LESSON 6

Question 1

PROFESSIONS, PROFESSIONALS AND PROFESSIONALISM

Answer 1

Real estate licensees are part of this group of professionals.

While there are numerous definitions of “profession”, most share some common elements in that the members of a profession:
-accept a responsibility to put the interest of the public and their clients and employers ahead of their own interests
-have a high level of expertise that is valued by members of the public
-are required to complete specific requirements for initial entry and ongoing training and education, as a condition of continued membership
-are required to maintain objectivity when making decisions
-are required to follow specific rules of conducts, developed primarily for the protection of the public
-are held accountable for their actions
-hold other members of profession accountable for their actions

Professions are often at least traditionally, thought of as “callings” rather than jobs or occupations. This idea focuses on the fact that professionals are primarily motivated to provide a valuable service to others as opposed to making money for themselves. This focus encourages professionals to:
-collaborate and work together
-share knowledge and best practice; and
-move the profession forward through striving for continuous improvement

Professionalism is the overall competence of a professional considering their skills, judgment and behavior.

Question 2

ETHICS

Answer 2

Ethics are moral principles that govern a person’s behavior.

Ethics recognizes that is is possible to do wrong without breaking any civil or criminal law.

“The spirit of the law is not concerned so much with setting down rules. Rather it reflects the values which a society draws upon in its development of legal rules”.

The spirit of the law may include values such as the protection of the public, fairness and transparency.

Morality is centrally concerned with right versus wrong, and good behavior versus bad behavior.

The ability to identify ethical issues and respond accordingly is a fundamental aspect of professionalism.

Question 3

THE REGULATION OF A PROFESSION

Answer 3

Crown agency is a public sector organization under the supervision of the government, but administered independently.

Professionals are subject to the common law, like any other person. For example, they must fulfil their obligations under contracts to which they are a party, they must not commit torts (e.g. negligence), and they must fulfil fiduciary duties owed to clients (e.g. duties of loyalty, confidentiality, full disclosure, and avoiding conflicts of interest).

Question 4

REGULATING IN THE PUBLIC INTEREST

Answer 4

Misconduct is an unacceptable or improper behavior.

Professional misconduct is a type of misconduct under the Real Estate Services Act that focuses on competency in practice and technical breaches of the RESA, the Real Estate Services Regulation, the Home Buyer Rescission Period Regulation and the Real Estate Services Rules.

Conduct unbecoming a licensee is a type of misconduct under the Real Estate Services Act that is contrary to the best interests of the public, undermines public confidence in the real estate industry, or brings the real estate industry into disrepute.

Section 35 of RESA sets out two key types of misconduct:
1. professional misconduct and
2. conduct unbecoming a licensee.

While professional misconduct is primarily focused on competency in practice and technical breaches of RESA, the Real Estate Services Regulation, the Home Buyer Rescission Period Regulation, or the Rules, BCFSA may also discipline licensees for conduct unbecoming a licensee, which is defined as conduct that:
-is contrary to the best interests of the public
-undermines public confidence in the real estate industry; or
-brings the real estate industry into disrepute.

Question 5

TRUST

Answer 5

Trust is fundamental in establishing a profession’s value in the eyes of the public. If the public does not trust that the professional will act ethically and professionally and put their interests ahead of the professional’s own interests, they will not utilize the services of that professional.

Question 6

HOW HOENSTY AND INTEGRITY RELATES TO TRUST

Answer 6

Core values are fundamental beliefs of a person or organization.

The foundation of trust is built from honesty and integrity. Honesty and integrity are core values of professionals, including licensee and are key to building and maintaining trust.

Question 7

HONESTY

Answer 7

Honesty is acting in a manner that is sincere and truthful, and free of deceit.

Honesty is explicitly addressed in both RESA and the Rules.

Question 8

INTEGRITY

Answer 8

Integrity is a hard word to define, but we know it when we see it or, more particularly, when is lacking!

Honesty is a necessary element of integrity, but integrity is much broader. Integrity involved acting ethically and doing the “right thing”, whether or not anyone is watching and whether or not it benefits you.

Question 9

THE HEADLINE TEST

Answer 9

Headline test is a test that one, can use to evaluate whether a decision or action aligns with one’s overall professionalism that considers how the decision maker would feel if the decision or action were to appear as a headline of a newspaper or news site.

One way to evaluate whether a decision or action aligns with honesty and integrity is to imagine how you would feel if your actions became a headline on the home page of a news site, or were widely shared on social media. If you would be embarrassed, ashamed or concerned about your professional reputation, the actions are probably not ones that demonstrate honesty and integrity.

Human Rights Code is a statue to protect and promote human rights in BC, including protection from discrimination.

Question 10

DUTIES TO CLIENTS

Answer 10

The primary duties owed by licensees are to their clients. Professionalism and ethical behavior are fundamental when working with clients. Clients expect the act ethically, to be trustworthy, and to do what is best for the client.

Question 11

SOURCES OF DUTIES TO CLIENTS

Answer 11

The duties owed by licensees to clients are derived from two key sources: the common law and legislation.

The sources of duties above combine to form a complex set of overlapping duties to clients as well as to the other parties in a transaction.

Question 12

DUTIES TO CLIENTS UNDER THE RULES

Answer 12

Fiduciary is a person who holds a position of trust with respect to someone else and is obliged, by virtue of that relationship of trust, to act solely in the other person’s benefit.

Question 13

SECTION 30 A) - ACT IN THE CLIENT’S BEST INTEREST

Answer 13

Agent is a person who is authorized to act on behalf of another person or group.

Principal is a person who authorizes an agent to act on their behalf (e.g. a client).

Licensees must not do anything that would go against their clients’ interests. The overarching fiduciary duty that agents owe to their principals (i.e. clients) is this same duty of loyalty. Many of the other duties in the Rules and the other fiduciary duties are simply extensions of the overall duty of loyalty to act in a client’s best interests.

Question 14

SECTION 30 B) - ACT IN ACCORDANCE WITH THE CLIENT’S LAWFUL INSTRUCTIONS

Answer 14

Licensees must follow all instructions from their clients, provided that those instructions do not violate the law. This duty is also a fiduciary duty.

When receiving instructions, it is important for licensees to consider whether the form in which they have received the instructions complies with any service agreement that is in place. For instance if the applicable service agreement requires instruction to be in writing and the licensee received a verbal request from the client to complete a task, the licensee should ask the client to sent their instructions in writing.

Question 15

SECTION 30 C) - ACT ONLY WITHIN THE SCOPE OF THE AUTHORITY GIVEN BY THE CLEINT

Answer 15

Scope of authority is the bounds or extent of authority granted by the principal to the agent.

Licensees have a duty to only act within the authority that is granted to them by their client. This duty is also touched upon by the common law, as acting outside one’s scope of authority can result in a claim of breach of contract or negligence.

Section 45 of the Rules requires licensees to obtain written authorization to sign agreements on behalf of their clients. In other words, signing agreements for a client is outside of the licensee’s scope of authority unless they have received express written authority to do so.

Question 16

SECTION 30 D) - ADVISE THE CLIENT TO SEEK INDEPENDENT PROFESSIONAL ADVICE ON MATTERS OUTSIDE OF THE LICENSEE’S EXPERTISE

Answer 16

The real estate sales industry is a complex field where licensees are asked a wide range of questions by clients. Questions may relate to tax, law, appraisal, mortgages or construction, to name a few areas.

Licensees who are in any doubt as to whether they have the expertise to adequately answer a client question should immediately refer the client to another competent professional such as an accountant, lawyer, insurance broker, mortgage broker, appraiser, roofer, etc.

Licensees should also be aware of the increased risks of dabbling in niche areas such as agricultural or commercial property if they do not possess the relevant expertise to properly assist a client in such a transaction. Failing to observe this duty can also result in common law liability, particularly through a claim of negligence.

Question 17

SECTION 30 E) - MAINTANI THE CONFIDENTIALITY OF THE CLIENT’S INFORMATION

Answer 17

This duty, which mirrors the fiduciary duty of confidentiality, requires licensees to keep confidential any public information that has been told to them by their client unless:
-they have been authorized by the client to disclose it; or
-they are required by law to disclose the information.

Question 18

SECTION 30 F) - DISCLOSURE ALL KNOWN MATERIAL INFORMATION

Answer 18

Requires that licensees disclose to their clients all known material information respecting the real estate services, and the real estate and the trade in real estate to which the services relate. The duty of full disclosure is also a fiduciary duty. Material info is any info that might affect the value of the property of the client’s decision, or a fact that could cause a reasonable person to make a different decision about the transaction.

Question 19

SECTION 30 G) - COMMUNICATE ALL OFFERS TO THE CLIENT IN A TIMELY, OBJECTIVE AND UNBIASED MANNER

Answer 19

Licensees must promptly communicate all offers to their clients in a timely and objective way. This does not mean that licensees cannot provide their opinion or advice on how the client should respond to the offer; however, any opinion or advice provided must be objective and cannot be influenced by inappropriate considerations like personal interest or biases. Failure to communicate offers in this required manner can also be seen as negligent and a breach of the fiduciary duty of loyalty.

Question 20

SECTION 30 H) - USE REASONABLE EFFORTS TO DISCOVER RELEVANT FACTS

Answer 20

Requires licensees to use reasonable efforts to discover relevant facts respecting any real estate that the client is considering acquiring. Relevant facts could include physical features of the property, characteristics of the development and/or neighborhood, and general market conditions.

Question 21

SECTION 30 I) & J) - AVOIDING AND DISCLOSING CONFLICTS OF INTEREST

Answer 21

Conflict of interest is a situation where there is a substantial risk that the agent’s representation of a client would be negatively affected by the agent’s own interest or by the agent’s duties to another current client, a former client, or a third party.

The avoidance and disclosure of conflicts of interest is a key fiduciary duty that can undermine the overall fiduciary duty of loyalty, if it is not observed.

There is a risk that the licensee’s ability to act in the best interests of the client will be negatively affected - either by the licensee’s own interests or by the fact that they also owe a duty to another client. The significance of the risk will depend on the specifics of the situation, but one must be sure not to underestimate the potential implications. Conflicts of interest can have serious repercussions if they are not dealt with appropriately.

Commission based remuneration structures result in conflicts of interest arising more frequently than with other types of remuneration, and some level of conflict of interest is sometimes unavoidable.

Potential conflicts of interest is a situation where there is currently no conflict of interest, but the circumstances suggest that a conflict could arise in the future.

A key means of avoiding conflicts of interest is to have transparent discussions with clients about potential conflicts of interest early and often. For example, you should be up front with your clients and discuss what would happen if another client became interested in their property. Disclosure and consent are key safeguards to help mitigate the risks associated with conflicts of interest. Unfortunately, disclosure of a conflict does not eliminate your duty to act in the best interests of your client at all times. You cannot continue to represent a client if you cannot fulfil your fiduciary duties, even if you have made the required disclosures and obtained the client’s agreement.

Question 22

SECTION 34 - ACTING WITH REASONABLE CARE AND SKILL

Answer 22

Negligence is the failure to exercise reasonable care and skill, which causes someone to suffer harm or damages.

This section imposes the common law standard of negligence upon licensees when providing real estate services. This section applies to licensees when dealing with both clients and non-clients.

Question 23

DEFININF REASONABLENESS

Answer 23

Standard of care is the reasonable degree of care a person should provide to another.

The common law, and some of the duties in section 30, impose a reasonableness standard on licensees. For example, the common law of negligence requires licensees to act with reasonable care and skill and act as a reasonably prudent licensee would in comparable circumstances. Further, section 30 places a duty upon licensees to undertake reasonable efforts to discover relevant facts, and the duty to take reasonable steps to avoid any conflict of interest.

Question 24

BREACHING DUTIES TO CLEINTS

Answer 24

The Rules and the duties under common law are very similar, which means that complying with the Rules will most likely keep you in compliance with the common law.

Failing to meet one’s duties to a client is indeed an ethical lapse. Failure to meet their obligation as a trusted professional is generally seen as a breach of professional ethics. Remember, it is not valid excuse as a professional that you made a mistake because you weren’t knowledgeable enough or careful enough.

Question 25

DUTIES TO THIRD PARTIES
SECTION 35 2) OF RESA (CONDUCT UNBECOMING A LICENSEE)

Answer 25

Conduct unbecoming includes more than just a licensee’s conduct towards their clients. It also involves conduct towards the (represented and unrepresented) parties on the other side of a transaction, as well as members of the general public.

Question 26

SECTION 33 AND 34 OF THE RULES

Answer 26

Diligence is a careful and detailed work.

Although a licensee’s primary duty of loyalty is to their clients, it does not mean that a licensee is free to sabotage other third parties’ interests.

Fiduciary duties are not owed to non-clients (i.e. individuals who are involved in the real estate transaction but who are not being represented by the particular licensee); however, section 33 and 34 of the Rules still apply and state that when providing real estate services, a licensee must act honestly (section 33) and with reasonable care and skill (section 34).

Question 27

DISCLOSURE

Answer 27

One of the key fiduciary duties owed to clients is that of full disclosure.

Adequate transparency is essential in order for licensees to be seen as honest and ethical professionals. Clients must feel confident in the info and advice they are provided by their licensee.

Ensuring sufficient disclosure is a key part of transparency, which in turn is an important element of demonstrating honesty and integrity. Licensees should ensure that they understand their disclosure obligations clearly so that professionalism can be maintained.

As a general rule, ethical and transparent disclosure requires early, continuous, and full written disclosure.

Question 28

THE DUTY TO REPORT MISCONDUCT

Answer 28

The discussion in this chapter thus far has focused on holding yourself to the highest professional and ethical standards. The focus of this section is about holding other in the profession to the highest standards through the reporting of misconduct. This is known as the duty to report.

Question 29

THE PROFESSION IS A SHARED RESPONSIBILITY

Answer 29

Maintaining the integrity of the real estate profession and the confidence the public places in licensees is a shared responsibility between BCFSA and the members of the profession.

Not only must licensees be accountable for their own actions, but they must also make other licensees accountable for their actions. The real estate profession is collegial, and licensees often work together towards common goals.

The duty to report plays an important role in the challenge of ensuring that the public has confidence in the real estate profession.

Question 30

THE RILE OF LICENSEES IN MAINTAINING PROFESSIONALISM

Answer 30

Licensees cannot expect that an effective regulator that responds to consumer complaints effectively is enough to maintain the integrity of the profession - licensees also have a role to play.

Question 31

THE DUTY TO REPORT IN OTHER PROFESSIONS IN BC

Answer 31

The duty to report is a common obligation for professionals. This is consistent with the premise that public confidence in a profession can only be maintained when the members of the profession help to enforce the values of the profession.

Question 32

THE DUTY TO REPORT IN RESA AND THE RULES

Answer 32

The Rules make explicit mention of the duty to report. Section 29, contains a number of responsibilities for representatives and associate brokers, states that they must promptly notify their managing broker on learning of conduct that they consider may be:
-professional misconducts
-conduct unbecoming a licensee
-improper or negligent conduct.

In short, section 29 applies to any misconduct within a licensee’s brokerage and requires representatives and associate brokers to report the misconduct to their managing broker.

Question 33

THE DUTY TO REPORT AS AN ETHICAL DUTY

Answer 33

The duty to report in the Rules focuses on licensees reporting the misconduct of others within their brokerage to their managing broker. But what about the misconduct of licensees and unlicensed employees at other brokerages?

There is no explicit duty in the Rules for licensees to report the misconduct of those outside of their brokerage.

Under this ethical duty, licensees have a responsibility to report the conduct of any licensee:
-that they believe might constitute professional misconduct, conduct unbecoming a licensee, or improper or negligent conduct; or
-that presents a danger to that licensee’s clients of to the public interest.

Question 34

WHAT TO DO WHEN UNSURE OF WHETHER TO REPORT

Answer 34

Sometimes, the fact that misconduct has occurred is obvious. However, there are other times when things are not as clear. When another licensee’s actions “feel wrong”, yet the licensee is not suer whether they constitute professional misconduct, conduct unbecoming a licensee, or improper or negligent conduct, they should ask themselves the following questions:
-have a consumer’s interest been harmed by the licensee’s actions?
-does it seem likely that someone’s interests may be harmed in the future by the licensee’s actions?
-does the licensee stand to benefit as a result of their actions, and this has not been adequately disclosed to the client?
-does the licensee seem unaware or unwilling to correct their actions?

Question 35

WHERE TO REPORT MISCONDUCT

Answer 35

In most cases, reports of misconduct should be directed to one’s managing broker.

The fact that misconduct should generally be reported to one’s managing broker does not preclude or prevent the licensee from reporting misconduct directly yo BCFSA. Direct reporting to BCFSA may be necessary if:
-another licensee’s conduct presents such a great risk to the public that immediate action by BCFSA is necessary or
-the licensee’s managing broker is not immediately available, and the misconduct is of a serious nature.

Furthermore, a licensee should report directly to BCFSA if:
-they have concerns about how their managing broker is handling, or has handled, an instance of misconduct
-it is managing broker who has committed the professional misconduct; or
-for any reason, they would feel more comfortable reporting to BCFSA rather than to their managing broker.

Question 36

HANDLING REPORTS OF MISCONDUCT AS A MANAGING BROKER

Answer 36

Managing brokers have a range of option available to them to deal with issues of misconduct in their brokerage, such as:
-speaking to BCFSA for guidance
-addressing the issue with:
the license or employee involved in the potential misconduct;
the consumer impacted by the misconduct
the managing brokers of the other licensees and employees involved
other in the brokerage who were not involved in the misconduct and
the brokerage’s legal counsel to determine what legal risks may be associated with the conduct
-reporting the matter directly to BCFSA
-cancelling the employment or independent contractor relationship with the licensee or employees
-reviewing and updating the brokerage’s policies and procedures to address the unacceptable conduct
-creating brokerage training that focuses on discouraging inappropriate behavior and
-offering to compensate those who have suffered damages with respect to the misconduct.

Question 37

ETHICAL CODES OUTSIDE OF RESA AND THE RULES

Answer 37

The REALTOR Code includes three parts: the Preamble, the Code of Ethics and the Standards of Business Practice.

The Preamble introduces the REALTOR Code and explains its function. The Code of Ethics reinforces the commitment of REALTTORS to professional competent service, absolute honesty and integrity business dealing, utmost civility, co-operation with and fairness to all, and personal accountability through compliance with the Standards of Business Practice.

The Standards of Business Practice are comprised of twenty-nine articles that set out specific rules of conduct.