Designated Agency: Myth Busting!

Over the course of the past couple of years, the Real Estate Council of Alberta (RECA) has received a growing number of questions from brokers and industry professionals about the practice of and transition to designated agency. Once we’ve had a chance to chat with a practitioner, invariably, the most frequently asked question is, “Why aren’t more Alberta real estate brokerages practicing designated agency?”

Well, it’s like this. Imagine trying to make a decision about whether you want to do something, based on incorrect information. The fact is, in many cases, that is exactly what has been occurring with respect to real estate brokerages considering whether or not to make the switch to designated agency.

Since the introduction of designated agency in 2008, there have been five myths about the practice, any one of which could make an industry professional think twice. Now, let’s deal with them here, one at a time. Let the myth-busting begin.

Myth 1: A designated agent cannot represent a seller and buyer/landlord and tenant in the same transaction. In other words, no opportunity to “double end” a transaction.
Fact: The concept of designated agency has always allowed for an industry professional to “double end” a transaction. Section 59.1 of the Real Estate Act Rules was added in 2008 specifically to prescribe how a designated agent must act in a transaction brokerage situation, therefore enabling an industry professional to “double end” the transaction in designated agency.

Myth 2: A designated agency brokerage cannot contain shared office space.
Fact: Regardless of whether the brokerage practices common law agency or designated agency, there is a requirement for there to be policies and procedures for shared offices to maintain privacy and confidentiality in accordance with agency obligations and privacy legislation. There is no restriction in designated agency to preclude industry professionals from sharing a work space.

Myth 3: Designated agency brokerages must eliminate the “bullpen” and traditional Monday morning meetings.
Fact: Whether common law or designated agency, a brokerage must have policies around activities in the “bullpen,” and the Monday morning meeting can continue to be a source of ideas to enhance the knowledge and professionalism of the industry professionals registered with the brokerage.

Myth 4: The transition from common law to designated agency will require extensive and costly renovations to a traditional brokerage office; that establishing effective information barriers will be an unaffordable task.
Fact: The brokerage office space must be evaluated for issues that might arise as a result of the change in agency practice. Most, if not all, such issues will likely be managed through detailed policies and procedures as opposed to extensive renovations. Again, just as in the previous myths, a brokerage must have appropriate policies and procedures in place to protect the privacy of client’s and customer’s personal information.

Myth 5: The broker will be unable to provide advice to either designated agent when the brokerage represents both parties in the same transaction.
Fact: This actually presents a conflict for common law brokers and designated agency brokers alike. In transaction brokerage, the broker must provide oversight in an impartial manner favouring neither party to the prejudice of the other. There are many different solutions to this dilemma, including, but not limited to brokerage standard practice checklists and appointing assistant managers. The most important point is this is not exclusive to designated agency brokerages. Whether common law or designated agency, the broker must have procedures in place to allow him or her to maintain a neutral, facilitative posture when this conflict arises.

What things have you heard about the practice of designated agency?