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?
Let’s go through an example of when a professional abuses this relationship. We can take a professional that many of us need at some point: a real-estate agent. People use agents because they want help with what is probably the biggest transaction of their lives. And that’s all the more understandable in Vancouver’s baffling housing market.
Maybe there’s a retired couple wanting to downsize because the kids have all moved out. They want to sell their family home. 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 that 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. And we aren’t talking about mere seller’s remorse. 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.
There are rules setting out professional-conduct requirements that protect us in real-estate transactions. There are rules created under the Real Estate Services Act. But, as with anything, rules are broken from time to time. What happens when rules are broken?
The Real Estate Council of British Columbia (RECBC) is a regulatory body that protects the public in these situations. I spoke with their executive officer, Erin Seeley, about how they can take disciplinary actions against licensed real-estate agents. RECBC also has its own tribunal for investigating and disciplining agents. The consequences can be severe. For conduct after September 30, 2016, this tribunal can administer penalties on agents of up to $250,000 per infraction.
This tribunal is a regulatory body holding real-estate agents accountable. But where do the civil courts come in? The tribunal’s process can run parallel to a civil lawsuit. The two have somewhat different purposes. The tribunal’s disciplinary measures are to uphold standards and protect the public. A civil lawsuit is for victims themselves to seek compensation for their losses.
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.
Do real-estate agents have a fiduciary duty to their clients? “Absolutely,” Seeley says. “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.
I’m not trying to pick on real-estate agents here. I personally know many real-estate agents who are highly skilled and ethical. But with any industry, there can be a few bad apples. In those instances, clients can seek a legal remedy.
Of course, these remedies are for when the damage is already done. What can you do to stop these problems from happening in the first place? How can you be pro-active?
Who you choose for a professional is hugely important. Before hiring a professional, shop around. See if the person is well respected in the field. Choose someone you can comfortably talk to. Find someone you trust. And when you have chosen your professional, make sure to stay involved. Asking your professionals questions helps you understand your options and risks. It leads to better decision-making and better results for you.
A word of caution: you should not act or rely on the information provided in this column. It is not legal advice. To ensure your interests are protected, retain or formally seek advice from a lawyer. Kevin wishes to thank Erin Seeley for sharing her insight. RECBC offers free information at https://www.recbc.ca/ to promote consumer awareness.