Multiple Representation: A Manifesto for Legalized Conflict of Interest
In Ontario, real estate agency is governed by the Real Estate Business and Brokers Act (”REBBA”). Under the provisions of the Act, a real estate brokerage may act on behalf of BOTH a Seller and a Buyer in respect of the same trade in real estate, provided all parties consent to this in writing and appropriate disclosures are made by the brokerage.
The situation is referred to as Multiple Representation.
According to Ontario Regulation 580/05 (made under REBBA) which forms the Code of Ethics, Section 16 reads as follows in respect of Disclosure before Multiple representation:
A brokerage shall not represent more than one client in respect of the same trade in real estate unless it has disclosed the following matters to the clients or prospective clients at the earliest practicable opportunity:
1. The fact that the brokerage proposes to represent more than one client in respect of the same trade.
2. The differences between the obligations the brokerage would have if it represented only one client in respect of the trade and the obligations the brokerage would have if it represented more than one client in respect of the trade, including any differences relating to the disclosure of information or the services that the brokerage would provide.
Clients must fully understand the impact of such representation on information provided to them and services offered. Brokerages set out these details in the representation agreement describing what salespersons in a multiple representation role will and will not do. The scope of such limitations will vary according to brokerage policy.
The Ontario Real Estate Association’s prescribed Buyer representation agreement includes the following language in respect of Multiple Representation disclosure:
“The Buyer understands and acknowledges that the Brokerage must be impartial when representing both the Buyer and the seller and equally protect the interests of the Buyer and the seller in the transaction. The Buyer understands and acknowledges that when representing both the Buyer and the seller, the Brokerage shall have a duty of full disclosure to both the Buyer and the seller, including a requirement to disclose all factual information about the property known to the Brokerage.
However, The Buyer further understands and acknowledges that the Brokerage shall not disclose:
• that the seller may or will accept less than the listed price, unless otherwise instructed in writing by the seller;
• that the Buyer may or will pay more than the offered price, unless otherwise instructed in writing by the Buyer;
• the motivation of or personal information about the Buyer or seller, unless otherwise instructed in writing by the party to which the information applies or unless failure to disclose would constitute fraudulent, unlawful or unethical practice;
• the price the Buyer should offer or the price the seller should accept; and
• the Brokerage shall not disclose to the Buyer the terms of any other offer.
However, it is understood that factual market information about comparable properties and information known to the Brokerage concerning potential uses for the property will be disclosed to both Buyer and seller to assist them to come to their own conclusions.”
So what does all this mean?
In a nutshell, it’s a Manifesto for the Legalization of the Conflict of Interest hidden in a blanket of greed affectionately known as the ”double-dip”. I’ve coined my own phrase, namely the “2-1-0″…Getting paid Twice, for One transaction, and serving Zero parties.
The most obvious analogy would be akin to having a lawyer act in capacity for both a defendant and plaintiff. The Relevant Rule of Professional Conduct of the Law Society of Upper Canada reads:
“Conflict of Interest, Rule 5
The lawyer must not advise or represent both sides of a dispute and, save after adequate disclosure to and with the consent of the client or prospective client concerned, should not act or continue to act in a matter when there is or there is likely to be a conflicting interest.”
Even though the real estate industry has provided for these very specific requirements when it comes to multiple representation, the substance over form still wreaks of conflict. It is quite arguably one of the biggest strikes against the Real Estate profession insofar as public perception is concerned, in my humble opinion.
What can you the consumer do about this?
Thankfully, our Democracy still provides for consumer choice. Since written consent is one of the prerequisites to multiple representation, you can simply refuse to agree. This does not mean you necessarily have to refuse the unilateral service of the Realtor in question, but only to the extent he or she is also acting for someone else.
Keep in mind also, that situations involving two Realtors from the same Brokerage also are considered to be Multiple Representation situations since it is technically the “Brokerage” that is the agent in the transaction. The individual broker or sales representative is merely granted authority to bind the Brokerage in the transaction. It follows then, that multiple representation is far less likely an occurrence in smaller brokerages.
Caveat Emptor…Excerise your Options.
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2 Responses to “Multiple Representation: A Manifesto for Legalized Conflict of Interest”
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Great post Carl,
I personally don’t think dual agency is a problem when the buyer and seller each have a different agent representing them, even if those agents do work for the same brokerage. As long as brokerages are allowed to represent buyers and sellers it’s impossible to put an end to dual agency entirely.
But if our legislators could somehow put an end to the ‘legalized conflict of interest’ that has one agent representing both parties, I think it would be a big step forward for consumer protection in the real estate industry.
john
I was victimized by a sham buyer’s agent in Silver Spring, Maryland when a sham buyer’s agent working for the Weichert Company switched roles to become a seller’s agent at the very last moment (at the time of bidding for a house of choice) without my informed consent. I withdrew from the contract when I learned about this illegal and unethical reversal of roles. Unfortunately, the laws of Maryland have no mandatory penalties for such statutory violations, and a client CANNOT sue an agent for negligent misrepresentation for them. Hence, the average citizen in Maryland (and most other U.S. states) are in effect powerless vis-a-vis the U.S. real estate cartel.
Go to Google and type in my name “Joel Stern”, then “Weichert” for Internet coverage of my case.
Pass on this information to your civic-minded colleagues in the legal profession, the real estate industry, and the media. I know there are at least a few persons of integrity left, the only problem is networking with them to join forces against the legalized fraud known as dual agency.
Joel Stern
202-261-8812 (9-5 EST)