Designated Agency was enacted in Nova Scotia effective 1 January 2017. Can Ontario be far behind?
CBC Marketplace in 2016 did an expose about conflicts of interest in certain real estate transactions, where dual representation was permissible. The focus was Ontario.
So, I suppose the first question is always:
“should this potential conflict of interest be eliminated in its entirety?”
Perhaps, that would be one solution. But, you will probably suspect that a quick and dirty solution would have a Listing Brokerage incorporate another Brokerage, this time, strictly for Buyers.
Nova Scotia acted promptly.
The Nova Scotia Real Estate Commission has indicated:
“Starting January 1, 2017, brokerage agreements will be mandatory for all buyer clients of a brokerage in Nova Scotia.
- describe the role and services of the brokerage and designated agent, if applicable
- outline the obligations of the client, the brokerage and designated agent, if applicable
- explain the extent to which personal information can be shared
- establish clear commencement and expiry dates for the relationship
- address conflicts of interest”
The Commission also addresses the matter of “agency” on its website:
WHAT IS AN AGENCY RELATIONSHIP
Agency is a legal concept and the root of all agent-client relationships. The law of agency describes it as a relationship where one party (the licensee) accepts responsibility for representing another party (the client) in dealing with a third party.
A licensee may or may not have an agency relationship with you. If you are a client, you are in an agency relationship; if you are a customer, you are not. The difference between the two relationships is that licensee and brokerage have a much higher level of responsibility to you if you are a client.
As the client, the agency relationship exists between you and the brokerage under common law agency, or between you and the designated agent under designated agency. The essence of the agency relationship is that the brokerage has the authority to represent you as a client in real estate dealings with others.
Brokerages and designated agents are legally obligated to protect and promote their client’s interests. As a client, your licensee has the following duties to you:
- to protect and promote your negotiating position at all times;
- to disclose all relevant facts about a property or a transaction, including material latent defects;
- to obey your lawful instructions;
- to provide undivided loyalty;
- to act in your best interest;
- to keep your confidence;
- to exercise reasonable care and skill in performing all assigned duties; and
- to account for all money and property placed in their possession while acting on your behalf.
As a client, your licensee will also:
- explain real estate terms and practices;
- provide and explain forms used;
- identify and estimate service costs of other professionals involved in a transaction;
- assist you with negotiation;
- prepare offers and counter offers at your direction;
- present all offers promptly; and
- give you true (identical) copies of all agreements.
TWO AGENCY MODELS
There are two different agency models practiced by brokerages in Nova Scotia: common law agency and designated agency.
COMMON LAW AGENCY
Under common law, agency is between the client and the brokerage. All real estate representatives licensed with the brokerage represent all clients of the brokerage and are deemed to know all relevant information about those clients. That is to say, when any licensee at a common law brokerage enters into agency with a buyer or a seller, every licensee at the brokerage is immediately considered to be a representative of that buyer or seller and owes them undivided loyalty, advice and advocacy.
Under designated agency, the agency relationship is only with the designated agent specified in the brokerage agreement, not with the brokerage, and not with any other licensees of the brokerage. Unlike common law, when any licensee at a designated agency brokerage enters into agency with a buyer or seller, only the licensee(s) specified in the brokerage agreement as the designated agent represents the buyer or the seller.
It is the brokerage’s job to put written policies and procedures in place to protect the confidential information of all clients and ensure the designated agent does not communicate any confidential information in the interests of clients to other licensees of the brokerage. This is how a designated agency brokerage can represent a buyer and a seller in a single transaction with full agency representation to both parties, when both parties have different designated agents.”
That explanation was worthwhile and permits two people from the same Brokerage to act in the same deal, one for the Seller, and one for the Buyer, each acting in the respective best interests of their clients.
This makes sense! It’s happening anyways!
It would eliminate the advantage to the Buyer to hire the Listing Agent, simply in order to obtain the “inside scoop”.
We may see this in Ontario by March 2022 with the new TRESA.
Six years from the CBC investigation seems a long time, but, the point is “well-taken”.
Brian Madigan LL.B., Broker