Agency Relationships

WHAT IS AN AGENCY RELATIONSHIP

Agency is a legal concept and the root of all agent-client relationships. The law of agency describes it as a relationship where one party (the licensee) accepts responsibility for representing another party (the client) in dealing with a third party.

A licensee may or may not have an agency relationship with you. If you are a client, you are in an agency relationship; if you are a customer, you are not. The difference between the two relationships is that licensee and brokerage have a much higher level of responsibility to you if you are a client.

CLIENT RELATIONSHIP

As the client, the agency relationship exists between you and the brokerage under common law agency, or between you and the designated agent under designated agency. The essence of the agency relationship is that the brokerage has the authority to represent you as a client in real estate dealings with others.

Brokerages and designated agents are legally obligated to protect and promote their client’s interests. As a client, your licensee has the following duties to you:

• to protect and promote your negotiating position at all times;
• to disclose all relevant facts about a property or a transaction known to the licensee, including material latent defects;
• to obey your lawful instructions;
• to provide undivided loyalty;
• to act in your best interest;
• to keep your confidence;
• to exercise reasonable care and skill in performing all assigned duties; and
• to account for all money and property placed in their possession while acting on your behalf.

As a client, your licensee will also:

• explain real estate terms and practices;
• provide and explain forms used;
• identify and estimate service costs of other professionals involved in a transaction;
• assist you with negotiation;
• prepare offers and counter offers at your direction;
• present all offers promptly; and
• give you true (identical) copies of all agreements.

TWO AGENCY MODELS

There are two different agency models practiced by brokerages in Nova Scotia: common law agency and designated agency.

COMMON LAW AGENCY

Under common law, agency is between the client and the brokerage. All real estate representatives licensed with the brokerage represent all clients of the brokerage and are deemed to know all relevant information about those clients. That is to say, when any licensee at a common law brokerage enters into agency with a buyer or a seller, every licensee at the brokerage is immediately considered to be a representative of that buyer or seller and owes them undivided loyalty, advice and advocacy.

DESIGNATED AGENCY

Under designated agency, the agency relationship is only with the designated agent specified in the brokerage agreement, not with the brokerage, and not with any other licensees of the brokerage. Unlike common law, when any licensee at a designated agency brokerage enters into agency with a buyer or seller, only the licensee(s) specified in the brokerage agreement as the designated agent represents the buyer or the seller.

It is the brokerage’s job to put written policies and procedures in place to protect the confidential information of all clients and ensure the designated agent does not communicate any confidential information in the interests of clients to other licensees of the brokerage. This is how a designated agency brokerage can represent a buyer and a seller in a single transaction with full agency representation to both parties, when both parties have different designated agents.

TRANSACTION BROKERAGE

Transaction brokerage occurs when a real estate brokerage or a designated agent represents two or more parties in the same trade, for example, both the buyer and seller, or two or more buyers.

As an impartial facilitator, the brokerage or the designated agent treats both parties in an even-handed and impartial manner. Because the transaction facilitator’s obligations to the clients are restricted, entering into transaction brokerage requires the written consent of both parties prior to the facilitation of a transaction.

The client is not obligated to proceed with a real estate transaction under transaction brokerage. All parties must be provided with an opportunity to obtain independent advice or alternative representation from another brokerage or designated agent as an alternative to transaction brokerage.

In transaction brokerage, the transaction facilitator will, for both parties:

• explain real estate terms and practices;
• provide and explain forms;
• identify and estimate service costs of other professionals involved in a transaction;
• prepare offers and counter offers at your direction;
• present all offers and counter offers promptly; and
• give true (identical) copies of all agreements.

In transaction brokerage, the transaction facilitator cannot for either party:

• make recommendations about the transaction, for example, what you should offer/counter offer;
• assist with negotiation;
• inform of their other party’s top/bottom line; or
• disclose any confidential information about the other party unless specifically authorized to do so.

It is not appropriate to enter into transaction brokerage in certain situations, including when the transaction facilitator:

• is representing family, colleagues or themselves;
• has an ongoing agency relationship with one of the parties, like a builder or developer; or
• is representing a novice seller or buyer.

CUSTOMER RELATIONSHIP

A buyer or a seller may also choose to use the services of a licensee without requiring an agency relationship. For example, this might occur when a licensee is showing an unrepresented buyer their seller-client’s property or when they approach a seller directly on behalf of their buyer-client. If you are in a customer relationship, do not provide the licensee with any information you do not want the other party to know (ex. motivation, divorce, financial situation, etc.) as the licensee has fiduciary duties to their client to tell them anything they know.

In a customer relationship, the licensee has a legal and ethical duty to provide accurate and honest answers to questions and can provide the following services to you:

• explain real estate terms and practices;
• provide and explain real estate forms;
• identify and estimate service costs of other professionals involved in a transaction;
• prepare offers and counter offers at your direction;
• present all offers and counter offers promptly; and
• give you true (identical) copies of all agreements.

The licensee cannot:

• make recommendations about the transaction, for example, what you should offer or counter offer;
• assist you with negotiation;
• inform you of their client’s top/bottom line; or
• disclose any confidential information about their client unless specifically authorized to do so.