What is the obligation to avoid placing oneself in a conflict of interest?
The OACIQ Discipline Committee has recently pointed out, in the decision Organisme d'autoréglementation du courtage immobilier du Québec v. Tardif, 2022 CanLII 101739 (QC OACIQ), the basis of the ethical obligation of real estate brokers to avoid placing themselves in a conflict of interest (s. 2 RBR1). This rule must be understood as a duty to promote and protect clients' interests. In other words, the client's interests must, at all times and in all circumstances, come before those of the real estate broker.
In this case, the defendant concomitantly had the seller sign a brokerage contract for an undivided co-ownership property, as well as his own promise to purchase this undivided property. By doing so, the defendant has placed himself in a conflict of interest within the meaning of s. 2 of the RBR, since he is no longer in a position to advise his client properly.
Therefore, when a broker signs a brokerage contract with a client, he must at all times put his client's interests first. He must collect the relevant information and documents, advise him and assist him throughout the process of selling or buying a property. To do so, he obtains privileged and confidential information on the client's financial and personal situation.
The real estate broker cannot therefore purchase his own listing since he holds this privileged and confidential information. He can no longer advise his client properly, since the client's interests are in conflict with his own interests. The seller wants to obtain the maximum price and the best conditions of sale, while the buyer wants to obtain the lowest possible price by putting conditions that are favourable to him.
In this case, the Discipline Committee has also pointed out that the obligation to avoid placing oneself in a conflict of interest implies that the real estate broker must actively take measures to avoid placing himself in a conflict of interest. This is therefore a positive obligation. Also, the mere fact of disclosing one's status as a real estate broker or obtaining one's client's consent is not sufficient with regards to this ethical obligation. The client's interests must prevail over all others.
The Discipline Committee explains that practising an activity other than real estate brokerage, such as building a housing stock, is likely to compromise the integrity and independence of the real estate broker. When a broker introduces himself as a real estate broker to a potential client, is he acting for the benefit of this client by offering his services, or for his own benefit as an investor?
In this case, the defendant offered a guarantee of sale to his clients which allowed him to purchase, to his advantage, properties from them so as to develop his housing stock. The Committee concludes that this business model is a flagrant and deliberate example of conflict of interest that violates ethical obligations. By doing so, the real estate broker is not able to preserve his professional independence or provide advice in the client’s best interests, and not in his own interests.
The hearing on penalty will allow the Discipline Committee to determine the appropriate sanctions. Remember that sanctions may range from a reprimand, a fine, to a licence suspension or revocation. Restrictive conditions of practice may also be imposed.
As part of their real estate transactions, brokers have as a priority to defend their clients’ interests while being loyal. Remember that offering "performance guarantees," such as remuneration reductions or “sale guarantees,” is also an apparent conflict of interest, which is prohibited. For more information in this regard, read the section Performance and sale guarantees of the Guideline – Representation, solicitation, promotion and advertising.
1 Regulation respecting brokerage requirements, professional conduct of brokers and advertising
