Legally Speaking - October 2014 (473)
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Legally Speaking (473, October 2014)

 

Number 473, October 2014

PRACTICE LIMITED DUAL AGENCY AT YOUR RISK

Jennifer CleeDespite being fraught with risk, licensees continue to practice limited dual agency. While BC courts have recognized the modifications to the agency relationship agreed to by buyers and sellers who have entered a Limited Dual Agency Agreement, a licensee failing to document the parties’ informed written consent to limited dual agency prior to acting as a limited dual agent will place the licensee’s commission at risk.

In Partners Realty Ltd. v. Morrow,1 a recent Ontario decision, a licensee showed her buyer the seller’s unlisted property, then wrote an offer for the property on her buyer’s behalf. However, the licensee refused to show the buyer’s offer to the seller until the seller entered into a listing agreement. The buyer’s offer was then presented and accepted by the seller. The seller later refused to complete and the brokerage sought payment of its commission on the aborted sale pursuant to the terms of the listing agreement.

The seller maintained that she was not liable for the brokerage’s commission as the brokerage had materially breached the agreement in failing to deliver written notice of the dual agency situation prior to the buyer’s offer being presented, contrary to the following written terms of the Limited Dual Agency Agreement:

I hereby acknowledge that the Listing Broker may be entering into Buyer Agency Agreements with buyers who may be interested in purchasing or leasing my Property. In the event that the Listing Broker has entered into or enters into a Buyer Agency Agreement with a prospective buyer or tenant for my Property, I hereby consent to the Listing Broker acting as a Dual Agent for the transaction, however, the Listing Broker is required to inform me in writing of a Dual Agency situation with the Seller and Buyer at the earliest practical opportunity and in all cases prior to any offer to purchase or lease being submitted or presented.

The court found that, contrary to the terms of the agreement, the licensee did not inform the seller, in writing, of the dual agency situation prior to the offer to purchase being presented. The court found that the failure to make written disclosure of the dual agency relationship prior to the offer being presented constituted not only a breach of the agreement, but a breach of duty to make full and fair disclosure of all material facts. The court considered that the obligations of an agent include:

“…disclosure of everything known to him respecting the subject matter of the contract which would be likely to influence the conduct of his principal or everything that would be likely to operate upon the principal’s judgment.”

While the wording used in the Ontario listing agreement differs from ours, the requirement for written disclosure of any dual agency relationship and informed consent by the parties to that relationship (be it competing buyers or a buyer and seller), is effectively the same.

Clause 12 (A) of the Multiple Listing Agreement states:

A. If the Designated Agent (or where the Designated Agent is comprised of more than one licensee, one of those licensees) is also the agent of a prospective buyer who becomes interested in the Property, the Listing Brokerage:
  i) will seek the written consent of the Seller and the prospective buyer for the Designated Agent to continue to act as their limited dual agent to facilitate a sale of the Property…

To preserve any claim for commission when acting as the agent for the seller and the buyer in a transaction (and to avoid lawsuits and disciplinary complaints), a licensee must remember to obtain the informed written consent of both parties before acting on their behalf.

Jennifer Clee
B.A., LL.B.

  1. 2014 ONSC 124 (CanLII).
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