Number 419, May 2008
Limited Dual Agency or No Agency?
REALTORS® should remember that limited dual agency isn’t the only option available to them when dealing with both parties to a transaction.
A REALTOR® approached a property owner to see whether he was interested in selling his property. The REALTOR® faxed an offer to him together with an exclusive listing contract, a Limited Dual Agency Agreement and the Working With a REALTOR® brochure. The owner rejected the initial offer, but accepted a revised offer and signed all the documents. The transaction completed but some time later the seller, convinced the property had sold for less than its value, sued the REALTOR® and his brokerage for breach of fiduciary duty, breach of contract and negligence.(1) The findings with respect to those claims are discussed in Legally Speaking 418.
I believe the case is instructive for REALTORS® on a different level.
The REALTOR® opted to act as a limited dual agent, which imposed agency duties, albeit limited ones, on the REALTOR® and his brokerage. Incurring those limited dual agency duties resulted in the lawsuit for, among other things, breach of the fiduciary duty an agent owes to their principal. But was limited dual agency the only option available to the REALTOR®? Did he and his brokerage have to assume the obligations of a limited dual agent?
The court held that no agency relationship was formed with the seller until the seller signed the exclusive listing contract. It’s assumed from the facts that an agency relationship with the buyer existed prior to sending the offer to the seller. Accordingly, at the time the REALTOR® was preparing the offer, he was the buyer’s agent but hadn’t yet become the agent of the seller. At that point, the REALTOR® had two options:
- provide the seller no agency representation and treat him as a customer, OR
- offer limited dual agency representation with the consent of both parties.
The parties chose limited dual agency at the suggestion of the REALTOR® and the REALTOR® and brokerage assumed limited agency duties to the buyer and the seller. It was on the basis of those agency duties that the brokerage and REALTOR® were sued.
But was consideration given to providing the seller no agency representation and completing the transaction without becoming the agent of the seller? The REALTOR® could have treated the seller as a customer and entered into a fee agreement, whereby the seller specifically acknowledged and agreed that the brokerage and REALTOR® acted for the buyer and “did not owe any agency duties to the seller.” By not becoming the agent of the seller, they could have continued to act as the sole agent of the buyer, wouldn’t have become the limited dual agent of both parties and wouldn’t have owed any fiduciary duties to the seller.
While it might not have prevented the lawsuit, it would have eliminated any claims based on agency duties. The fee agreement would also have secured the payment by the seller of the REALTOR®’s commission, despite the fact that the REALTOR® wasn’t the seller’s agent.
Understanding the difference between the options of no agency representation and limited dual agency, and the legal obligations assumed by REALTORS® and brokerages under each situation, is crucial. A more detailed explanation of the options of no agency representation and limited dual agency can be found in the BCREA Continuing Professional Education course, What Brokerages and REALTORS® Need to Know About Agency.
Bull, Housser & Tupper LLP
| ||1. ||Summit Staging Ltd. v. 596373 B.C. Ltd., 2008 BCSC 198. |
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