Practice Tip: Disclosing Personal Trades

Advice from your Real Estate Practice Advisor, Kristian Tzenov

As a result of the current economic environment and the global COVID 19 pandemic, I have been receiving an increasing number of inquiries surrounding personal trades and the required disclosure obligations. Whenever real estate professionals engage in personal trades, either directly or indirectly, they are required to make the necessary disclosures [Real Estate Act Rules s.62].

A different set of requirements exists depending on the representation status of the other party. However, the other party having representation does not eliminate the obligation of the real estate professional engaged in a personal trade to disclose their status as an industry member and their brokerage.

In addition to the disclosures discussed below, buyers and sellers must be allowed to seek independent legal advice.

Disclosure to a Represented Buyer or Seller

When you are engaging in a personal trade and dealing with someone who is represented by another industry professional, there are two items you must immediately disclose in writing:

• you hold a real estate licence with RECA
• the name of your brokerage

Disclosure to an Unrepresented Buyer or Seller

Alternatively, when you are engaging in a personal trade and dealing with someone who is not represented by another industry professional, there are additional written disclosures you must immediately complete—these would be in addition to the disclosures in the previous section:

• any direct or indirect interest you have in the transaction
• any information that you are aware of which could materially affect the value of the property
• the complete details of any negotiations for a future trade of the property

Disclosure to acquire a property listed for sale or managed by the real estate professionals’ brokerage

A third scenario involves situations where you engage in a personal trade of a property currently listed for sale or managed by your brokerage. Under these circumstances, you must immediately make a number of additional disclosures:

• the apparent conflict of interest
• the name of the Buyer and what their relationship is to the brokerage
• any confidential information of the Seller that the Buyer may have already received
• who will be representing the Buyer in the transaction

These Requirements Are Not Just For You

These disclosure responsibilities apply not only to real estate professionals registered with the brokerage, but also to directors, shareholders, employees of the brokerage, or immediate family members of these individuals.

Disclosure Timing

The timing of these disclosures must take place at the earliest practical opportunity and would certainly have to be done prior to the presentation of any offers.

Insurance Considerations

Another practical consideration for industry members when determining if personal trades are worth their effort, is that the Real Estate Insurance Exchange (REIX) does not provide errors and omission (E&O) insurance on personal trades.

In order for the E&O Insurance to be applicable, when taking part in personal trades, you must engage another industry professional to represent you in the transaction. This would not eliminate your obligation to follow the disclosure requirements in the Real Estate Act Rules. It would, however, afford your representative the protection of E&O Insurance provided by REIX.

Remember, should you choose to proceed with a personal trade, you must be able to demonstrate that the transaction was righteous, meaning the transaction proceeded the same way it would have if it was not a personal trade, and that your personal conflict of interest did not alter the transaction in any way.