What this topic covers
Professional conduct, agency and advice to clients in commercial trades, for the Practice of Commercial Real Estate (PCRE) exam: service agreements, clients and customers, disclosure, conflicts, licence scope and advice. These are original study notes for practice questions, not RECA material. Legal points rest on the Real Estate Act and the Real Estate Act Rules in force on 1 January 2027; requirements and timing can change: check the current version of the text.
Service agreements: should or must
- Commercial trade: the licensee should sign a written service agreement (Real Estate Act Rules, Rule 43(1.1)): advisable, not mandatory.
- Property management: collecting rents is property management (Rule 1(1)(w)), and a licensee who establishes a client relationship there must have a written service agreement (Rule 43(1)). One investor can trigger both: buying a building (should), managing it (must).
- Once written: the agreement must be signed by the parties and show the listed terms, including duration, services and remuneration (Rule 43(2)); a true copy goes to the client immediately upon signature (Rule 43(3)).
Clients, customers and agency
- Client: a buyer or seller who expressly or implicitly consents that the licensee act on his or her behalf, and the licensee consents (Rule 48); a signed agreement is not a condition.
- Customer: a buyer or seller not in an agency relationship; the commercial nature of the property does not change the test.
- Designated agency: designated agents owe sole agents' duties; a buyer's confidential information is not shared with other licensees of the brokerage unless the buyer authorizes it or the law requires it (Rule 58.1).
- Specialist: holding out as one raises the standard of competent service (Rule 41(b)) to that of a reasonably competent specialist.
Disclosure, confidentiality and conflicts
- Timing: before eliciting, or as soon as possible upon receiving, confidential information about needs, motivation or finances, and before any service agreement, disclose in writing the services, whom else the licensee acts for and any conflict of interest (Rule 55(1)); small talk is excluded (Rule 55(4)); seek a written acknowledgement (Rule 55(3)).
- Confidentiality: information about a client, property or transaction is disclosed only with the client's authorization or as the law requires (Rule 44(1)); a broker's approval is not consent.
- Referral fees: written disclosure that contact details were forwarded and a fee may be received, copy kept (Rule 45(1)-(2)); the fee is paid through the brokerage (Rule 54(1)(c)).
- Personal trades: when a person associated with the brokerage, or a director, shareholder or official (Rule 62(3)), wishes to acquire an interest in a property it lists, even as a co-owner, the brokerage immediately discloses the conflict, the buyer's identity, confidential information received and who represents the buyer, and lets the seller seek independent advice (Rule 62(2)). The purchase is not barred.
Licence scope and expert advice
- Appropriate licence: trading requires the licence for that industry (Real Estate Act, s. 17); residential and commercial broker industries are separate (s. 7.1). An owner-occupied family home goes to a residential licensee.
- Residential tenants: a commercial building can still carry tenancy obligations; disclose relevant facts (Rule 58(j)) and advise legal advice (Rule 58(k)), not interpret the statute.
Advising sellers, landlords, buyers and tenants
- Leasing commission: typically paid by the landlord under its service agreement, which sets any share for the tenant's brokerage.
- Activity report: keeps the client informed of marketing and response (Rule 57(l)).
- Off-market sale: weigh confidentiality against fewer offers, then follow lawful instructions (Rule 57(d)).
- Financing: lenders review leases, rent roll and an appraisal; explain how this affects the financing condition's timing.
Sample questions (5)
1. Commercial associate Callum signs a written tenant representation agreement with a retail tenant, even though Rule 43(1.1) of the Real Estate Act Rules does not make one mandatory in a commercial trade. Which statement about the signed agreement is correct?
- It may omit its duration and the fee, because those terms are settled once the lease itself is signed.
- It may omit the terms Rule 43(2) lists, because a written agreement was merely advisable in this trade.
- It must show the terms Rule 43(2) lists, and a true copy goes to the tenant whenever the tenant asks.
- It must show the terms Rule 43(2) lists, and a true copy goes to the tenant immediately upon signature.
Rule 43(1.1) makes a written service agreement advisable rather than mandatory in a commercial trade, but Rule 43(2) governs every written service agreement once one exists: it must be signed by the parties and show the listed terms, including the duration, the services to be provided and the remuneration. Rule 43(3) then requires the licensee to deliver a true copy to the client immediately upon its signature, not when the client asks for one. The optional nature of the agreement does not relax these requirements, and the duration and the fee belong in the agreement itself rather than in the later lease.
2. Wei, a licensee, consents to act on behalf of an investor who expressly asks for help buying a warehouse. Under Rule 48 of the Real Estate Act Rules, how is the investor classified?
- A customer, because the investor has just approached the licensee.
- A client, once a written service agreement has been signed.
- A customer, because the property is commercial rather than residential.
- A client, because an agency relationship has been established.
Under Rule 48, an agency relationship exists when a buyer or seller expressly or implicitly consents that a licensee act on his or her behalf and the licensee consents to act, and a buyer or seller in that relationship is a client. Both conditions are met here. A customer is a buyer or seller who is not in an agency relationship, and the commercial nature of the property does not change that test. A signed agreement is good practice under Rule 43(1.1) but is not a condition of the agency relationship in Rule 48.
3. In a typical commercial leasing transaction, which party is usually responsible for paying the real estate commission?
- The tenant, because the tenant benefits most from the new lease.
- The landlord, under the commission terms of the leasing mandate.
- Both parties in equal shares, as the Real Estate Act requires.
- The tenant's lender, as part of the financing package for the space.
The blueprint asks candidates to identify the party typically responsible for commissions in a leasing transaction, and in commercial leasing that is the landlord, whose service agreement sets out the commission and how it is shared with any tenant's brokerage. The tenant benefits from the lease but is not the usual payer. A lender is not a party to the lease commission, and the Real Estate Act does not require an equal split between the parties.
4. What is the main purpose of an activity report that a licensee gives to a seller client whose office building is listed for sale?
- To satisfy the brokerage's duty to report trust account activity to RECA.
- To keep the seller informed of marketing efforts, inquiries and showings.
- To prove to prospective buyers that the building has been advertised.
- To replace the written service agreement once marketing has started.
An activity report keeps the client informed of what has been done to market the property and of the response received, which supports the duty in Rule 57(l) to keep the seller fully informed regarding the progress of the transaction. Trust account reporting is a separate brokerage obligation and is not what an activity report is for. A report cannot replace the service agreement, and its audience is the client rather than prospective buyers.
5. An investor asks licensee Dana to find an office building for it to buy and, after closing, to collect the rents and run the building's day-to-day operations. Which statement about written service agreements is correct?
- Rule 43(1.1) applies to both services, so a written agreement is advisable but not required for either.
- Rule 43(1) requires one for managing the building; Rule 43(1.1) says one should be used for buying it.
- Rule 43(1) requires one for buying the building, while Rule 43(1.1) covers managing it instead.
- Neither service needs one, because both concern a single commercial property and a single client.
Collecting rents is property management under Rule 1(1)(w) of the Real Estate Act Rules, and Rule 43(1) says a licensee who establishes a client relationship when engaging in property management must enter into a written service agreement. Representing the investor in buying an office building is a trade in commercial real estate, for which Rule 43(1.1) says the licensee should enter into one. The two rules are not reversed, Rule 43(1.1) does not reach the management services, and having one client and one property does not remove either rule.