Limited Dual Agency and the BC Court of Appeal #439
In 2008, a BC Supreme Court decision awarded damages against a REALTOR® for breach of fiduciary duty when acting as a limited dual agent.1 The REALTOR®, while selling his own property to a client, entered into a Limited Dual Agency Agreement as well having the buyer execute an Addendum to the Contract of Purchase and Sale agreeing to seek independent legal and appraisal advice. At trial, the court found that the REALTOR® owed the buyer a duty of loyalty and disclosure which had not been sufficiently modified by either the Limited Dual Agency Agreement or the Addendum to absolve the REALTOR® from liability. The REALTOR® appealed. That the BC Court of Appeal upheld the decision is not surprising.2 What is of interest, however, are the comments of the Court of Appeal on the concept of limited dual agency.
This is the first decision of the BC Court of Appeal to consider the practice of limited dual agency in British Columbia. The court acknowledged the existence of the practice stating that "a dual agency agreement is an agreement entered into when a real estate agent acts for both the vendor and the purchaser. In such circumstances, there are inherent conflicts of interest for the agent, who is fixed with obligations to two principals. The dual agency agreement limits such fiduciary obligations so that such arrangements are possible."
The court also quoted with approval from two other trial court decisions which had supported the concept of limited dual agency noting that:
|"In British Columbia there has arisen in the real estate industry a practice and a procedure whereby REALTORS® can act for both parties, that is the seller and the purchaser. Where there is to be such an arrangement, a form of agreement has been developed which is signed by both the vendor and the purchaser. By that agreement it is acknowledged that both of the parties have agreed that one agent will act for both of them. The agreement purports to limit the scope of the duties which are owed by the agent to each of the parties. It contains an acknowledgement that all parties are aware of the specifics of the arrangement and the obligations that will be imposed."3
That the BC Court of Appeal has accepted the concept of limited dual agency is of significance as decisions of the BC Court of Appeal are binding on lower courts.
While the court was generally supportive of the concept of limited dual agency it found that it would not apply to a situation where a REALTOR® was not only the agent involved but one of the principals in the transaction. The court noted in this case that the usual dual agency arrangement involves three parties; the seller, the buyer and the REALTOR® and that the Limited Dual Agency Agreement imposed a duty of impartiality on the REALTOR® with respect to the REALTOR®'s dealings with the buyer and the seller. The court found that "impartiality is possible in the usual situation involving three individuals" but could not see "how an agent who is himself the seller could truly set impartiality as between himself and the buyer," concluding that "where the agent is also a principal, the limitations in the dual agency agreement are inapplicable and cannot be given effect."
In this case, having found that the Limited Dual Agency Agreement was ineffective in limiting the REALTOR®’s fiduciary obligations to the buyer, the court also found that the Addendum, which had been signed two days after the Contract of Purchase and Sale had been executed, did not assist the REALTOR® as the fiduciary breaches had already occurred by the time it was signed. It left open the possibility that the REALTOR® could have protected himself by getting the Addendum, or a similar waiver, signed at the outset of the negotiations.
Where a REALTOR® is selling or buying their own property to or from a client, limited dual agency is inappropriate. Their client should either be represented by another REALTOR® or should obtain independent legal and appraisal advice.
|See Legally Speaking 419 (May 2008).
|DeJesus v. Sharif, 2010 BCCA 121.
|Grimshaw v. Progroup Realty Ltd., 2004 BCSC 1836.
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