Friday, February 17, 2012

fi•du•ci•ar•y /fəˈdo͞oSHēˌerē/

fi•du•ci•ar•y   /fəˈdo͞oSHēˌerē/ 
Adjective:   Involving trust, esp. with regard to the relationship between a trustee and a beneficiary.
Noun:   A trustee.
Synonyms:  trustee – confidant

Real estate Licensees are often described as owning their clients’ a ‘fiduciary duty”.   Let’s be reminded what that means – for both the expectation of the client and the delivery of services for the REALTOR®.

To be a fiduciary means that your client has put trust and confidence in you to deal with their real estate transaction.  A fiduciary duty is a duty of utmost good faith which means you – as the   REALTOR®  , are expected to be completely loyal to your client and NEVER put your own personal interests before the ‘duty’.  It also means that you must not profit from your position as a fiduciary.

In the Professional Standards Manual that all licensed   REALTOR®   have and are expected to follow it states:

As an agent, a brokerage and the licensees related to the brokerage have certain duties to their client. As explained in the Working With a REALTOR® brochure, the brokerage and the licensees related to the brokerage have: 

  • a duty of undivided loyalty to the principal; 
  • a duty to keep the confidences of the principal; 
  • a duty to obey all lawful instructions of the principal; and 
  • a duty to account for all money and property of the principal placed in the brokerage’s hands while acting for the principal. 
When does the ‘duty’ start and when does it end?

Your ‘duty’ comes into existence when you start to provide trading services to a buyer or a seller.  The origin is usually straightforward – When the client begins to receive guidance or advice from you – and when they believe you are working for them – Agency is created – therefore a fiduciary relationship and the obligations that go along with it are created.  It can be more difficult to say when the duty comes to an end. A lot will depend on the circumstance of the transaction.  A fiduciary relationship does not end with the existence of a contract of purchase and sale.  It lasts at least until the listing agreement expires or the transaction completes.  It is important to note that the Real Estate Council of British Columbia has taken the position that the duty of confidentiality remains even after the contractual arrangement between the licensee and the client has ended.

A licensee acting in a fiduciary relationship has a duty to disclose all material information to his or her client.  I always remember something my professor taught me at UBC – “You are to be a conduit to your client -- not a sieve.”  It is not up to a licensee to decide what is “material” or not, for any given client.  “Material” information can be different for one client or circumstance, to another.  It is information that would likely influence the clients’ conduct – or their decision – in the transaction.  The consequences of the disclosure of the information are not relevant.

A licensee must keep confidential ANY information received from their client pertaining to the transaction.  What a seller is willing to accept or a buyer is willing to offer should never be disclosed.  Realtors that insist on negotiating for their clients through verbal communications between licensees walk a very slippery slope and not only are at risk of breaching their fiduciary duty, they are also very likely in contravention of the Real Estate Service Act, the  REALTOR®  Code of Ethics, and Board Regulations and by-laws – to negotiate verbally is wrong on so many levels and fraught with huge consequence and risk to the licensee.  “I was trying to save time” – is NOT a defence that would ever be accepted in court, or for that matter, not likely by your client either.

Sorry  -  got off on a tangent there – verbal negotiation is an issue that causes me personally, great frustration and worry.  There is just no reason to ever do it. 

What it is important for both  REALTOR® and client to take away from this BLOG today – is to know exactly what Fiduciary duties are so the  REALTOR® knows the professional standard to which they are measured and so that the client knows what they have a right to expect from their Professional Real Estate Agent.
When the going gets "Tough"...just call me.

Susan Tough