Real estate

Duty of Confidentiality in Real Estate

A Listing Agreement, as it is popularly known, is nothing more than a contract between the legal holder of an interest in land (the “Principal”) and a duly licensed real estate firm (the “Agent”), whereby the firm determines and accepts to find a purchaser within a specified time who is ready, willing and able to purchase the interest in the land which is the subject of the contract, while acting within the scope of the authority which the Principal gives to the Agent, and where further rather the licensee determines and agrees to pay a commission if the licensee is ever successful in finding such a buyer.

As in all contracts, an element commonly known in law as an “implied covenant of good faith and fair dealing” is implied into a Listing Agreement.

This covenant is a general assumption of the law that the parties to the contract – in this case the titleholder and the licensed real estate firm will deal fairly with each other and that they will not cause harm to each other. breaking their words.

or otherwise breach their respective and mutual contractual obligations, express and implied. Breach of this implied agreement gives rise to liability both in contract law and, depending on the circumstances, in tort.

Due to the special nature of a listing agreement, the courts have long decided that during the term of the agency relationship, a second element is implied in the contract arising from the many duties and responsibilities of the Agent towards the Principal: a. obligation of confidentiality, which obligates an agent acting exclusively for a seller or a buyer, or a dual agent acting for both parties under the provisions of a Limited Dual Agency Agreement, to keep certain information provided confidential by the Director. As with the implied covenant of good faith and fair dealing, a breach of this duty of confidentiality gives rise to liability both in contract law and, depending on the circumstances, in tort.

Pursuant to a recent decision by the Real Estate Council of British Columbia (http://www.recbc.ca/), the regulatory body mandated to protect the public interest in matters relating to real estate real estate, a question now arises as to whether or not 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 firm for breaching a continuing duty of confidentiality that the Real Estate Council found owed to the seller of a property. In this case the subject property was listed for sale for more than two years. During the period of the Listing Agreement, the price of the property was reduced on two occasions. Despite this, the property ultimately did not sell and the listing expired.

After the listing expired, the Seller entered into three separate ‘fee agreements’ with the real estate firm. In all three cases, the Seller declined agency representation and the firm was identified as the ‘Buyer’s Agent’ in these fee agreements. A party commenced legal proceedings against the Seller, which involved the subject property.

Counsel acting for the plaintiff approached the real estate firm and requested that they provide Statements containing information regarding the listing of the property. This attorney made it very clear that if the firm did not voluntarily provide the Statements, he would either call the firm and the licensees as witnesses to testify before the judge, or obtain a court order pursuant to Rules of Court forcing the firm to provide such evidence. The real estate firm, believing it had no other choice in the matter, promptly complied by providing the required Declarations.

As a direct and proximate result, the Seller filed a complaint with the Real Estate Board alleging that the information contained in the Declaration was ‘confidential’ and that the firm had breached a duty of confidentiality owed to the Seller. As it turned out, the Statements were never used in court proceedings.

The real estate brokerage, on the other hand, took the position that any duty of confidentiality arising from the agency relationship ended upon the expiration of the Listing Agreement. The firm argued, further, that even if there were a duty of continuing confidentiality, such a duty would not preclude or otherwise limit the evidence that the real estate brokerage would be compelled to provide pursuant to a subpoena or a process according to Rules of Court. And, finally, the real estate company pointed out that there is no realtor-client privilege and that under the current circumstances the Seller could not have prevented the firm from testifying in the lawsuit.

The Real Estate Board did not accept the line of defense and asserted that there is a continuing duty of confidentiality that extends beyond the expiration of the Listing Agreement. The Council decided that by providing the Statements, both the brokerage and the two licensees had breached this duty.

Attorney-client privilege is a legal concept that protects communications between a client and an attorney and keeps those communications confidential. There are limitations to the attorney-client privilege, such as the fact that the privilege protects confidential communication but not underlying information. For example, if a customer has befor discloses confidential information to a third party who is not a lawyer, and then gives the same information to a lawyer, the attorney-client privilege will continue to protect the communication with the lawyer، but will not protect the information provided to the third party.

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

And whether or not the duty of confidentiality extends beyond the termination of a Listing Agreement is still a matter of open debate, again in the case of the attorney-client privilege there is sufficient legal authority to support the position that such a privilege does in fact extend to a indefinitely, so that an analogy can be drawn, as well as respecting the duration of the duty of confidentiality that the Agent owes to the Seller, to the extent that such duty extends indefinitely.

This, in summary, appears to be the position of the Real Estate Council of British Columbia on the matter.

Clearly, whether the duty of confidentiality arising from a Listing Agreement survives the termination of the contract is problematic for the real estate profession in terms of practical applications. If, for example, a listing with Broker A expires and the seller re-lists with Broker B, if there is a continuing duty of confidentiality on the part of Broker A, in the absence of express consent on the part of the seller, a realtor. Brokerage A could not act as the buyer’s agent for the purchase of the seller’s property if it were re-listed by Brokerage B. All, therefore, would run afoul of all real estate professional cooperation rules. 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 guidance, 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 confidential information, is to respond that the broker will request obtain the necessary consent. by the client and, if that consent is not given, the lawyer will have to take the necessary legal steps to compel the disclosure of such information.

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