The Real Estate Agent’s Duty to Disclose Role in a Transaction:

An Analysis on Graf v Periyathamby, 2024 ONSC

By Ashley Hizo and Slonee Malhotra

The Ontario Superior Court of Justice has recently awarded damages to the plaintiffs of a real estate dispute after several related transactions failed due to a real estate agent’s conflicting role.

In the case of Graf v Periyathamby, 2024 ONSC 1062, the Graf’s listed for sale two income properties in order to fund the purchase of a restaurant. The Graf’s did not know who the true seller of the restaurant was. Significant setback arose however, as the real estate agent in both the sale and purchase of the income properties and the sale and purchase of the restaurant were the same individual.

It is important to note that the Graf’s had to sell their income properties before they could complete the purchase of the restaurant. The real estate agent advised the Graf’s that he could assist with this and that he had buyers ready to buy the Graf’s income properties. The dual role the real estate agent had however was exacerbated as the buyers for the income properties were the same people who owned the restaurant that the Graf’s had intended to buy. In effect, the same real estate agent would be acting on both sides of the buyer and seller for both the income properties and the restaurant.

The Court found that the transactions for all properties involved were interconnected, and that the real estate agent did not truthfully disclose his connection and dual role.

RECO: Multiple Representation Disclosure Requirements

Effective December 1, 2023, phase 2 of the Trust in Real Estate Services Act (“TRESA”) came into force to replace the Real Estate and Business Brokers Act (“REBBA”). Among the several important changes that we have previously written about here, phase 2 of TRESA includes a mandatory disclosure requirement to the effect that if a brokerage proposes to have a designated representative represent more than one client in the same trade, certain requirements have to be followed. Specifically, a brokerage or designated representative is prohibited from representing more than one client in a trade unless:

1. The brokerage makes the mandatory written disclosure;
2. The brokerage makes best efforts to obtain an acknowledgment that the required disclosure was received; and
3. After receiving the disclosure, if each of the existing or prospective clients agree, the clients provide written consent to the brokerage or designated representative continuing to represent them in respect of the trade.

The content of the disclosure must include the following information:

1. The fact that the brokerage proposes to have the designated representative represent more than one client in the same trade; and
2. The differences between the duties the brokerage and the designated representative would have if the designated representative represented only one client in the trade, and the duties the brokerage and the designated representative would have if the designated represented more that one client in the trade, including any differences relating to,
3. The duties the brokerage and the designated representative would owe to the clients,
4. The services the brokerage and the designated representative would provide, and
5. The remuneration arrangements the brokerage would have.

The required disclosure content differs if a brokerage is proposing to represent more than one client in a trade and where a brokerage is proposing to represent a client and has a designated representative represent another client in the same trade. The full details regarding the content of mandatory disclosure can be found on RECO Bulletin No. 3.2.

In all arrangements however, the mandatory written disclosure is intended to communicate to the client the consequences that may arise in consenting to multiple representation. The case of Graf v Periyathamby serves as a cautionary tale on the consequences that may arise.

For any questions related to this article or legal assistance regarding a real estate matter, we encourage you to reach out to one of our experienced real estate lawyers at SorbaraLAW.