An agent owes his/her principal various
fiduciary duties including: accountability,
confidentiality, competence, good faith/full
disclosure, loyalty, and obedience.
This requirement, often referred to as
full and complete accounting , is owed by an
agent to his/her principal in a real estate
transaction. The agent, upon request, must
provide details of all funds held in trust
and all monies handled on behalf of a
principal. Brokerages must maintain accuracy
in record keeping to ensure that all
transactions comply with the provincial
regulatory requirements and generally
accepted methods of accounting.
An agent must not use information
acquired as the principal’s agent for any
purpose likely to cause the principal harm
or to interfere with the principal’s
business.
The duty of confidentiality should not
be confused with a real estate
professional’s responsibility to disclose
any known material facts about the property
to non-principals. This obligation to
disclose material facts, including defects,
is based on the professional’s duty to treat
all persons honestly. The duty of honesty
does not depend on the existence of an
agency relationship.
An agent must have sufficient knowledge
and skill to carry out required duties. In
representing a principal, the agent must
exercise a degree of care and skill that
might be expected from an average person in
that trade or profession.
The requirement for good faith/full
disclosure is an important duty owed by an
agent to his/her principal in a real estate
transaction. Good faith can best be
described as honesty of intention and
abstention from taking advantage of another.
The duty of good faith encompasses a
wide range of responsibilities. For example,
should the agent have any interest in a
transaction, this fact must be fully
disclosed to the principal. Also, the law
does not allow an agent, trustee, or other
person in a position of confidence or trust
to let personal interests conflict with
duty. It does not matter if the interest is
direct or indirect, or that no loss was
sustained by the principal. The agent’s duty
also includes the requirement to act in good
faith by not making any secret profit from
the transaction.
The agent must also disclose any
information to the principal that is
relevant to the transaction. An agent must
tell the principal of all known relevant and
material information that pertains to the
scope of the agency. This duty to disclose
includes any facts affecting the value or
desirability of the property. If there is
any doubt whether the information is
important to the principal, the agent must
disclose it and let the principal decide.
Loyalty is typically viewed as the most
important duty owed to a principal. The
agent must place the interests of the
principal above all else except the law. The
duty of loyalty obligates the agent to act
at all times solely in the best interests of
the principal, excluding all other
interests, including that of the agent.
Agents must disclose information that
would reveal a conflict, actual or
potential, between the interests of the
agent and those of the principal. The agent
must not act for more than one principal to
the transaction except with the informed,
written consent of all principals after
receiving full information from the agent.
Real estate brokers, as agents, are
under a duty to follow the principal’s
lawful instructions whether the agent agrees
with them or not. It is immaterial whether
the agent uses reasonable judgement while
actually ignoring the principal’s specific
orders. An example might involve a
principal’s stockbroker being instructed to
sell shares when the price reaches $10 and
the broker does not do so owing to a
professional opinion that the values will
increase. If the share value falls below
$10, the stockbroker could be responsible
due to the failure to follow lawful
instructions.
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