Real Estate Council Lack of Jurisdiction #258
By Gerry Neely
Section 20 of the Real Estate Act gives the Real Estate Council the power to conduct an inquiry into a complaint, under regulation 9.12, that a licensee has been negligent or incompetent in the performance of any act, for which he is required to hold a license. While the committee reviewing the evidence may come to the conclusion that the licensee has been negligent, the facts that emerge at the hearing may also establish that the Real Estate Council hasn't the jurisdiction to impose a penalty.
The facts at one hearing were that a company licensed as an agent under the Real Estate Act, owned a bed and breakfast business which it offered for sale. It had two shareholders and directors, both licensed under the Act. They prepared an offer for the sale of the business to buyers, who were aware that the company and its directors were licensed. The property had to be subdivided and the buyers were given possession as tenants, with completion to follow the registration of the subdivision plan.
A restrictive covenant was registered with the subdivision plan, which required an owner to obtain the present owner's approval for any business to be conducted on the property. The buyers were not aware of the restrictive covenant until after the purchase was completed. They were concerned that while they were able to get consent, the restrictive covenant might affect any sale they wished to make. Since they believed they should have been told about these terms they complained to the Real Estate Council.
The hearing committee concluded that this was negligent conduct and recommended a 45-day suspension of license. The licensees appealed, arguing that the preparation of the offer was not an act done by them in their capacity as licensees under the Real Estate Act, and they were not the agents of the buyers.
It was clear that they were not agents. As the court said, it would have been an impossible conflict for the licensees as sellers, to act as agent for the buyers. The Court of Appeal agreed that the Real Estate Council, acting through a Hearing Committee, can only have jurisdiction to impose a penalty, if the relationship between the sellers and the buyers had been that of agent and principal.1
A licensee called concerning the refusal of a listing agent to present an offer to purchase to the seller, because the seller had already signed an unconditional offer for the sale of his home, with completion still to come. The licensee believed that the listing agent had a duty to present the offer, a belief correctly based upon a number of earlier decisions which held that the listing agent's duty to the seller continued until the completion of the sale. (See Column #117.)
These cases had their origin in the customary agent/subagent relationship. This led to speculation that with the introduction of buyer agency, what is the duty of a buyer's agent who has an accepted contract, when the buyer's agent becomes aware that a second person wants to buy the same property?
As a simple example, assume that this person hands to the buyer's agent a signed offer and a deposit cheque. If it is clear that the buyer's agent had no agency relationship with the seller, the buyer's agent's duty would be to present the second offer to the buyer, rather than to the listing agent or seller. (For a resale at a profit?)
Now assume that another buyer's agent represents the second person. In that event, the buyer's agent acting for the second person would be able to elect whether to present the offer to the first buyer's agent, or to the listing agent. (As a back-up offer, if the first buyer refused to negotiate?)
What relationship should there be between the buyer's agent and a second buyer who is not represented by another licensee. The safest relationship would be none and a referral of the second buyer to another agent. (That might not be in the interests of the first buyer, since the second offer could now be presented directly to the seller.) The next safest, with the knowledge and consent of the first buyer, would be to treat the second buyer as a customer to whom no advice would be given and for whom the only service would be limited dual agency, or as the judge said in the first case in this column, is that an impossible conflict?
|1.||Hooper v. Real Estate Council of British Columbia, BCCA, Vancouver Registry #CA020002, Reasons for judgment, March 28, 1996.|
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