The Dual Disadvantage
In its most simplistic form, dual agency occurs when a real estate agent represents both the buyer and seller in the same transaction. Ontario law permits dual agency representation provided appropriate disclosures and consents are satisfied. With or without disclosure and consent, dual agency can create a conflict of interest. In today’s brisk real estate market, dual agency situations are bound to arise. If not handled correctly by the real estate agent, the principal or client (buyer or seller) in a real estate transaction can be disadvantaged.
Real Estate Professional’s Obligations:
In a dual agency situation, the agent owes a fiduciary duty to both principals. An agent’s statutory fiduciary obligations include the duty of utmost care, integrity, honesty and loyalty in dealing with either or both principals. However, dual agents are confronted with difficulties when negotiating certain terms and price in connection with a real estate transaction. For example, the seller wants the purchase price to be higher and the buyer wants it lower.
The Real Estate and Business Brokers Act (2002) which regulates trading of real estate in Ontario, recognizes dual agency as multiple representation and reads in part, "a registrant shall not represent more than one client in respect to the same trade in real estate unless all of the clients represented by the registrant in respect of that trade consent in writing."
What this means to consumers:
When taking a listing to either sell or lease real property, the agent should explain the concept of dual agency to the client and explain that it is permitted with proper disclosure and consent. The agent shall emphasize that if a dual agency occurs, prompt notice and disclosure will be given and any confidential information received from one principal will not be disclosed to the other principal without the expressed written consent of that principal. After disclosure of dual agency, all principals must consent in writing. A principal does not have to consent.
If the principal refuses to consent to the dual agency setting, the agent will need to recommend another agent from a different real estate company to represent one of the principals. This approach extinguishes the dual agency setting resulting in the consummation of the transaction.
When entering the real estate market, buyers should do some investigation before employing a buyer’s agent to represent their interests. The agent should be skilled in satisfying buyer requirements and objectives as well as being professional and experienced. If the proper agent is employed and the appropriate disclosures are made, conficts of interest arising from the dual agency experience can be avoided.