The duty of confidentiality in the real estate sector

In any Listing Agreement there is a time when the relationship with the agency ends.

A Listing Agreement, as it is widely known, is none other than a contract between the rightful owner of a participation in the land (the ‘Principal’) and a duly authorized real estate company (the ‘Agent’), by which the signing stipulates and agrees to find a Buyer within a specified period of time who is ready, willing and able to purchase the interest in the land that is the subject of the contract while acting within the scope of the authority that the Principal confers on the Agent, and where furthermore, the holder stipulates and agrees to pay a commission in the event that the licensee succeeds in finding said Buyer.

As in all contracts, a Listing Agreement involves an element that is commonly known in the law as an “implicit agreement of good faith and fair dealing.” This covenant is a general assumption of law that the parties to the contract, in this case the holder and the licensed real estate company, will treat each other fairly and that they will not cause each other harm by breaking their words. or otherwise breach their respective and mutual contractual obligations, express and implicit. Failure to comply with this implicit agreement gives rise to liability both in contractual law and, depending on the circumstances, also in extra-contractual liability.

Due to the particular nature of a Listing Agreement, the Courts have long ruled that during the life of the agency relationship a second element is implicit in the contract arising from the many duties and responsibilities of the Agent towards the Principal: a duty of confidentiality, which obliges an Agent who acts exclusively for a Seller or a Buyer, or a Dual Agent who acts for both parties under the provisions of a Limited Dual Agency Agreement, to maintain the confidentiality of certain information provided by the Principal. As with the implicit agreement of good faith and fair treatment, the breach of this duty of confidentiality gives rise to liability both in contractual law and, depending on the circumstances, also in tort.

According to a recent decision by the Real Estate Council of British Columbia (http://www.recbc.ca/), the regulatory body empowered with the mandate to protect the public interest in matters related to the real estate sector, a question. as to whether the duty of confidentiality extends beyond the expiration or termination of the Listing Agreement.

In a recent case, the Real Estate Council reprimanded two licensees and a real estate company for violating an ongoing duty of confidentiality, which the Real Estate Council found was owed to the seller of a property. In this case, the property in question was put up for sale for more than two years. During the term of the Listing Contract, the price of the property was reduced on two occasions. However, the property ultimately did not sell and the listing expired.

Following the expiration of the listing, the seller entered into three separate “fee agreements” with the real estate company. On all three occasions, the Seller declined to represent the agency and the company was identified as ‘Buyer’s Agent’ in these fee agreements. One of the parties initiated a lawsuit against the Seller, which was related to the property in question.

The attorney acting on behalf of the plaintiff approached the real estate firm and requested that they provide affidavits containing information about the property’s price. This attorney made it very clear that if the firm did not voluntarily provide the affidavits, it would subpoena the firm and licensees as witnesses to testify before the judge, or obtain a court order in accordance with the law. Court rules forcing the company to present said evidence. The real estate firm, believing there was no other option in the matter, promptly complied by providing the requested Affidavits.

As a direct and immediate result, the Seller filed a complaint with the Real Estate Council arguing that the information contained in the Affidavits was ‘confidential’ and that the firm had breached a duty of confidentiality due to the Seller. As it turned out, the affidavits were never used in court proceedings.

The real estate broker, for its part, took the position that any duty of confidentiality derived from the agency relationship ended with the expiration of the Listing Contract. The firm further argued that even if there were a duty to maintain confidentiality, such duty would not exclude or otherwise limit the evidence that the real estate broker would be required to deliver under a subpoena or in a proceeding under the Court rules. And finally, the realtor pointed out that there is no realtor-client privilege and that, in the current circumstances, the seller could not have prevented the firm from testifying in the lawsuit.

The Real Estate Council did not accept the line of defense and held that there is an ongoing duty of confidentiality, which extends after the expiration of the Listing Agreement. The Council ruled that by providing the affidavits, both the broker and the two licensees had breached this duty.

The attorney-client privilege is a legal concept that protects communications between a client and the attorney and maintains the confidentiality of those communications. There are limitations to the attorney-client privilege, such as the fact that the privilege protects confidential communication but not the underlying information. For example, if a customer has previously disclosed confidential information to a third party who is not an attorney, and then gives the same information to an attorney, the attorney-client privilege will still protect the communication to the attorney, but will not protect the information provided to the third party.

Because of this, an analogy can be drawn in the case of a real estate agent-client privilege during the existence of a Listing Agreement, whereby confidential information is disclosed to a third party, such as a Real Estate Board for publication. under the terms of Multiple Listings. Service agreement, but not before such information is disclosed to the real estate agency. In this case, the privilege would theoretically protect the confidential communication as well as the underlying information.

And as to whether or not the duty of confidentiality extends beyond the termination of a Listing Agreement remains a subject of open debate, again in the case of an attorney-client privilege there is broad legal authority to support the position. In fact, they extend indefinitely, so that it could be said that an analogy can also be inferred regarding the duration of the duty of confidentiality that the Agent owes to the Seller, to the extent that said duty is extend indefinitely.

This, in a synopsis, appears to be the position taken by the Real Estate Council of British Columbia on this matter.

Clearly, whether the duty of confidentiality arising from a listing agreement survives termination of the contract is problematic for the real estate profession in terms of practical applications. If, for example, a listing with brokerage A expires and the seller re-quotes with brokerage B, if there is a continuing duty of confidentiality on the part of brokerage A, in the absence of express consent from the seller, a broker of Broker A’s real estate would not be able to act as Buyer’s Agent for the purchase of Seller’s property, if it were re-listed by Broker B. All of which, therefore, would be against all professional cooperation rules. between real estate firms and their representatives. In fact, this process could potentially destabilize the entire foundation of the Multiple Listing Service system.

In the absence of specific guidelines, until this whole matter is clarified, perhaps the best course of action for real estate firms and licensees when asked by an attorney to provide information that is confidential is to respond that the brokerage will seek consent. necessary. of the client and, if that consent is not obtained, the lawyer will have to take the necessary legal measures to force the disclosure of such information.

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