Too Much Information Presents Ethical Dilemma

(Ontario)

Question:

I attend a listing appointment and the Seller says: “I have had water in my basement but you cannot tell anyone.”

I explain that we need to disclose, he refuses. I then walk away from the listing.

It is now listed with another sales person and no mention of water. My buyer with whom I have a Buyer Representation Agreement with wants to see it.

Am I able to disclose the water issues now?

Answer:

Probably, not. Yes, if you read the Seller his “Miranda Rights”.

No, if you didn’t mention anything.

You elicited this confidential information from the Seller at a time when you were pitching an agency relationship. The fiduciary duties at common law came into play right then. Confidentiality is one of those duties. So, you would have to keep quiet. This would be an implied agency appointment. Then, it ended. You refused to proceed with an express agency appointment via the Listing Agreement. This was a good call “ethically” because you don’t want to be involved with this issue.

The problem going forward is that you might have a potential Buyer for this same property, and you have some confidential information which you cannot disclose. That means that you cannot properly act for that Buyer in this deal. Refer it out.

You cannot tell anybody the confidential information, the Buyer (whom you have referred), the Buyer’s new agent, or the Listing Agent. The only way this information would become available is that the Seller changes their mind and grants you permission to disclose.

Otherwise, this particular transaction needs to be handled by another one of the 103,000 real estate agents in the Province, other than you. The good news is that you made the right ethical call and refused to become involved.

This same issue arises for lawyers in a more serious environment. A notorious criminal interviews four lawyers, admits “murder” to all of them. Eventually, he hires one. The first three are bound to silence. They don’t get to tell the whole world just because they would like to, and think that it’s the “right” thing to do. And, that’s “murder”, this is just a water issue in a house.

Agency law goes back thousands of years. The Supreme Court of Canada reviewed all the reasons and indications for implied agency a quarter of a century ago. It’s not new.

Ethics and law diverge on this point. Sometimes, you have to walk away. It’s not about you. The only reason a person would get in this mess is not knowing the right things to say at the outset.

Read the Seller his “Miranda rights”. Tell him you act for potential buyers in the neighbourhood and anything he says and discloses to you, you will have to pass on to your buyer clients. Once the Seller understands this point, if they still disclose the water issue, it’s no longer confidential.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

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