Licensee Services and Duties: Representation vs. Non-Representation Relationships in Real Estate
A non-representation relationship exists when a licensee provides limited services to an individual or entity without establishing a formal representation relationship.
WHAT YOU'LL LEARN
Licensee Services and Duties: Representation vs. Non-Representation Relationships in Real Estate
Licensee Duties: Clients vs. Non-Clients Under Real Estate Act Rules
Risks of Serving Non-Clients Without Clear Boundaries or Disclosure
Scenario Activity
Licensee Services and Duties: Representation vs. Non-Representation Relationships in Real Estate
Key Legislative Guidance
Definition of Non-Representation Relationships: A non-representation relationship exists when a licensee provides limited services to an individual or entity without establishing a formal representation relationship.
The Real Estate Act Rules define a "representation relationship" as a formal agreement. Therefore, non-representation means the absence of such an agreement.
Permissible Services for Non-Clients:
Providing general market information: A licensee may offer publicly available data, such as property prices, rental rates, or condominium trends.
Answering factual questions: Non-clients may receive straightforward answers about legislation or operational procedures, provided the information does not include advice.
Facilitating simple administrative tasks: For example, assisting a non-client with filling out a standard form, as long as no advice or advocacy is provided.
Prohibited Services: Non-representation relationships explicitly exclude providing advice, opinions, or fiduciary duties. The REA Rules states:
"A licensee must not misrepresent the nature of their relationship with the person they are assisting."
Licensees must disclose in writing that they are not representing the individual and clarify that no fiduciary duties apply.
Example:
A licensee may assist a condominium owner with general information about the process for resolving bylaw disputes but cannot advocate for the owner or provide opinions on specific actions they should take.
Licensee Duties: Clients vs. Non-Clients Under Real Estate Act Rules
Comparison of Representation vs. Non-Representation Relationships
Representation Relationships:
Fiduciary Duties Apply: Licensees owe duties of trust, loyalty, and confidentiality to their clients.
Written Agreement Required: Representation relationships must be documented in a signed agreement.
Obligation to Act in the Client's Best Interests: Licensees must prioritize the client’s interests above all else.
Non-Representation Relationships:
No Fiduciary Duties: Licensees owe no fiduciary obligations to non-clients.
Written Disclosure Required: Licensees must provide non-clients with written disclosure that they are not being represented.
Limited Scope of Services: Services are restricted to general information and basic administrative assistance without providing advice or advocating for the non-client.
Key Differences:
Aspect | Representation |
Fiduciary Duties | Yes (trust, loyalty, confidentiality) |
Written Agreement | Required (representation agreement) |
Scope of Services | Comprehensive and advisory |
Advocacy Allowed | Yes |
Aspect | Non-Representation |
Fiduciary Duties | No |
Written Agreement | Required (disclosure of non-representation) |
Scope of Services | General and administrative only |
Advocacy Allowed | No |
Example:
If a condominium corporation hires a manager (representation relationship), the manager must act in the corporation's best interests and manage funds accordingly. Conversely, if the manager assists a non-client unit owner with general questions about bylaw enforcement, no fiduciary obligations exist, and services must remain limited.
Risks of Serving Non-Clients Without Clear Boundaries or Disclosure
Key Risks
Risk of Misrepresentation: Failing to clearly disclose the nature of the relationship can lead to misunderstandings or legal liability. For example, a non-client may believe that the licensee is advocating for them and later claim misrepresentation if the licensee acts neutrally.
Conflict of Interest: Providing services to both a client and a non-client in the same transaction may create a perceived or actual conflict of interest. Without disclosure, this could breach the licensee's obligations.
Breach of Fiduciary Standards: Even in a non-representation relationship, actions that blur the boundaries (e.g., giving advice) could result in the unintended assumption of fiduciary obligations, exposing the licensee to potential regulatory penalties.
Impact on Professional Integrity and Compliance:
Non-disclosure damages trust with clients and the public, undermining the professionalism of the licensee.
Breaches of the REA Rules can result in administrative penalties, license suspension, or cancellation.
Example:
A condominium manager fails to disclose that they are not representing a unit owner during a dispute with the condominium corporation. The owner assumes the manager is advocating on their behalf, leading to dissatisfaction and a complaint when the manager acts neutrally.
Scenario Activity
Scenario:
A licensee is approached by a unit owner who is not a client. The owner requests help understanding the condominium corporation’s financial statements. The licensee provides basic information about interpreting the statements but avoids giving advice.
Discussion Questions:
Did the licensee comply with the REA Rules regarding non-representation relationships?
What written disclosures should the licensee have provided to ensure clarity about their role?
What would have been the risks if the licensee had advised the unit owner instead of providing general information?
