In Manitoba, an agency relationship can arise in a real estate transaction when a person wishing to sell his/her home seeks the assistance of a real estate salesperson. This relationship is known as seller agency and, in this situation, the principal is the seller of the property and the listing brokerage firm is the agent for the seller. All of the salespeople employed by the listing brokerage firm, regardless of which branch office they work in, represent the seller. It is important to note that the seller agency relationship exists between the listing broker and the seller despite the fact that the real estate salesperson employed by the listing broker actually obtains and services the listing. How does this affect ownership of the listing agreement which created the agency relationship? The listing agreement belongs to the listing broker, NOT the salesperson. If a salesperson leaves the employment of his/her broker, he/she is not entitled to take his/her listings to the new employer without the consent of the employing broker.
These representatives of the seller, that is the listing broker and all of his/her salespeople, will use their professional negotiation skills, seek out qualified buyers, and generally promote the listed property, keep information concerning the seller confidential, and act in the seller's best interests. The hallmarks of this relationship are good faith, full disclosure, competence, obedience, and accounting - all of the normal fiduciary duties owed by an agent to his/her principal.
The seller and the real estate firm will enter into a signed real estate listing contract - most often the Manitoba MLS ® Real Estate Listing Contract which will be discussed in Session 2. This contract outlines the details of their relationship and, under the terms of the contract, the seller agrees to pay a commission to the listing broker when the home is sold or under certain other conditions.
What Happens When the Listing Salesperson Sells the Property?
If the listing salesperson is "double-ending" the deal by selling his/her own listing or if another salesperson employed by the listing brokerage firm, either in the same office or in another branch office, sells the property, the seller is entitled to assume from Clause 6A of the listing contract that, unless told otherwise, the listing broker represents only the seller and the buyer is not represented. In such cases, it is important that salespeople employed by the listing brokerage firm fully inform prospective buyers of this situation -- that they are not represented - and that they are very careful not to form an agency relationship with the buyer through their words or actions towards the buyer. Such an agency relationship would be an undisclosed dual agency relationship - one that is illegal under the law of agency. If in fact the listing brokerage firm is representing both parties in the same transaction, which is referred to in Clause 7C of the Listing Contract as joint representation, it can only do so with the informed consent of the buyer. The seller, by signing the Listing Contract, will have acknowledged the possibility of such joint representation, but must still be informed if it is to occur. This informed consent of both buyer and seller can be obtained by having both parties sign an Acknowledgement of Limited Joint Representation. Also, most brokerage firms will have policies and procedures in place for this situation - make sure that you know and understand how this situation should be handled.
NOTE: The signing of the Acknowledgement of Limited Joint Representation form by BOTH the buyer and the seller is NOT an option - it is the only way that you, or anyone in your firm, can represent both parties in the same transaction. Anything else is illegal under the common law of agency.
An Important Point About Limited Joint Representation
Joint representation is not automatic - it does not arise just because a buyer wants to view, or even make an offer on, one of the listing brokerage firm's properties. Joint representation only arises with the informed consent of both the buyer and the seller - the buyer specifically requests an agency relationship with the listing brokerage firm and consents to the joint representation. Also, even though the seller has consented to such a possibility when he/she signed the listing contract, he/she must still be informed if the joint representation is to occur and be asked to sign an Acknowledgement of Limited Joint Representation form. Remember that it is possible for a listing brokerage firm to be the agent for the seller and have a buyer, who is not represented by the listing brokerage firm or any other cooperating brokerage firm, purchase that property.
If joint representation does occur, then the listing brokerage and all of the salespeople employed by that brokerage firm, regardless of which branch office they work in, represent both the seller and the buyer and therefore owe the usual fiduciary duties to both parties, with the exception of confidentiality to both buyer and seller. When you represent both the seller and the buyer in a case of limited joint representation, you must be very certain that you have a clear understanding of what information must be disclosed and what information must be kept confidential. Conflicts can occur and extreme care must be exercised, particularly in disclosure of information which is confidential to either party.
NOTE: The signing of the Acknowledgement of Limited Joint Representation form by BOTH the buyer and the seller is NOT an option - it is the only way that you, or anyone in your firm, can represent both parties in the same transaction. Anything else is illegal under the common law of agency. The Working with a Real Estate Salesperson brochure CANNOT be used to obtain informed consent to limited joint representation as it is not a contractual document - it is only an acknowledgement by the buyer or seller that agency was discussed.