Real estate brokerages are companies licensed to assist consumers in buying, selling, or leasing real estate.
A real estate broker oversees each brokerage. Real estate associates and associate brokers need to be registered with a brokerage, and they are typically the brokerage representatives when working with consumers.
Agency is a relationship established when two parties agree to have one party represent the other party or provide services on behalf of that party. In a typical real estate deal, the brokerage or brokerage professional will act as the ‘agent’ for the consumer.
When people say, “real estate agent,” they typically mean the associates or associate brokers who work with consumers directly. But the legally defined ‘agent’ of the consumer is the brokerage itself, or the individual(s) that the brokerage names as ‘designated agent(s).’
When a buyer or seller first contacts a brokerage or brokerage professional, there is no agency relationship. An agency relationship develops when the brokerage professional and consumer agree that the brokerage’s professional will represent the consumer in a transaction.
If a consumer interested in residential real estate or property management wants to be in an agency relationship, the brokerage representative will ask the consumer to sign a written service agreement that confirms the consumer’s decision. Consumers must enter a written service agreement, as it offers valuable protection for real estate professionals and consumers. These agreements provide clarity and transparency regarding the nature of the agency relationship, and explain the duties and obligations of the professional and the consumer. Consumers can decline to sign, but by doing so, the brokerage cannot represent them.
Sole agency is a relationship in which the brokerage or licensee acts as the agent for only one party in a trade.
In sole agency, agents (i.e. the licensees) are obligated to protect and promote the interests of their clients. Specifically, a sole agent owes his or her clients the following duties:
Undivided loyalty: the agent must act solely in the client’s best interests, must always put the client’s interests above the agent’s own interests and above the interests of other parties. This means avoiding conflicts of interest and protecting the client’s negotiating position at all times.
Confidentiality: the agent has a duty to keep the client’s confidences. Confidential information includes any information about the client, the property, or the transaction that is not required by law to be disclosed, but if disclosed could be used by another party to the disadvantage of the client. The duty of confidentiality continues even after the agency relationship ends.
Full disclosure: the agent must inform the client of all facts known to the agent that might affect the relationship with the client or influence the client’s decision in the transaction. This includes any conflicts of interest the agent might have in providing services to the client. The agent should not decide if information is important to the client, rather, the agent is obligated to disclose all relevant information to the client. However, the agent cannot disclose any confidential information from a previous agency relationship to the client unless the previous client agrees in writing.
Obedience: The agent must obey all of the client’s lawful instructions, as long as instructions are reasonable and ordinary under the circumstances. If the client insists the agent do something unlawful, the agent would be obliged to refuse, and consider terminating the relationship and existing service agreement.
Reasonable care and skill: The agent must exercise reasonable care and skill in performing all assigned duties. The agent is expected to meet the standard of care that a reasonable and competent industry member would exercise in a similar situation.
Full accounting: The agent must account for all money and property placed in the agent’s hands while acting on the client’s behalf.
Customer status is when a licensees performs certain tasks and services for a consumer, but they are not the agent of that consumer and are not working on the consumer’s behalf.
Customer status is appropriate for consumers who do not want to have an agency relationship with you, but still want your services to help them facilitate a transaction.
In customer status, your brokerage does not represent the consumer. You are not the consumer’s agent and do not owe them fiduciary duties. You will not provide the customer any services that require the exercise of discretion or judgment, the giving of confidential advice, or advocating on their behalf.
However, even in customer status, a brokerage and its registered licensees continue to have the following obligations to their customer:
When entering customer status, ask the consumer to acknowledge their choice by signing a a Customer Status Acknowledgement Form or a Customer Status Acknowledgement and Fee Agreement.
At the discretion of the brokerage, you may assist customers in completing a transaction by:
Transaction brokerage is a service (relationship) option in which a brokerage or an individual real estate professional provides facilitation services to a buyer and seller in the same transaction. Transaction brokerage is intended as an option when a real state licensee has existing sole agency relationships with a buyer and a seller, and a conflict of interest arises.
Transaction brokerage allows the transaction to continue by allowing a licensee to facilitate the transaction while not advocating for either side. The licensee treats the buyer and seller in an even-handed, objective, and impartial manner. Essentially, the licensee will treats both sides of the transaction as customers; no longer are they in sole agency relationships.
Consumers must provide their informed, written consent to transaction brokerage before this relationship may occur, and before any offer is presented to buy or sell a property.
In transaction brokerage, a licensee can provide facilitation services and but cannot provide confidential advice, advocate on behalf of either the buyer or seller, or use discretion or judgment that benefits the buyer or seller to the prejudice of the other. Facilitation services may include:
For more information about transaction brokerage, please review the Transaction Brokerage Practice Guide for Licensees or see the FAQs below.
Transaction FAQs |
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Q A | Does transaction brokerage replace dual agency? Yes, on October 1, 2008, transaction brokerage replaced dual agency with limitations. Transaction brokerage is an option for buyers and sellers when a brokerage represents a seller with whom it has an agency relationship and a buyer with whom it has an agency relationship is interested in the seller’s property. Interested means the buyer has expressed an interest in purchasing the seller’s property. The former Rule 59, “Dual Agency with Limitations” was replaced with a new Rule 59, “Transaction Brokerage for Common Law,” and Rule 59.1, “Transaction Brokerage for Designated Agency.” |
Q A | What is a common law brokerage? The traditional, and most common, business model of real estate brokerages in Alberta is the common law brokerage. In a common law brokerage, when a consumer enters into a seller or buyer brokerage agreement, the agency relationship that is created is between the consumer (seller or buyer) and the brokerage (company). |
Q A | Does transaction brokerage apply to commercial real estate? Yes, transaction brokerage replaced dual agency for all industry members trading in real estate, including commercial real estate transactions. |
Q A | Are dual agency with limitations and transaction brokerage the same? No, but these are very similar concepts in practice. In dual agency, which was removed as an option on October 1, 2008, and transaction brokerage, the brokerage and its industry members must treat both parties to the transaction in an even-handed, objective and impartial manner. Industry members cannot use discretion or judgment that benefits one client to the prejudice of the other client. In transaction brokerage, the following obligations are preserved and are consistent with previous dual agency practices of many industry members:
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Q A | If dual agency with limitations is similar to transaction brokerage, what is different? The main difference relates to the issue of confidentiality of information and the way transaction brokerage is practised when compared to the way dual agency was practised prior to October 1, 2006. From the outset of an agency relationship, an industry member is obligated to keep all information received from a client in confidence except information they are authorized to disclose by the client or information that is required to be disclosed by law. An example of mandatory disclosure is the seller’s obligation to disclose material latent defects to a potential buyer. As provided in previous disclosure and consent forms, there was no confidentiality in dual agency prior to October 1, 2006. With the exception of motivation and the price a seller may be prepared to accept or a buyer was willing to pay, all other information and advice was to be disclosed to each party. This would include information received by the industry member prior to the establishment of the dual agency relationship. In reality, dual agency practices varied within brokerages and across the industry. When an industry member is in transaction brokerage, the Real Estate Act Rules maintain the obligation to keep motivation and price confidential. This does not represent a change from previous practices. However, all other information received in confidence prior to and during the transaction brokerage relationship must remain confidential. The exceptions to the obligation of confidentiality are the same as those in sole agency. In other words, the industry member must still disclose to the other party information that must be disclosed by law or information that a client authorizes be disclosed. |
Q A | What does “facilitation services” mean? It means services provided by an industry member to both the buyer and the seller to assist them in arriving at a mutually acceptable agreement. When providing facilitation services, the interests of the buyer and seller are met in an even-handed, objective and impartial manner without providing confidential advice, advocating on behalf of either the buyer or seller, or using discretion or judgment that benefits the buyer or seller to the prejudice of the other. The industry member, however, may provide information or advice that addresses issues of mutual interest to both the buyer and the seller in the transaction. |
Q A | What are some examples of facilitation services? Facilitation services include:
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Specific to Common Law Brokerages |
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Q A | How do I resolve the conflict when my brokerage is representing the buyer and the seller in the same transaction? You can ask your clients if they are willing to proceed under a transaction brokerage agreement. |
Q A | What happens if the parties do not agree to enter into transaction brokerage? If either client does not agree to enter into transaction brokerage, there are a number of options:
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Q A | In transaction brokerage, can I still sell my own listings to my buyers? Yes. Transaction brokerage in common law occurs when the same brokerage represents the buyer and seller in the same transaction. Therefore, this would be the case if the same industry member is working with the seller and the buyer in the same transaction. |
Q A | What forms do I use? Both the seller(s) and buyer(s) must provide their informed and written consent to transaction brokerage. This is achieved by having both parties sign a written transaction brokerage agreement at the time the conflict occurs. If the transaction involves a trade in residential real estate, the agreement must also comply with the mandated wording as set out in the Real Estate Act Rules, section 60.1. The forms are contained in Schedule 1 of the Rules. If it is a residential transaction and you are in a traditional brokerage (common law), the form you must use is called the Common Law Transaction Brokerage Agreement. If the transaction is not a trade in residential real estate (e.g. commercial, industrial, investment, farm, ranch, etc), you are not required to use the same wording as provided in the residential form; however, you must still use a written transaction brokerage agreement and it must comply with section 59(4) of the Real Estate Act Rules. Unless a brokerage has developed its own transaction brokerage agreement for non-residential transactions, RECA recommends the brokerage and its industry members use the Common Law Transaction Brokerage Agreement to ensure compliance with the Real Estate Act Rules. |
Q A | When do I get the transaction brokerage forms signed? After showing a property listed with your brokerage to a buyer client, if the buyer expresses an interest in the property, you should discuss the conflict of interest that arises from representing both the seller and buyer in the same transaction. You should also discuss the options available to the client. If the buyer consents to transaction brokerage, the buyer would complete a transaction brokerage form before writing an offer. You must then discuss the conflict of interest that arises from concurrent representation with the seller. The seller’s consent to transaction brokerage must be sought and obtained (by signing the transaction brokerage agreement) prior to presentation of the buyer’s offer. |
Q A | Who signs the Transaction Brokerage Agreement for the brokerage when one industry member represents both the buyer and seller in the same real estate trade? An industry member registered with a brokerage is a representative or agent of the brokerage when they provide real estate brokerage services to consumers. Therefore, the industry member will normally have the authority to sign the transaction brokerage agreement as they would sign any other service agreement or form on behalf of the brokerage. This is common practice within the industry; however, the brokerage policy and procedures manual should have a clause allowing for this to occur. |
Specific to Designated Agency Brokerages |
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Q A | What is the difference between transaction brokerage in a traditional brokerage (common law) and transaction brokerage in a designated agency brokerage? Transaction brokerage in a traditional brokerage company is an option when the same industry member, or two different industry members registered with the same brokerage, represent both the buyer and seller in the same transaction. In a designated agency brokerage, transaction brokerage is an option when the same industry member represents both the buyer and seller in the same transaction. As a result of this difference, the incidence of conflict of interest arising from concurrent representation and the practice of transaction brokerage is reduced significantly in a designated agency brokerage. |
Q A | What change in representative capacity do I offer my clients to resolve the conflict that results from me acting as the designated agent for the buyer and the seller in the same transaction? After you have disclosed to your clients that you represent the other side in a potential transaction, and explained how this is a conflict of interest, you can discuss the options available to both parties, including transaction brokerage. You should explain how transaction brokerage works and answer any questions either party may have. Then you can ask your clients if they are willing to proceed under a transaction brokerage agreement. |
Q A | What happens if the parties do not agree to enter into transaction brokerage? If either client does not agree to enter into transaction brokerage, there are a number of options:
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Q A | In transaction brokerage, can I still sell my own listings to my buyers (double-end the transaction)? Yes. Transaction brokerage in designated agency occurs when the same industry member represents both the buyer and seller in the same transaction. This option is allowed and is explained in the terms of the Exclusive Seller Designated Brokerage Agreement and Exclusive Buyer Designated Brokerage Agreement. |
Q A | What form do I use? Both the seller(s) and buyer(s) must provide their informed and written consent to transaction brokerage. This is achieved by having both parties sign a written transaction brokerage agreement at the time the conflict occurs. If the transaction involves a trade in residential real estate, the agreement must also comply with the mandated wording as set out in the Real Estate Act Rules, section 60.1. The forms are contained in Schedule 1 of the Rules. If it is a residential transaction and you are practicing designated agency, the form you must use is called the Designated Agency Transaction Brokerage Agreement. If the transaction is not a trade in residential real estate (e.g. commercial, industrial, investment, farm, ranch, etc), you are not required to use the same wording as provided in the residential form; however, you must still use a written transaction brokerage agreement and it must comply with section 59(4) of the Real Estate Act Rules. Unless a brokerage has developed its own transaction brokerage agreement for non-residential transactions, RECA recommends the brokerage and its industry members use the Designated Agency Transaction Brokerage Agreement to ensure compliance with the Real Estate Act Rules. |
Q A | When do I get the transaction brokerage forms signed? As a general rule, you should get the forms signed at the time the conflict of interest (that arises from representing both the seller and buyer in the same transaction) occurs. For example, after showing one of the properties you have listed to a buyer client, if the buyer expresses an interest in the property, you should discuss the conflict of interest that arises and the options available to the client. If the buyer consents to transaction brokerage, they would complete the transaction brokerage form before writing an offer. You must then discuss the conflict of interest that arises from concurrent representation with the seller. The seller’s consent must then be sought and obtained (by signing the transaction brokerage agreement) prior to presentation of the buyer’s offer. |
Q A | Who signs the Transaction Brokerage Agreement for the brokerage, in a brokerage that practises designated agency, when one industry member represents both the buyer and seller in the same real estate trade? An industry member registered with a brokerage is a representative or agent of the brokerage when they provide services to consumers. Therefore, the industry member who is acting as a designated agent normally would have the authority to sign the transaction brokerage agreement as they would sign any other service agreement or form on behalf of the brokerage. This is common practice within the industry; however, the brokerage policy and procedures manual should have a clause allowing for this to occur. |
Common law agency is a type of relationship where any licensee from a brokerage can step in and represent an individual client in a transaction without amending the relationship agreement.
Designated agency is a type of representation relationship between licensees and consumers. In a designated agency relationship, the service agreement is between the brokerage and the consumer, but the agency relationship is between the consumer and the licensee(s) designated as their agent(s).
Designated agency is fundamentally different from common law. In designated agency, although the service agreement is with the brokerage, the agency, and fiduciary relationship is between the designated licensee(s), not the brokerage, and the consumer.
Another significant difference in a common law brokerage is that the law deems that all persons in the brokerage have the same knowledge about the clients of the brokerage. In a designated agency brokerage, designated agents do not share information with the brokerage or with the designated agents representing other buyers or sellers. Clear documentation, agreed to by the brokerage, the designated agent(s), and the consumer are necessary for such a fundamental departure from common law brokerage practices.
For more information about designated agency, please review the Designated Agency Practice Guide for Licensees.
