The Troubles of Multiple Representation
By Ayda Tabrizi
Multiple representation, also known as double ending, occurs when two parties in a real estate transaction are represented by the same brokerage. This can occur when each party to the transaction retains a different representative from the same brokerage, or when a single representative is retained by both parties. This is often a very tempting prospect for any realtor; however, in either case brokerages and sales representatives must adhere to specific disclosure guidelines to ensure that the buyers and sellers are protected.
The multiple representation must be disclosed to both parties involved in the transaction, as well as to any other brokerages/sales representatives that are involved in any offer process, and consent of the parties to the transaction must be obtained in writing. It is also essential that the agent ensures that they preserve a written record of having made the disclosure to the other competing brokerages/sales representatives in case any questions arise in the future regarding the disclosure.
This disclosure is imperative primarily because of the obligations of the brokerage/sales representative to protect both parties’ interests equally and without bias (the representative’s “fiduciary duty”). Buyers and sellers may find that their interests/needs clash in certain ways, for example the seller is trying to get the most for their home, while the buyer is looking to pay the least possible amount. This is a situation where the broker/sales representative’s role can easily become clouded as they attempt to switch hats from the buyer’s representative to the seller’s representative and back.
In addition, other agents who have made competing offers for client’s that were not successful in any multiple offer situations may be left feeling as though their clients were cut out of the process for reasons unrelated to the actual overall value of their client’s offer.
By making full and timely disclosure of the multiple representations risk, all of the concerned parties, including the buyer and the seller and the other brokers/sales representatives participating in the process, will be far less concerned that they were somehow disadvantaged by this challenging situation. Aside from the obvious benefits to all involved from such disclosure, the disclosure is, in fact, mandated by the governing legislation.
In late 2017, with the introduction of the Fair Housing Plan, the Ontario government announced an update to the Real Estate Business Brokers Act (“REBBA”). This update set fines for potential multiple representation situations gone astray to $50,000 for representatives, while brokerages may be fined up to $100,000 per violation. The change to REBBA came to light after numerous media reports which painted brokerages and representatives in a negative light with regards to their fiduciary duties to their buyer and seller clients. In addition to the written consent that representative and brokerages must obtain, the changes to REBBA reflect that the representative’s role changes to more of a facilitator to administer the sale and purchase of the property, rather than the role where advice is given with regards to offers and prices, due to potential conflicts that may arise.
Due to the changes in REBBA, the Real Estate Council of Ontario (“RECO”) has taken on a broader role in regulating the real estate industry, and as new rules roll out, the specifics of how RECO will enforce these rules will present themselves over time.
Currently, RECO receives numerous complaints of infractions under the provisions of the Code of Ethics (specifically sections 3, 4, 5, 10, 16, 17 and the “catch all” provisions 38 and 39) arising from alleged failures to disclose multiple representation, especially with respect to conflict of interest, commissions, and confidentiality.
Potential fines for proven breaches of the Code of Ethics can still reach a hefty $25,000.00 plus additional educational course requirements, at the agent’s cost, and all legal fees associated with the disciplinary process.
It is therefore imperative that you do not lose sight of the risks when faced with the temptation of being able to double end a deal. If you are going to represent both the seller and the buyer in a transaction that you first ensure you are in compliance with the legislation or you risk facing large fines.
If you have any questions or concerns, please do not hesitate to contact our office for further information.
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