Working with Unrepresented Parties #536
Since the restriction on limited dual agency was introduced in 2018, it has become more common for REALTORS® to work with unrepresented parties in a transaction. Dealing with unrepresented parties presents risks to both consumers and Realtors. Realtors should be familiar with the Real Estate Rules for dealing with unrepresented parties so that they understand how to disclose to consumers whether or not they will be representing them. Further, so that they understand the services they can provide to clients and unrepresented parties to help ensure consumers are informed and protected.
Real Estate Rules and forms
When dealing with unrepresented parties, the starting point is to determine when to provide a Disclosure of Representation in Trading Services form, confirming the licensee will deal with the consumer as an unrepresented party. Real Estate Rule 5-10 states that before providing any trading services, a licensee must disclose whether or not they will represent the party as a client. This disclosure must be made on the prescribed form approved by the Real Estate Council of British Columbia (RECBC). Rule 5-10 needs to be read in conjunction with the definition of "trading services" under the Real Estate Services Act (the "Act"), which is very broad and includes the following1:
"...(a) advising on the appropriate price for the real estate;
(b) making representations about the real estate;
(c) finding the real estate for a party to acquire;
(d) finding a party to acquire the real estate;
(e) showing the real estate;
(f) negotiating the price of the real estate or the terms of the trade in real estate;
(g) presenting offers to dispose of or acquire the real estate;
(h) receiving deposit money paid in respect of the real estate"
Based on the definition of "trading services" and the requirements of Rule 5-10, it is imperative to confirm very early on that you will be dealing with the consumer as an unrepresented party, and not as a client under an agency relationship. Licensed real estate professionals must make disclosures to consumers, including disclosures about the services to expect from real estate professionals and the risks of being unrepresented in a real estate transaction.
There are two scenarios, noted in subsection 3 of Rule 5-10, in which a licensee does not need to provide the disclosure of representation in trading services form. These scenarios include situations where a licensee is only hosting an open house or providing factual responses to general questions. However, these two scenarios are further qualified and limited by the requirement that the licensee has not solicited or received information from the party regarding the "party's motivation, financial qualifications, or needs in respect of real estate."2 As noted previously, this means that in most instances the requirement to provide the Disclosure of Representation in Trading Services form confirming that you will deal with the consumer as an unrepresented party will likely arise very early on in any communications or dealings with the unrepresented party.
Once the Disclosure of Representation in Trading Services form has been provided and explained, confirming that the licensee will deal with the consumer as an unrepresented party, then the requirements under Rule 5-10.1 are triggered and the licensee must provide a Disclosure of Risks to Unrepresented Parties form to the unrepresented party. This form confirms the risks of being unrepresented, describes the limited amount of assistance and information the licensee can provide to the unrepresented party, and confirms that any information provided by the unrepresented party will not be kept confidential. The form also includes a recommendation for the unrepresented party to seek independent representation regarding the transaction.
Note that even if an offer presented by an unrepresented party may not be as clear or in a standard format typically used in your local market, Rule 5-3.1 states that "unless otherwise instructed by the licensee's client, a licensee who receives a signed offer to acquire or dispose of real estate must promptly communicate the offer to the relevant party to the trade in real estate."3
What services can you provide to an unrepresented party?
So what services can you provide to an unrepresented party? Realtors can only provide limited assistance to unrepresented parties such as providing statistics, standard contracts and relevant documents, helping the unrepresented party fill out standard contracts and documents, communicating messages from the unrepresented party to your client, and presenting offers and counteroffers. When assisting the unrepresented party with completing standard contracts or other relevant documents, no advice can be provided to the unrepresented party. It's very important that Realtors are consistent in their messaging and actions regarding what assistance they can and cannot provide to unrepresented parties to avoid situations of implied agency or complaints and disputes.
Realtors must be aware of the Rules, required forms and types of assistance that can be provided when dealing with unrepresented parties. Early disclosure under Rules 5-10 and where applicable 5-10.1 is key in protecting Realtors and avoiding complaints from consumers. Additionally, it's important that Realtors are consistent in their messaging to unrepresented parties, and the type of assistance they provide throughout the transaction.
Finally, always recommend to the unrepresented party that they obtain professional advice.
|3.||See Rule 5-3.1.|
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