The Duty Of Confidentiality In Real Estate

British Columbia - The Duty Of Confidentiality In Real Estate

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In any Listing business agreement there is a point in time when the agency connection ends.

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A Listing Agreement, as it is widely known, is none other than a ageement between the rightful titleholder of an interest in land (the 'Principal') and a duly licensed real estate firm (the 'Agent'), whereby the firm stipulates and agrees to find a Buyer within a specified timeframe who is ready, willing and able to buy the interest in land that is the field matter of the ageement while acting within the realm of the authority that the necessary confers onto the Agent, and wherein furthermore the titleholder stipulates and agrees to pay a commission should the licensee ever be victorious in seeing such Buyer.

As in all contracts, there is implied in a Listing business agreement an element which is generally know at law as an 'implied ageement of good faith and fair dealings'. This ageement is a general assumption of the law that the parties to the ageement - in this case the titleholder and the licensed real estate firm - will deal fairly with each other and that they will not cause each other to suffer damages by whether breaking their words or otherwise breach their respective and mutual contractual obligations, express and implied. A breach of this implied ageement gives rise to liability both in ageement law and, depending on the circumstances, in tort as well.

Due to the singular nature of a Listing Agreement, the Courts have long since ruled that while the term of the agency connection there is implied in the ageement a second element that arises out of the many duties and responsibilities of the Agent towards the Principal: a duty of confidentiality, which obligates an Agent acting exclusively for a wholesaler or for a Buyer, or a Dual Agent acting for both parties under the provisions of a wee Dual agency Agreement, to keep confidential obvious information in case,granted by the Principal. Like for the implied ageement of good faith and fair dealings, a breach of this duty of confidentiality gives rise to liability both in ageement law and, depending on the circumstances, in tort as well.

Pursuant to a recent decision of the Real Estate Council of British Columbia (http://www.recbc.ca/) , the regulatory body empowered with the mandate to protect the interest of the communal in matters tantalizing Real Estate, a request now arises as to whether or not the duty of confidentiality extends beyond the expiration or otherwise termination of the Listing Agreement.

In a recent case the Real Estate Council reprimanded two licensees and a real estate firm for breaching a chronic duty of confidentiality, which the Real Estate Council found was owing to the wholesaler of a property. In this case the field asset was listed for sale for over two years. while the term of the Listing business agreement the price of the asset was reduced on two occasions. This notwithstanding, the asset finally did not sell and the listing expired.

Following the expiration of the listing the wholesaler entered into three detach 'fee agreements' with the real estate firm. On all three occasions the wholesaler declined agency representation, and the firm was identified as 'Buyer's Agent' in these fee agreements. A party commenced a lawsuit as against the Seller, which was related to the field property.

The lawyer acting for the Plaintiff approached the real estate firm and requested that they provide Affidavits containing information about the listing of the property. This lawyer made it very clear that if the firm did not provide the Affidavits voluntarily, he would whether subpoena the firm and the licensees as witnesses to give evidence before the Judge, or he would procure a Court Order pursuant to the Rules Of Court compelling the firm to give such evidence. The real estate firm, believing there was no other option in the matter, abruptly complied by providing the requested Affidavits.

As a direct and proximate result, the wholesaler filed a complaint with the Real Estate Council maintaining that the information contained in the Affidavits was 'confidential' and that the firm had breached a duty of confidentiality owing to the Seller. As it turned out, the Affidavits were never used in the court proceedings.

The real estate brokerage, on the other hand, took the position that any duty of confidentiality arising from the agency connection ended with the expiration of the Listing Agreement. The firm argued, moreover, that even if there was a duty of chronic confidentiality such duty would not forestall or otherwise limit the evidence that the real estate brokerage would be compelled to give under a subpoena or in a process under the Rules Of Court. And, finally, the realty enterprise pointed out that there is no such thing as a realtor-client privilege, and that in the instant circumstances the wholesaler could not have prevented the firm from giving evidence in the lawsuit.

The Real Estate Council did not accept the line of defence and maintained that there exists a chronic duty of confidentiality, which extends after the expiration of the Listing Agreement. Council ruled that by providing the Affidavits both the brokerage and the two licensee had breached this duty.

The attorney-client privilege is a legal thought that protects communications between a client and the attorney and keeps those communications confidential. There are limitations to the attorney-client privilege, like for instance the fact that the privilege protects the confidential transportation but not the basal information. For instance, if a client 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 transportation to the attorney, but will not protect the information in case,granted to the third party.

Because of this, an analogy can be drawn in the case of a realtor-client privilege while 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 a multiple Listings aid agreement, but not before such information is disclosed to the real estate brokerage. In this instance the privilege theoretically would protect the confidential transportation as well as the basal information.

And as to whether or not the duty of confidentiality extends past the termination of a Listing business agreement is still a matter of open debate, again in the case of an attorney-client privilege there is ample legal authority to preserve the position that such privilege does in fact increase indefinitely, so that arguably an analogy can be inferred as well respecting the period of the duty of confidentiality that the Agent owes the Seller, to the extent that such duty extends indefinitely.

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

Clearly, whether the duty of confidentiality that stems out of a Listing business agreement survives the termination of the ageement is problematic to the Real Estate profession in terms of practical applications. If, for instance, a listing with Brokerage A expires and the wholesaler re-lists with Brokerage B, if there is a chronic duty of confidentiality on the part of Brokerage A, in the absence of express consent on the part of the wholesaler a Realtor of Brokerage A could not act as a Buyer's Agent for the buy of the Seller's property, if this was re-listed by Brokerage B. All of which, therefore, would fly right in the face of all the rules of expert cooperation between real estate firms and their representatives. In fact, this process could potentially destabilize the entire foundation of the multiple Listings aid system.

In the absence of exact guidelines, until this entire matter is clarified maybe the best procedure of activity for real estate firms and licensees when requested by a lawyer to provide information that is confidential, is to answer that the brokerage will seek to procure the necessary consent from the client and, if that consent is not forthcoming, that the lawyer will have to take the necessary legal steps to power the disclosure of such information.

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