The nature of agent’s duties to their client(s), and the profession at large, can be grouped into three primary categories; statutory, contractual and fiduciary. Over the next few months we will focus on the nature and extent of these duties beginning with statutory obligations.
In Ontario, statutory duties and obligations are governed primarily by the Real Estate and Business Brokers Act, 2002 (the “Act”), which is supported by the Real Estate Council of Ontario’s Code of Ethics, the Ontario Real Estate Association, the Canadian Real Estate Association and the Toronto Real Estate Board. The Act is divided into eight parts each consisting of its own defined set of circumstances a
nd corresponding rules. However, for the purpose of this article we will focus on Part VI of the Act, titled Conduct and Offences. Part VI consists of 18 sections which range from the duty of the brokerage (section 26), prohibitions against breaking contracts (section 33) to orders for compensation and restitution (section 41).
The general focus of Part VI is designed to govern the conduct of agents and brokers. Arguably, one of the most fundamental and straight forward, yet problematic, sections of Part VI is section 32. Section 32 of the Act mandates that all agents and brokers, when acting in their personal capacity, disclose in writing that a) they are a brokerage, broker or salesperson; and b) that they make full disclosure of all facts within their knowledge that affect or will affect the value of the real estate. While the vast majority of agents in my experience are very careful to comply with this section, there are certainly those who have failed or neglected to comply with section 32 and the consequences can be quite serious.
As descried in “Legal Responsibilities of Real Estate Agents” by R. Bocska and M. Rumack, the case of Beaver Lumber Co. v. 222044 Ontario Ltd. illustrates an extreme example of the consequences that can result when the purchasers failed to disclose their status as a broker and agent. In this case, a sales agent and broker purchased a property but failed to disclose their status as such, as was required under the former section 31(1), now section 32 of the Act. After acquiring the property, the two subsequently re-sold the property for $500,000 more than they originally paid. The court found the agent and broker collectively liable to the seller in the amount of $542,000, plus 13% interest for knowingly making deliberate false and fraudulent representations. In addition both parties had their licenses revoked for conduct the court described as “reprehensible and certainly deserving of the courts disapproval and chastisement.”
What is abundantly clear from this and other similar decisions is that not only should agents and brokers alike always disclose their professional capacity when acting on their own behalf but in general, and as will be discussed next month as a general rule of thumb, when in doubt, disclose!
ABOUT THE AUTHOR: Jeremy Mandell is an associate with the law firm Garfinkle, Biderman LLP, a full service firm of 19 lawyers located downtown Toronto. Jeremy’s areas of practice include all areas of commercial and residential real estate as well as aspects of corporate law. He can be reached at (416) 869-1234 or by e-mail at email@example.com.