This article first appeared in the Georgia Straight and has been edited to improve online readability.
Trust and professionals go hand in hand. After all, trust is at the very heart of the professional/client relationship.
We hire professionals for everything. They help keep us healthy. They handle our money and our legal affairs. They also fix our homes and cars. We put our trust in professionals because of their knowledge, skills, and experience. We trust the professional to give us good advice. We trust that they act and advise in our best interests.
Unfortunately, this trust can sometimes be abused. When that happens, the client is very vulnerable. The client can lose money or be harmed. So what are their legal protections and remedies?
People use real estate agents because they want help with what is probably the biggest transaction of their lives.
Let’s consider a retired couple wanting to downsize because the kids have all moved out. They want to sell their family home so they hire a real-estate agent to help them get a great price for the property.
The agent tells the clients about a potential buyer and offer. The agent recommends the couple accept, so they do. The deal goes ahead but, two weeks later, the couple finds out that the property has exchanged hands a few times already and is being listed for sale again.
This has the couple wondering if they sold their property at too low of a price. With a bit of digging around on social media, they are shocked at a discovery. The person who they sold their house to is actually their agent’s cousin.
Here, the agent’s misconduct is not the flipping of the house. The misconduct is the agent’s advice to sell the house for a bargain price to someone the agent had an undisclosed relationship with. This failure to disclose resulted in the agent’s personal profit. Put another way, the agent abused the trust of the clients.
The Real Estate Council of British Columbia (RECBC) is a regulatory body that protects the public in these situations. RECBC has its own tribunal for investigating and disciplining agents and the consequences can be severe – up to $250,000 per infraction.
A civil lawsuit against a professional can be based on a number of legal grounds: the agent’s actions or advice may be negligence. On the more serious side, there may be fraud. Anyone can be found to be negligent and fraudulent, though.
Professionals, however, can be liable to their clients for something else as well. Because of the trust given by clients, the law can hold professionals to a higher standard. Under the law, professionals may have what’s called a fiduciary duty.
With a fiduciary duty, a professional would be required to give utmost loyalty to the client and to act in their best interest. If a professional breaches this duty, the client may have a claim. If the professional is found legally responsible, then they may have to compensate the client.
“Absolutely,” says RECBC Executive Officer Erin Seeley. “They have responsibilities as fiduciaries: to be loyal, avoid conflicts of interest, and give full and complete disclosure of any material facts.”
That hypothetical situation is egregious. A case could be made that the real-estate agent breached their fiduciary duty to the clients. The couple could sue for the amount that they should have made if they had a loyal agent. In other words, that couple could be entitled to the amount they lost because their professional didn’t act in their best interest.
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