Professional relationships compromised

A conflict of interest arises when you or your brokerage office, acting on behalf of a client, have a competing professional or personal bias which may hinder your ability to fulfill the fiduciary duties you have undertaken on behalf of your client.

In a professional relationship, your financial objective of compensation for services rendered is not a conflict of interest. It is an exchange of known quantities; your services and their payment. However, whether you represent a buyer or seller, they are entitled to know the exact amount of compensation you will receive arising out of any aspect of the employment relationship.

Thus, fees and benefits derived from other sources need to be disclosed to the client. These include compensation in the form of:

  • professional courtesies such as referrals;
  • familial favors; and
  • preferential treatment by others toward you or your agents. [See RPI Form 119]

Similarly, the referral of a client to a financially controlled business owned or co-owned by you or others in your brokerage office is a financial benefit from a transaction disclosed by use of an affiliated business arrangement (ABA) disclosure. [See RPI Form 519 and 205]

In contrast to brokerage fees, a conflict of interest addresses your personal relationships potentially at odds with the agency duty of care and protection owed the client.

Thus, a conflict of interest creates a fundamental agency dilemma — it is not a compensation or business referral income issue.

Unless disclosed and you have the client’s consent, the conflict is a breach of your fiduciary duty of good faith, fair dealing and trust owed to the client when you continue to act on the client’s behalf.

Conflicts abound in everyday brokerage situations
To disclose or not to disclose?
The participation of relatives conflicts a transaction
Who really owns the property sold?
When acting as a principal, do not take a fee