Practical Aspects and DraftingChapter 3 · 51 practice questions

Chapter 3: Ethics, Marketing and Professional Conduct

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Overview

This chapter examines the ethical, legal, and professional standards that govern the conduct of real estate brokers in Quebec. It focuses on the obligations imposed by the Real Estate Brokerage Act, the Code of Ethics of Real Estate Brokers and Agencies, and the Civil Code of Québec regarding representation, disclosure, advertising, handling of client funds, and interactions with other license holders. Understanding these rules is essential for protecting the public, maintaining the integrity of the profession, and avoiding disciplinary sanctions.

Key Concepts

Ethics, Marketing & Professional Conduct — Module QC-PRAT Core Ethical Principles Honesty & Fair Dealing Full Disclosure Loyalty to Client Confidentiality Marketing & Advertising Rules No False or Misleading Ads Fair Housing Compliance Clear Brokerage ID No Guaranteed Results Professional Conduct Competence & Diligence Respect for All Parties Continuing Education Record Keeping Transaction Process & Legal Relationships 1. Listing Agency Agreement 2. Marketing Compliant Ads 3. Offer Present / Negotiate 4. Contract Written Agreement 5. Closing Transfer / Funds Legal Relationship Types Single Agency Dual Agency Transaction Broker No Agency ⚠ Violations: License suspension · Fines · Civil liability · Loss of commission Process Legal Conduct

The Broker’s Fiduciary Duties

When a broker enters into a mandate (brokerage contract) with a client—whether as a seller’s or buyer’s representative—they assume a fiduciary relationship. This means the broker must act with loyalty, integrity, transparency, and diligence in the client’s best interest. Core duties include:

The Broker's Fiduciary Duties The Broker's Fiduciary Duties Québec · Canada — Real Estate Brokerage Act & Code of Ethics LOYALTY S. 19-20 Code of Ethics ✓ Act in the exclusive interest of the client principal ✓ Dual representation prohibited without written and informed consent from both parties ⚠ Acquiring the property: written disclosure required INTEGRITY S. 5, 8, 16, 18 ✓ Probity: no false, misleading, or incomplete information ✓ Confidentiality of information (survives the mandate) ✓ Verification of seller's statements — official documents ✓ Disclose their status as a licence holder TRANSPARENCY S. 12, 15, 21 ✓ Inform accurately, conceal nothing ✓ Transmit EVERY written offer to the seller client, even if unfavourable ✓ Disclose latent defects known to the broker ⚠ Client demands concealment: withdraw from the mandate DILIGENCE S. 21 · Trust Accounts ✓ Deposits immediately placed in trust ✓ Separate account from agency ✓ No personal deposits, even temporary ✓ Respect exclusive contracts — no solicitation of clients ⚠ Misappropriation = serious fault DUTY OF ADVICE AND INFORMATION The broker must inform their client accurately and conceal nothing that could influence their decision. The duty of advice extends to third parties, notably buyers · The final decision always rests with the client OBLIGATION TO PRESENT EVERY WRITTEN OFFER S. 21 Code of Ethics — The broker must present any written purchase offer to their seller client, even if they deem it unfavourable. The decision-making power rests with the client. Loyalty Integrity Transparency Diligence | ✓ Cumulative obligations — the broker must respect all four pillars simultaneously
Handling of Client Funds HANDLING OF CLIENT FUNDS (TRUST) Real Estate Brokerage Act — Quebec/Canada GOLDEN RULE — Immediate Deposit Any sum received (deposit, down payment) must be immediately deposited into a trust account. No delay, no exception — as soon as funds are received. ✓ COMPLIANT SCENARIO 1. Receipt of client funds Cheque payable to the broker or agency 2. Immediate deposit Trust account separate from the agency 3. Separate safekeeping No mixing with personal funds ✓ COMPLIANT — No ethical violation ✗ NON-COMPLIANT SCENARIO 1. Receipt of client funds Cheque payable to the broker or agency 2. Deposit into a personal account Even temporarily — prohibited 3. Illegal appropriation Serious ethical misconduct ✗ ILLEGAL — Appropriation + serious misconduct ⚠ Consequences: possible licence revocation, fines, civil and criminal proceedings — public protection above all
  • Loyalty: The broker must prioritize the client’s interests over their own or those of third parties. This includes presenting all offers, even those deemed disadvantageous, and avoiding conflicts of interest.
  • Confidentiality: Information obtained during the mandate (e.g., transaction details, client’s personal situation, price concessions) cannot be disclosed without written authorization, even after the transaction ends.
  • Integrity and Accuracy: All information provided to the public or to parties in a transaction must be truthful, complete, and not misleading. The broker must verify essential facts (e.g., area, taxes, year of construction) rather than relying solely on the client’s statements.
  • Disclosure of Material Defects: A broker must disclose any known fact that could affect a buyer’s decision, including past defects that have been corrected. Concealing such information is a breach of ethics, even if the client instructs otherwise. If a client insists on hiding a defect, the broker must advise the client of the legal obligation to disclose and, if necessary, withdraw from the mandate.

Representation Relationships and Dual Agency

A broker’s status toward a party depends on the existence of a written brokerage contract.

  • Mandate Relationship: Signing a buyer or seller brokerage contract creates a legal mandate. The broker becomes that client’s representative and must act exclusively in their interest.
  • Undisclosed Dual Representation: A broker cannot assist a non‑represented buyer by drafting an offer while also representing the seller without clarifying the broker’s role. If a buyer reasonably believes the broker is protecting their interests, an implied representation may arise. To avoid an ethical fault, the broker must disclose their status and, if dual representation is permitted, obtain the client’s written consent.
Dual Representation: Rules and Consent Dual Representation: Rules and Consent BROKER Representation mandate SELLER Signing client of the brokerage contract BUYER Not represented (no mandate) Exclusive brokerage contract Duty of loyalty Help with drafting a purchase offer ⚠ RISK OF IMPLICIT REPRESENTATION Without clarifying the role, the broker may be perceived as the representative of both parties WRITTEN AND INFORMED CONSENT REQUIRED ✓ Obtain written agreement from both parties ✓ Explain the implications and risks ✓ Clarify the broker's role explicitly Refusal Agreement WITHDRAW from the mandate ACT as representative Ethical reminder — Art. 19 and 20 of the Code of Ethics The broker must act in the exclusive interest of their client. Dual representation is prohibited without written and informed consent from both parties.
  • Respecting Exclusive Contracts: A broker cannot enter into a representation agreement with a buyer who already has an exclusive buyer brokerage contract with another broker, unless that buyer properly terminates the existing contract. Doing so constitutes solicitation, which is prohibited by the Code of Ethics.

Handling of Client Funds

Any money received on behalf of a client (e.g., deposit cheques for a promise to purchase) must be deposited promptly into a trust account held by the agency. Depositing such funds into a personal account—even temporarily—is illegal and a serious ethical violation, as it constitutes misappropriation.

Advertising and Marketing

Advertising and Marketing Rules Advertising and Marketing Rules Chapter 3 — Ethics, Marketing, and Professional Conduct 1 Truthfulness and Accuracy of Information ✓ No false, misleading, or incomplete information ✓ Verification through official documents (appraisals, certificates) ✗ Ex.: "direct metro access" for a 20-minute walk 2 Testimonials and Photos ✓ Prior written authorization required ✓ Describe the intended use in the authorization ⚠ Even without naming, a photo can reveal confidential information (price, identity) 3 Guarantees and Promises ✓ Must be supported by a written agreement ✓ Clause in the prior brokerage contract ✗ Ex.: "guaranteed sale in 30 days" without a contract 4 Prohibition of Rebates ✓ Commission sharing with a third party prohibited ✓ Reserved for license holders ✗ Rebate to a non-license holder = offense 5 Identification and Transparency ✓ Advertising clearly identifiable as such ✓ Broker and agency name mandatory ✓ Mention license holder status when buying/selling for oneself (art. 16) 6 Prohibited Practices ✗ Unverifiable superlatives ("lowest guaranteed commission") ✗ Poaching: soliciting a client bound by an exclusive contract with another broker (art. 29) Fundamental Principles Probity • Loyalty • Integrity — Real Estate Brokerage Act, Code of Ethics, Civil Code of Québec

Advertising must be truthful, accurate, and verifiable. Key rules include:

  • No False or Misleading Claims: Exaggerating property features (e.g., claiming “direct access to metro” when it is a 20‑minute walk) or using superlatives like “lowest commission guaranteed” without objective evidence are prohibited.
  • Testimonials and Client Photos: Using a client’s photo or testimonial in advertising requires written authorization. Even if the client is not named, posting a photo of a sold property with a congratulatory message may reveal confidential transaction details.
  • Guarantees and Promises: Statements such as “guaranteed sale in 30 days” must be backed by a separate written agreement specifying the terms, conditions, and remuneration. Without such an agreement, the claim is false and misleading.
  • Disclosure of License Status: When a broker sells their own property, they must disclose in any advertisement that they are a real estate license holder to avoid a hidden conflict of interest.

Conflicts of Interest and Self‑Dealing

A broker cannot purchase a property they have been mandated to sell (or lease) without full written disclosure of their personal interest and written consent from the client. This rule also applies to indirect acquisitions (e.g., through a family member or corporation). The same principle prohibits a broker from sharing a commission or paying a referral fee to an unlicensed person for a brokerage operation or client recommendation, as this undermines public protection.

Conflicts of Interest and Self-Dealing Conflicts of Interest and Self-Dealing Art. 18 of the Code of Ethics of Real Estate Brokers — Real Estate Brokerage Act (Quebec) ✗ Prohibited scenario Broker mandated to sell a property Direct or indirect purchase (straw man) Serious breach of professional ethics vs ✓ Mandatory mechanism — 2 cumulative conditions 1 Complete written disclosure Broker's personal interest in the transaction (including indirect acquisitions) AND 2 Written consent from the client, free and informed, obtained BEFORE the purchase (art. 18 Code of Ethics) ✓ Acquisition permitted only if both conditions are met Before signing the deed of purchase — otherwise, the broker must recuse themselves ⚠ Indirect acquisitions — examples covered by disclosure Purchase by a controlled company Purchase by a family member Straw man or intermediary person ✓ Key points to remember: • The broker can NEVER buy a property they are mandated to sell without prior written disclosure. • Disclosure must be complete: nature of the interest, terms, potential consequences. • Consent must be written, free and informed — obtained before any purchase steps.

Solicitation and Inter‑Broker Relations

Brokers must respect the exclusive contracts of other license holders. It is an ethical violation to:

  • Offer services to a seller who is already bound by an exclusive listing agreement with another broker.
Solicitation and Exclusive Contracts Solicitation and Exclusive Contracts — Art. 29 of the Code of Ethics Prohibition on soliciting a client already bound by an exclusive contract with another broker ✗ PROHIBITED SCENARIO — SOLICITATION Broker A (holder of the mandate) Owner (exclusive contract) exclusive contract Broker B (active solicitation) solicitation prohibited ⛔ Prohibited by Article 29 of the Code ✓ OPEN HOUSE — CORRECT BEHAVIOR Buyer (represented by broker C) Duty broker (same agency) introduces themselves redirect to the designated broker Broker C (designated) KEY RULES — RESPECT FOR EXCLUSIVE CONTRACTS Prohibition of solicitation No broker may solicit a client bound by an exclusive contract (art. 29). Respect for exclusivity The exclusive contract protects the broker's work and the client's commitment. Open house — Redirect If a represented buyer introduces themselves, the duty broker must redirect them. ETHICAL FOUNDATION Solicitation undermines collegiality and the exclusivity of the mandate. A broker cannot profit from another's work nor induce a client to break their commitment. ✓ Respect the colleague's exclusive contract ✓ Redirect the buyer to their designated broker at an open house ✓ Act with loyalty, probity, and integrity toward everyone
  • Attempt to represent a buyer who has an active exclusive buyer brokerage contract with another broker.
  • Interfere with an existing mandate by encouraging a client to terminate it without justification.

Access to Client Documents

Even after a mandate ends, the broker must provide the client with documents obtained during the mandate (e.g., inspection reports, copies of offers) if the client requests them. The duty of confidentiality does not prevent a client from accessing their own records. This obligation flows from the Civil Code provisions on mandate and the broker’s duty to account.

Important Regulations and Code of Ethics Provisions

Code of Ethics Articles (Relevant Selections)

ArticleSubjectKey Obligation5Integrity and accuracyA broker must not publish false, misleading,or incomplete information; must verifyessential facts.8ConfidentialityA broker may not disclose confidentialinformation without the client’s writtenauthorization.12Disclosure of material factsA broker must inform parties of any factthat may influence their decision toproceed.15Avoiding misleading conductA broker cannot conceal defects or misleadany party.16Disclosure of personalinterestA broker acting for their own account mustdisclose their license status.18Self‑dealingA broker cannot acquire a property they aremandated to sell without written disclosureand consent.19, 20Dual representationA broker must avoid undisclosed dualrepresentation and must clarify their role.21Transmission of offersA broker must present all written promisesto purchase to the client without delay.29SolicitationA broker must not solicit a client bound byan exclusive contract with another broker.62+Accounting and documentationA broker must account for documents andfunds held on behalf of clients.

Real Estate Brokerage Act

  • Uses of professional titles are restricted to holders of the appropriate license (e.g., “mortgage broker”). Using a title without a license is a prohibited and misleading practice subject to sanctions.
  • Commission sharing or referral fees may only be paid to license holders (with limited exceptions for brokers from other jurisdictions or authorized categories). Paying a “kickback” to an unlicensed person for a referral is illegal.

Regulation Respecting the Terms of Practice

  • Trust accounts must be maintained separately from personal or operating accounts. All deposits received from clients must be deposited into the agency’s trust account, not a personal account.

Civil Code of Québec (Mandate)

  • A mandate creates a duty of loyalty, disclosure, and diligence. The broker must act in the client’s interest and provide a full accounting after the mandate ends.

Common Relationships Between Concepts

  • Duty of loyalty vs. duty to third parties: A broker must be loyal to their client but cannot follow client instructions that would require lying or concealing defects. When the client’s request conflicts with the broker’s duty of integrity, the broker must refuse and, if necessary, withdraw from the mandate.
  • Confidentiality vs. client access: Confidentiality protects the client from unauthorized disclosure to others, but it does not prevent the client from obtaining their own documents. After the mandate ends, the client retains a right to access documents obtained for them.
  • Disclosure in advertising vs. substantiation: Claims that compare prices or promise results must be supported by objective evidence. A lack of substantiation turns a normal marketing statement into a misleading advertisement.
  • Representation boundaries and exclusivity: Broker A cannot represent a buyer who already has a contract with Broker B for the same purpose. Similarly, Broker B cannot knowingly assist that buyer without violating Broker A’s exclusive contract. This protects both the integrity of the mandate and the collegiality among license holders.
  • Handling deposits and trust accounts: Any sums held for others (e.g., deposits) must be kept in a trust account. The prohibition on mixing personal and trust funds reinforces the fiduciary nature of the broker’s role and prevents misappropriation.
  • Ethical obligations and client instructions: A client may request that the broker not disclose a known defect, but the broker has a professional and legal obligation to disclose material facts. The broker must educate the client and, if the client persists, terminate the mandate rather than participate in concealment.

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