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Is Dual Agency Dead?

It appears dual agency with limitations is a thing of the past in the real estate industry.  Long live transaction facilitation!  As of October 1, 2008, real estate brokerages are no longer to use the term “dual agency” when the same brokerage represents the buyer and the seller.  The new term to be used is “transaction brokerage” or “transaction facilitation.”  It appears that all the brokerages in Lethbridge are going to stay with common law agency, and will not be going to designated agency as set out in the new rules.  However, even brokerages that operate under common law agency must comply with the new rule 59, which calls for transaction facilitation, instead of the old dual agency with limitations.

The real estate industry regulators have long been troubled by the whole idea of dual agency.  The regulators felt that dual agency was a mirky world of dual allegiances in which real estate members tried to serve two masters.  Therefore, in June of 2004, the report of the agency task force (“ATF”) in conjunction with Professor William Foster, recommended a change from dual agency with limitations to transaction brokerage.  The ATF felt that transaction brokerage offered risk reduction for industry members.  They believed transaction brokerage would also assist consumers and industry members in recognizing that the industry member would not be serving as an advocate for either party under this new arrangement.

It is important to recognize that when an industry member goes from representing one party, to a transaction brokerage situation, there is a major change in roles and duties for the industry member.

It is also important to remember that when you change from sole agency to transaction facilitator that:

1. A facilitator must be objective, and focus on getting consensus between the parties.  The facilitator cannot give confidential advice to or advocate on behalf of either the buyer or the seller.
2. A facilitator may provide standard forms to the parties, and may act as a “scribe” only in the preparation of these forms, in accordance with specific instructions to the buyer or seller.  The facilitator must not make any suggestions in such preparations, such as recommending certain terms or conditions that would suggest any advocacy on the part of either party to such negotiations.
3. Therefore, the key to success as a facilitator is to properly prepare your clients before you become a facilitator. You should let your clients know about the key issues they will need to be aware of during the negotiations, such as the need for proper due diligence conditions.  This preparation should be done before you find yourself in the role of a facilitator because you can no longer do so once you don the cap of a facilitator.

It is important that all industry members, who wish to represent two parties to a deal, learn the new rules and duties of becoming a transaction facilitator.

Paul G. Pharo, Q.C. is a Lethbridge Lawyer.