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Brian Madigan LL.B., Broker
BRMadigan@Rogers.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300

Cell: 647-404-8150 
Toll Free: 1-888-507-0817

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Can You Tell a Secret?

July 11, 2019 - Updated: July 11, 2019

 

Can You Tell a Secret?
 

Let’s assume that Bob, the Listing Agent is acting for Mary in respect to the sale of her house. Bob hosts an Open House and Fred and Wilma attend. They are interested and would like to put in an Offer.
 

The house is listed at $999,000 and has just been on the market for a week.
 

Buyers as Clients
 

The Buyers sign a Buyer Representation Agreement. Mary consents to Bob representing both herself and the prospective Buyers in the same deal.

 

This is agency and fiduciary duties apply to all parties.
 

Buyers as Customers
 

The Buyers sign a Buyer Customer Service Agreement. This is not agency and no fiduciary duties are owed to the Buyers.

 

Buyers” Instructions
 

Fred and Wilma instruct Bob to prepare an Offer for $979,000.00.
 

Buyers’ Secret
 

In the course of drafting up the Offer and signing it, Fred states that they would be prepared to go as high as $989,000.00, in fact, $990,000.00 (if that would look better on paper.
 

Multiple Representation
 

Here are the multiple representation provisions in the standard form BRA (and similarly, the Listing Agreement:
 

          "MULTIPLE REPRESENTATION:
 

The Buyer hereby acknowledges that the Brokerage may be entering into listing agreements with sellers of properties the Buyer may be interested in buying or leasing. In the event that the Brokerage has entered into or enters into a listing agreement with the seller of a property the Buyer may be interested in buying or leasing, the Brokerage will obtain the Buyer’s written consent to represent both the Buyer and the seller for the transaction at the earliest practicable opportunity and in all cases prior to any offer to purchase or lease being submitted or presented.
 

The Buyer understands and acknowledges that the Brokerage must be impartial when representing both the Buyer and the seller and equally protect the interests of the Buyer and the seller in the transaction. The Buyer understands and acknowledges that when representing both the Buyer and the seller, the Brokerage shall have a duty of full disclosure to both the Buyer and the seller, including a requirement to disclose all factual information about the property known to the Brokerage. However, The Buyer further understands and acknowledges that the Brokerage shall not disclose:
 

• that the seller may or will accept less than the listed price, unless otherwise instructed in writing by the seller;

• that the Buyer may or will pay more than the offered price, unless otherwise instructed in writing by the Buyer;

• the motivation of or personal information about the Buyer or seller, unless otherwise instructed in writing by the party to which the information applies or unless failure to disclose would constitute fraudulent, unlawful or unethical practice;

• the price the Buyer should offer or the price the seller should accept; and

• the Brokerage shall not disclose to the Buyer the terms of any other offer.
 

However, it is understood that factual market information about comparable properties and information known to the Brokerage concerning potential uses for the property will be disclosed to both Buyer and seller to assist them to come to their own conclusions. Where a Brokerage represents both the Seller and the Buyer (multiple representation), the Brokerage shall not be entitled or authorized to be agent for either the Buyer or the Seller for the purpose of giving and receiving notices.”
 

So, in the case of the Buyers being clients too, this information about a potential higher Offer is secret. In fact, it’s raised and identified specifically in the agency document.
 

Buyers’ Secret if they are simply Customers
 

This issue is a little more complicated. If we were simply looking at a theoretical answer, or a hypothetical answer to an exam question, the answer would be that the Agent must pass the information along. That’s based upon the fiduciary duty to “disclose” which is owed to the Seller, Mary and the fact that no fiduciary duties (at all) are owed to Fred and Wilma.
 

However, that approach doesn’t take into consideration the fact that a confidentiality requirement may arise strictly in contract. Thus, in this particular case, Fred and Wilma may have indicated the $990,000.00 to Bob “in confidence” expecting full well that Bob being a professional will keep it secret. This statement, namely, the request for secrecy could have been either:
 

  • Express, or
  • Implied.
     

Express
 

Fred and Wilma would have started their statement with….”Bob, can I tell you something in confidence…”.
 

Implied
 

There is no caution at the outset by either Fred or Wilma, but they think that as a professional, Bob will keep the secret. It only makes sense.
 

Miranda Rights
 

In order to protect himself, Bob could have said:
 

  • Anything you say out loud, goes directly to Mary, after all, she’s my client, I owe her fiduciary responsibilities and you as just “service customers”, or
  • Anything you say, can and will be used against you…
     

From the perspective of a “professional”, Bob is in an excellent position to protect himself in this situation. If he chooses not to do anything, that’s his problem. The solution was easy.
 

In my view, far too many agents rely upon the hypothetical exam question for the answer to this issue. It just doesn’t go far enough.
 

Professionals should be careful!
 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: agents duties fiduciary duty contractual duty liability ontario law
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

Phone: 416-745-2300

BRMadigan@Rogers.com

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