The Agency Relationships
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Relationship between a salesperson and client is
referred to as master/servant relationship
An official agent is always a brokerage
◦ Agency = relationship between client and brokerage
◦ Salesperson is always intermediately
 Client is a Master, we are a Servant
◦ We deal with two kinds of people
 Customer
 Client
◦ Everyone is a customer but only someone who has
signed an agency agreement is a client
◦ Brokers/salespersons deal with clients and customers
◦ We owe general, fiduciary and regulatory duties to clients
◦ We only owe regulatory duties to customers
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Regulatory duties:
1. Due care
2. Ethical treatment
3. Duty to disclose material facts (which impact customer) – full
disclosure is the most important duty
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Fiduciary duties = COGA:
1.
2.
3.
4.
Competency and confidentiality
Obedience
Good and faithful
Accountability and loyalty
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Law is the most important duty, followed by
loyalty followed by COGA
Nothing is more important than client duties
except the law
Loyalty is most important duty after legal
duties
Following this is COGA
Indemnification
1.
◦
◦
Clients are responsible for any loss to their
property as long as we are acting within granted
authority
We are not liable unless we are acting unlawfully
Remuneration
2.
◦
We are entitled to remuneration for the work we
do
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There are 5 ways to create agency
1. Express Agreement
a. Written agreement (more common) created
immediately between broker/salesperson once
signed/executed
b. Oral agreement would be a customer. There is no
signed agreement.
2. Ratification
 Agency initially created verbally but agreed in writing
(ratified) at a later point
 For instance, unauthorized salesperson shows house
and drafts offer. The seller may ratify the offer even
though they did not authorize the salesperson earlier
3. Estoppels Conduct
 This occurs when the client (principal) acts in such a
way that the third-party believes that another party
(the agent) has authority to act on behalf of the
principal
 E.g. A seller suggests to a prospective buyer that a
brokerage has authority to negotiate and sign an
Agreement of Purchase on their behalf when in reality the
brokerage house and seller have no agency agreement
 It commonly occurs when an old client or customer
refers a new customer to you, who may believe that
you are representing them
4. Operation of law
 This typically applies through some kind of necessity,
i.e. when an emergency like a foreclosure occurs
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Implied authority applies to all four
relationships
◦ Express agencies must be specifically stated or
written down, but implied authority can be derived
from existing facts and circumstances
◦ E.g. Client and brokerage act in such a way to imply
that they have an express agreement, even though
no formal agreement between them actually exists
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Examples
◦ If a salesperson goes to a customer and explains the
agency, including how we get paid, if the customer
wishes to become a client and signs an agreement, this
becomes an express agreement
◦ If customer says he wishes to buy a house, to show him
a few houses after which he will sign for one, this is
initially verbal and later written and so it is a ratification
◦ If someone refers a customer to you and the customer
tells prospective buyers of the property to negotiate
through you, this is estoppels conduct
◦ If customer comes to you saying bank has threatened to
take their home, you list it immediately to prevent them
from losing their equity and relationship created via
operation of law
◦ Implied can exist in any of the four kinds of creation if
the agent, intermediately or principle act in a way to
imply existence of agency agreement
Multiple Representation (Dual Agency)
1.
Occurs when two clients are represented by same
brokerage
◦
Co-operating Brokerage
2.
Occurs when two clients are represented by two
different brokerages
◦
Single Agency (Single-representation)
3.
When a client and customer are represented by same
brokerage
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This ensures maintaining of loyalty because only one party
is involved in transaction
Multiple representation/dual agency creates problems
because one brokerage represents both parties
Breach of loyalty happens when another’s interests are
given preference over your client’s interests (clients duties
are more important than anything except law)
Sub-agency
4.
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1 customer is represented by 1 brokerage while 1
client is represented by another brokerage
If your brokerage represents the customer, then
your brokerage owes the other brokerage’s client
general, fiduciary and regulatory obligations
Unintended multiple representation
5.
◦
This occurs when 2 customers are represented by
the same brokerage
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X lists a property and a buyer from Y Realty
submits an offer and signs customer
agreement with Y Realty
◦ X is listed, Y is customer
◦ There are 2 brokerages, 1 client and 1 customer
which means this is a sub-agency
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If X works with both buyer and seller, it is an
unintended dual agency and not a dual
agency because we were not told if the
person is a client or customer
◦ In absence of knowledge of any written agreement,
we assume that the person is a customer
Mutual consent / release
1.
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Revocation
2.
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3.
Both parties agree to terminate the contract
Either party may revoke the contract
You may be able to sue for revocation but specific
performance of contract unlikely since court will
not force buyer to buy or seller to sell
Expiry
◦ The agency contract may expire if the contract was
made to last only a fixed period of time
Performance
4.
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The purpose of the agency has been completed
and the client has purchased or sold their
property
Impossibility
5.
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Contract becomes impossible to performance –
e.g. the house listed burns to the ground
Death/Mental Incapacity/Bankruptcy
Registration Cancellation
6.
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Brokerages terminated by RECO