Legally Speaking - January 2009 (427)
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Legally Speaking (427, January 2009)

 

Number 427, January 2009

Limited Dual Agency Can Still be a Risky Business

A recent BC Supreme Court decision awarded damages against a REALTOR® for breach of fiduciary duty while acting as a limited dual agent.1 The relationship between the plaintiff and the REALTOR® first began in 2005 when the plaintiff answered a newspaper ad concerning the sale of a property listed by the REALTOR®. The plaintiff, who was unsophisticated in the world of real estate, was unrepresented and consented to the licensee acting as a limited dual agent in the transaction. The plaintiff was so impressed with the REALTOR® that she remained in contact with him and referred several friends and acquaintances to him, and received several referral fees.

Shortly after purchasing the first property, the plaintiff and REALTOR® entered into negotiations to purchase a larger property owned by the REALTOR® himself. A price was agreed upon and a Contract of Purchase and Sale was executed, with the licensee acting as a limited dual agent. Two days later, the parties executed an addendum to the contract, which urged the plaintiff to obtain her own licensee and to seek independent legal advice with respect to the transaction. 

The transaction closed without the plaintiff seeking additional representation. The plaintiff subsequently sued the brokerage and the REALTOR®, claiming they owed a fiduciary duty to her to disclose that the purchase price was in excess of the market value, as well as the fact that significant renovations to the property had recently been completed.

The court found that the brokerage and the REALTOR® owed a fiduciary duty to the plaintiff to disclose the factors concerning the market value of the property and the recently completed renovations. The court focused on the plaintiff’s lack of sophistication and vulnerability, and the fact that she relied heavily on and placed her trust in the REALTOR®’s knowledge of real estate values, income potential and financing.

The court did not accept that the licensees’ duties had been limited by the execution of the limited dual agency agreement or the addendum urging the plaintiff to seek independent advice, because the setting of the terms, including price, had occurred before the limited dual agency agreement and addendum were signed. The court found that, prior to the execution of the limited dual agency agreement, the licensee owed a duty of complete and not limited disclosure to their client.

The fact that the court chose to find a breach of fiduciary duty, in light of the signed limited dual agency agreement and addendum, seems to be contrary to recent decisions that have supported limited dual agency.2 Factors that might have contributed to the finding of liability may have been the lack of sophistication of the client, her reliance on the REALTOR® and the fact that the REALTOR® was selling his own property rather than acting as the agent for a third-party seller.

Although recent judicial decisions have been supportive of limited dual agency, this case is a reminder that a licensee’s duty of disclosure may depend, in part, on the sophistication of their client and their reliance on the licensee. Particular caution must always be taken where the REALTOR® acts in their own interest as either buyer or seller.3

Brian Taylor
Bull, Housser & Tupper LLP

  1. De Jesus v. Shariff [2008] B.C.J. No. 1547 (S.C.).
  2. See Legally Speaking columns 419 and 426.
  3. See Report from Council, February 2008 Vol. 43, No. 5 and June 2008 Vol. 43, No. 8.
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