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Real Estate Agents’ Duty of Care – Part 1: Legal Framework

Posted on 15 Jul'14 Tags: , in Real Estate, Real Estate Blog Series

This article is part 1 of our Real Estate Blog Series

From Internet service providers to the hospitality industry, providing a service comes with many roles. Real estate agents are no different. The role of a real estate agent is to provide clients with a level of respect and integrity while performing their duties. Often when an agent becomes unsure of their role and relationship with their clients, they can be left vulnerable to litigation.

There is a Standard of Care expected of an agent — they are expected to act with reasonable care and skill and to provide clients the best service. Further, they are expected to fulfil the terms outlined in legal agreements or contracts.

Know and explore your rights while serving as an agent to a client.Ask questions such as:

  • What is expected and required of you upon signing a representation agreement with a client?
  • Who are you representing directly?
  • What about with a customer? This includes parties interested in your client’s property.

Each party has its own set of rules and obligations to follow throughout the entire process.

A client’s duty of careinvolves what has been laid out in the representation agreement. This agreement creates a contractual relationship between agent and client and is subject to legal scrutiny. Any violation of this agreement can leave you open to being sued, so ensure the agreement is well formed and that both parties understand every aspect of it.

The brokerage owes the client fiduciary obligations under agency and common law, (the acts which hold governance in Canada). A fiduciary is a legal or ethical relationship of trust between two or more parties – fiduciaries typically take care of monetary issues for another person;  regulatory obligations as set out in the Real Estate and Business Brokers Act of 2002, and associated regulations and the Canadian Real Estate Association`s Code of Ethics also ensure the client is owed fiduciary obligations. You can find the Canadian Real Estate Association’s Code of Ethics here.

Agents must guard and protect their client’s best interests as any reasonable fiduciary would under the contractual and professional parameters.

The customer on the other hand is owed a lesser level of obligations. Two duties which agents owe to clients and customers alike include:

  • To exercise reasonable care and skill, and
  • To ensure honesty and integrity.

A relationship between agent and client must be clearly defined and outlined in black and white terms from the start. These terms of the contract should be duly noted and include any special needs or requirements of the client to avoid a misunderstanding. Similarly, all clients must know the obligations of each agent, their duties and the services they provide; it is also important to know that levels of service are different than what the agent owes the client.

Disclaimer: The above article is not a legal opinion as every case is different and is only for general awareness. Please contact us for specific questions and legal advise.