This is an extract of the Auditor General’s report dealing with multiple representation:
“We found that although the buyer and seller of a property have conflicting interests, a single brokerage in Ontario is permitted to represent both the buyer and the seller in a single real estate transaction as long as the brokerage discloses and obtains consent from the clients for the multiple representation.
As a result, a buyer and seller can be represented by the same salesperson or broker. This poses a risk to the buyer and seller as the salesperson or broker cannot effectively represent the best interests of both parties.
The practice of the same registrant representing multiple parties in a single transaction is known as “double-ending,” because the registrant would earn a commission from both the buyer and the seller.
Under the Act, registrants are required to protect the best interests of their client, irrespective of whether they are representing the buyer or seller of a property. Yet a seller’s objective is to obtain the highest possible selling price and most favourable selling terms, while the buyer’s objective is to pay the lowest price under the most favourable terms.
These competing interests make it challenging for a registrant to effectively represent the best interests of both buyer and seller in the same transaction.
There is also a risk that other buyers interested in the property are at a disadvantage because the registrant representing the seller may be motivated to have their own buyer purchase the property, so that they can earn a commission from the buyer as well as the seller.
In 2017, and again in 2019, the Ministry considered proposing changes to the Act to prohibit a single salesperson or broker within a brokerage to represent both the buyer and seller, or more than one buyer in the same trade, subject to limited exceptions.
However, the Ministry ultimately decided that it would not propose changes to the regulations to prohibit this practice.
In the Ministry’s consultations with stakeholders in 2017 and 2019, the Ontario Real Estate Association (OREA), which represents the interests of real estate professionals, strongly opposed a regulatory change that would prohibit this practice.
The OREA’s main reason for opposing rules around double-ending was the possibility that consumers may forgo any representation from a real estate professional as a result.
In contrast, RECO’s 2019 submission to the Ministry during stakeholder consultations proposed that a different salesperson or broker employed by the same brokerage would have to be designated to represent each client when a multiple representation situation arises, a practice known as mandatory designated representation.
RECO stated that “it is when one individual represents more than one party to the same transaction that conflicts of interest are most pronounced and present the greatest risk of consumer harm.”
Although the Ministry advised us that it does not plan to propose changes to prohibit double-ending, it indicated that recent regulatory changes that are scheduled to come into effect on April 1, 2023, will enhance existing requirements for brokerages to disclose to buyers and sellers the differences in their obligations depending on whether they are representing only one party to a transaction or more than one party.
In addition, the Ministry indicated that registrants will be required to make their best efforts to obtain a written acknowledgment from each party that this information has been disclosed to them.
In comparison, the British Columbia Financial Services Authority (BCFSA), which regulates real estate licensees in British Columbia, restricts licensees from representing multiple clients with competing interests in a single real estate trade (e.g., the buyer and the seller, two buyers interested in the same property).
The Superintendent of Real Estate (the predecessor to the BCFSA) who introduced the restriction indicated that this is a significant source of real and potential conflicts of interest for licensees who may not be able to be fulfill their fiduciary duties to two clients with competing interests.
An exemption to this rule applies where the real estate is located in a remote location that is underserved by licensees and where it is impractical for the parties to be represented by different licensees.
Further, in June 2022, the Ministère des Finances and the Organisme d’autoréglementation du courtage immobilier du Québec (OACIQ), which regulates the real estate industry in Quebec, made amendments to Quebec’s Real Estate Brokerage Act to prohibit licence holders from acting for both the buyer and the seller during a transaction except where there is no other brokerage that has an establishment within a 50-kilometre radius of the property.”
I have edited the above by breaking it up into additional paragraphs and adding italics, however, the above is a full and complete version.
Brian Madigan LL. B., Broker