Several blog posts ago, we asked, rhetorically, if you knew the difference between a client and a customer. Lest you have forgotten, here is a brief reminder.
The terms are not interchangeable. Each has a specific definition in the Real Estate and Business Brokers Act, 2002 (REBBA 2002). The key to remembering the difference rests with the representation agreement. A client is represented under a (buyer or seller) representation agreement. A customer is not. As such, the level of obligation owed to each is different, although a duty of care is owed to both.
The duty of care owed to customers involves providing accurate information, responding to questions, being honest, and performing specific agreed-upon functions.
The duty of care owed to clients is outlined in the representation agreement (which must be signed, sealed, and delivered), general fiduciary obligations under agency law, and regulatory obligations (as set out in REBBA 2002).
Duties to Clients
In addition to the foregoing duty of care, obligations owed to clients include the following:
Eight General Obligations
1. Exercise care and skill – have the requisite knowledge and skills; provide complete and accurate information; recommend relevant experts, where applicable
2. Negotiate favourable terms – advance the client’s interests by assisting in negotiations; draft favourable terms and conditions for agreements arising from the negotiations
3. Maintain confidentiality – maintain confidentiality regarding all matters (e.g., client’s personal information, client’s motivation for buying/selling, the amount to be paid or accepted during negotiations)
4. Disclose information – disclose information pertinent to the client (e.g., actual or potential conflicts of interest); disclose matters relating to the transaction
5. Ensure honesty – demonstrate honesty of intent in all dealing
6. Act in person – perform duties personally, unless otherwise instructed
7. Obey instructions – obey the client’s instruction, unless it’s not lawful (e.g., the client asks you to create a misleading advertisement regarding the property)
8. Perform mandate – perform the mandate as set out in the representation agreement; act only within specified authorities; seek clarification if you are uncertain about said authorities
Five Fiduciary Obligations
1. Maintain utmost loyalty – the client’s interests come first, best achieved in single representation (i.e., you represent the interest of one party to a transaction)
2. Avoid conflicts of interest – beware aware of situations that may lead to conflicts of interest, such as:
• representing two or more clients at the same time (multiple representation)
• acquiring the client’s property
• selling owned property to the client
3. Disclose conflicts – disclose any personal or third-party interests that do or might conflict with the client’s interests; disclose the exact nature and extent of the conflict(s), preferably in writing and signed by the client
4. Not make secret profit – do not make a profit at the client’s expense (e.g., providing improper advice, accepting payment from another party without the client’s knowledge and written consent)
5. Not misuse confidential information – do not use confidential information (e.g., confidential details about the client, the property, and/or the transaction) for your own interests, to harm the client, or to interfere with the client’s endeavours
For More Information
For more information on duties to clients and customers, please consult Land, Structures and Real Estate Trading (course 2 textbook).
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