If you have bought or sold a house in British Columbia since 1994 you may have encountered the expression "dual agency" in dealing with a real estate agent. To understand what is meant by this expression, it is helpful to consider the legal notion of agency, the practice of real estate agents before 1994, and the different kinds of agency relationships a REALTOR can fulfill today.

Agency is a relationship in which one person acts for or represents another with that other's authority. It involves the delegation by one party (the principal) to another party (the agent) of the transaction of some business with more or less discretionary power to the agent who undertakes to manage the affair and render an account of it to the principal. It is a fiduciary relationship in which the agent owes a special duty of care and loyalty to the principal, putting aside self-interest. The principal relies on the skill and ability of the agent, the agent's loyalty, and the requirement that the agent follow instructions. All of these things apply to a real estate agent. The agenct is the real estate company by which the real estate sales person is employed. So the agency relationship is with the company and its employees.

Prior to 1994, a person wishing to sell real estate would enter a listing agreement with a real estate agency requiring the agency to market the property for a specified period of time in return for which the agent would be entitled to an agreed rate of commission. As a means of marketing the property, it was the custom (and still is) that the listing agent would offer to share its commission with another real estate agent who secures a purchaser to buy the property. Because the seller of the property was paying both agents, the courts held both agents to be the agents of the seller. Therefore, both agents owed a duty of loyalty, disclosure of information, the exercise of skill and ability, and the maximization of the sale price to the seller. This often came as a surprise to buyers who thought that they were getting this relationship from "their" REALTOR. In fact, because of that expectation REALTORS were also required by the courts to fulfill a special duty of care to the buyers with whom they worked. This often placed the REALTOR in an untenable position. Clearly, it was time for a change.

Today, REALTORS can work with people involved in a real estate transaction as agent for the seller, agent for the buyer, dual agent, or with no agency relationship. In entering an agency relationship, a REALTOR has a duty of undivided loyalty to his or her principal and must protect the principal's negotiating position at all times, keeping secret all confidences of the principal and disclosing to the principal all known facts which may affect or influence the principal's decision. The agent must obey all lawful instructions of the principal so long as they do not compromise the professional ethics of the REALTOR. The agent must exercise reasonable care and skill in performing all assigned duties and must account to the principal for all money and property placed in the agent's hands while acting for the principal. On entering a working relationship with a real estate agent, you can expect the agent to make it clear whether or not they are working as agent for you, for someone else, or in a dual capacity.

Dual agency arises when a real estate agent represents both buyer and seller in the same transaction. This might occur when a real estate agency has a listing of a property and one of its sales people shows the property to a person who then wishes to make an offer. Here, the agency has a duty to disclose the fact that it has a relationship with the seller and with the buyer even if two different sales people are involved. In order to proceed on this basis, it is essential that both the buyer and the seller consent to a dual agency. Because the agent has promised a duty of confidentiality, loyalty, and full disclosure to both parties, these duties must be limited in order to protect each party and bring about meaningful negotiation. The following limitations must be agreed to by both principals:

1. The agent will deal with the buyer and the seller impartially;
2. The agent will have a duty of disclosure to both the buyer and the seller except that;
   1. the agent will not disclose that the buyer is willing to pay a price or agree to terms other than those contained in the offer, or that the seller is willing to accept a price or terms other than those contained in the listing,
   2. the agent will not disclose the motivation of the buyer to buy or the seller to sell, and
   3. the agent will not disclose personal information about either the buyer or the seller unless authorized in writing; and
3. The agent will disclose to the buyer defects about the physical condition of the property known to the agent.

A REALTOR can also work with a person who is not their principal and where there is no agency relationship. This might happen when a prospective buyer meets a REALTOR at an open house but does not agree to a dual agency relationship. In that case, the REALTOR works for the seller and owes all of the duties listed above to the seller. However, the REALTOR can provide certain limited services to the buyer including preparation of an offer and presentation of it to the seller. However, such a REALTOR is not permitted to recommend or suggest a price, negotiate on behalf of the buyer, inform the buyer of the seller's bottom line, or disclose any confidential information about the seller.

Such a buyer might very well be better off working with a different REALTOR as their own agent. In such a case the buyer and the REALTOR may agree to an exclusive buyer's agent contract. This contract involves the principal agreeing to work only with that real estate agency during a specified period of time in order to locate a property and to provide the agent with sufficient information concerning the wishes of the principal. In return, the agent pledges its commitment to the principal for a specified rate of commission. The agent has a duty to credit the buyer with the amount of the commission shared by the listing agent. This may or may not satisfy the entire commission agreed upon in the contract.

Now that the rights and responsibilities of REALTORS and the parties to real estate transactions have been clarified and have become familiar to most people, REALTORS are better able to provide their services to their clients. Through full disclosure of the nature of the relationship, agents are able to meet their legal obligations as well as the expectations of buyers and sellers.

Please call or e-mail me with questions or comments you might have.

November 18, 1999