Don’t Do It!

Lessons

If you are buying a home and are not working with a Realtor® the chances are that you may choose to deal with the listing agent. No doubt you will enter into an arrangement known as Limited Dual Agency.

For the most part, when dealing with an ethical Realtor®, you will be informed of the fiduciary limitations that will be put upon the three parties – the buyer, the seller and the agent who are involved in the transaction. In most cases, this arrangement works well as the experienced Realtor® thoroughly communicates how the arrangement works and the implications to all parties.

However, the B.C. Court of appeal has declared and you need to know that there is a Limited Dual Agency circumstance that will not work.

Decision

In 2008, a BC Supreme Court decision awarded damages against a REALTOR® for breach of fiduciary duty when acting as a limited dual agent. 1 The REALTOR®, while selling his own property to a client, entered into a Limited Dual Agency Agreement as well having the buyer execute an Addendum to the Contract of Purchase and Sale agreeing to seek independent legal and appraisal advice. At trial, the court found that the REALTOR® owed the buyer a duty of loyalty and disclosure which had not been sufficiently modified by either the Limited Dual Agency Agreement or the Addendum to absolve the REALTOR® from liability. The REALTOR® appealed. That the BC Court of Appeal upheld the decision is not surprising. 2 What is of interest, however, are the comments of the Court of Appeal on the concept of limited dual agency.

First Time

This is the first decision of the BC Court of Appeal to consider the practice of limited dual agency in British Columbia. The court acknowledged the existence of the practice stating that “a dual agency agreement is an agreement entered into when a real estate agent acts for both the vendor and the purchaser. In such circumstances, there are inherent conflicts of interest for the agent, who is fixed with obligations to two principals. The dual agency agreement limits such fiduciary obligations so that such arrangements are possible.”

The court also quoted with approval from two other trial court decisions which had supported the concept of limited dual agency noting that:

“In British Columbia there has arisen in the real estate industry a practice and a procedure whereby REALTORS® can act for both parties, that is the seller and the purchaser. Where there is to be such an arrangement, a form of agreement has been developed which is signed by both the vendor and the purchaser. By that agreement it is acknowledged that both of the parties have agreed that one agent will act for both of them. The agreement purports to limit the scope of the duties which are owed by the agent to each of the parties. It contains an acknowledgement that all parties are aware of the specifics of the arrangement and the obligations that will be imposed.”3

Not Impartial

That the BC Court of Appeal has accepted the concept of limited dual agency is of significance as decisions of the BC Court of Appeal are binding on lower courts.

While the court was generally supportive of the concept of limited dual agency it found that it would not apply to a situation where a REALTOR® was not only the agent involved but one of the principals in the transaction. The court noted in this case that the usual dual agency arrangement involves three parties; the seller, the buyer and the REALTOR® and that the Limited Dual Agency Agreement imposed a duty of impartiality on the REALTOR® with respect to the REALTOR®’s dealings with the buyer and the seller. The court found that “impartiality is possible in the usual situation involving three individuals” but could not see “how an agent who is himself the seller could truly set impartiality as between himself and the buyer,” concluding that “where the agent is also a principal, the limitations in the dual agency agreement are inapplicable and cannot be given effect.”

Ineffective

In this case, having found that the Limited Dual Agency Agreement was ineffective in limiting the REALTOR®’s fiduciary obligations to the buyer, the court also found that the Addendum, which had been signed two days after the Contract of Purchase and Sale had been executed, did not assist the REALTOR® as the fiduciary breaches had already occurred by the time it was signed. It left open the possibility that the REALTOR® could have protected himself by getting the Addendum, or a similar waiver, signed at the outset of the negotiations.

Get Representation

Where a REALTOR® is selling or buying their own property to or from a client, limited dual agency is inappropriate. Their client should either be represented by another REALTOR® or should obtain independent legal and appraisal advice.

Courtesy of Brian Taylor Bull, Housser & Tupper LLP

  • 2. DeJesus v. Sharif, 2010 BCCA 121.
  • 3. Grimshaw v. Progroup Realty Ltd., 2004 BCSC 1836.

Copyright British Columbia Real Estate Association. Reprinted with permission.

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Reader Comments:

jesse Says:
July 23rd, 2010 at 7:32 am

Informative. I would always use a separate entity retained to look after my own interests. Double agency I too often see as a way of getting more commission for not much more work and the potential margins alone, let alone the fact that remuneration is only given if there is a sale, is fraught with inherent conflicts of interest.

Buying a multi hundred thousand dollar capital asset is a big deal. While the law may allow dual agency I would never do it. There are too many temptations to skirt the edges of the ethical and legal.

July 23rd, 2010 at 8:24 am

@jesse

In the majority I don’t disagree AND in this particular case it was impossible.

– unfortunately, in some parts of the country in small communities there is only one agent so it can be problematic for everyone.

– from my perspective given the following it can be the purest form of negotiation between two parties if the process unfolds WITHOUT the influence of a Realtor®.
BUT:
– to perform this duty properly requires a truly honest sense of what is fair and the knowledge of what is right and legal for both parties
– it is tantamount to ensure each party understands their rights and the limitations of the agent beyond the little blue pamphlet we are required to provide.
– specifically, it must be made clear to both parties that the agent cannot and will not influence any decision based on information given to him by either party UNLESS, he has been instructed to do so by that party – as a sidebar, I only take those instructions in writing.
– I believe that if you feel your agent can not keep trusted conversations as such, then dual agency is not for you. Simply, you got to know your limitations.

Here’s a thought for you:
What would you do if you found that your buyer agent was acting for you and other buyers on the same house? Are they acting in your best interest??

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