Know your client

Know your client More than identity: Is this the person who should be giving instructions? Are there others with an interest who should be consulted? Knowing your client often involves more than checking their ID to verify their identity. Ask yourself these questions.

Know your client Examples: Is property owned by two or more joint tenants? Is one person acting on behalf of a corporation with multiple directors? Here are a couple of examples. Is the property owned by two or more joint tenants, but you’re only dealing with one of them? Is the client acting on behalf of a corporation with multiple directors? Does he or she have legal authorization to do so?

Know your client Single registered owner: Does client’s spouse or ex-spouse have an interest in transaction? Do creditors have an interest in transaction? Even when it seems straightforward, that’s not always the case. One person may be the registered owner of the property, but their current or former spouse, or creditors, may have an interest in the transaction.

Know your client Elderly or ill clients: Issues of competency, duress or undue influence Is a third party acting as intermediary? There’s also potential risk if the client is elderly, or suffering from an illness or handicap, there could be issues around their competency, or whether they’re acting under duress or undue influence. Sometimes a third party acts as intermediary. Even when that person has the best of intentions, such situations are fraught with liability risk.

Know your client It’s up to you to: Be alert Ensure the proper parties have been consulted Ensure your authorization to act comes from the right parties You have a responsibility to: Be alert to potential problems or hidden issues. Ensure that all proper parties have been consulted, whether they appear on the title or not. Ensure that your authorization to act comes from the right parties – this is not always as straightforward as it seems. We’ll cover some situations you should watch for, so you’ll recognize them and know what to do or when you should consult others for help.

Know your client Corporations: Comply with Fintrac obligations Do a Corporate Registry search Ask for more documentation if necessary Confirm the person acting is authorized to do so. The law requires you to identify individuals and confirm the existence of corporations, trusts, partnerships and other unincorporated entities at the outset of the agency relationship. Start with a search of the Corporate Registry, and get a copy of the BC Company Summary. It will include The proper legal name of the company The location of its registered office Whether it’s up to date with its filings and is in good standing The identity of the directors and officers of the company For more complex structures, you might need to ask for more documentation, such as: The Incorporation Application The Incorporation Agreement – which sets out share structure The Articles of Incorporation Get written authorization, such as a Directors’ Resolution, confirming that the person giving you instructions is authorized to do so on behalf of all the directors. Keep a copy of it with your file documents.

Know your client Consult a lawyer or encourage your client to do so if: Company listed as registered owner is not the one who signed the contract The company has been struck from the Registry (as shown in BC Corporate Summary) Sometimes the company listed on the title is different from the one signing the contract – this is not uncommon with developers, who have will have several companies in operation. - If so, there might be a trust agreement between the two companies – you should reflect this in the contract by saying “Company A in trust for Company B” Because of complexity of trust agreements, you should consult a lawyer to assist in drafting the contract and advise both parties to the contract to obtain legal advice to ensure all legal issues are properly addressed. If the BC Corporate Summary shows the company has been struck from the registry, consult a lawyer. The property may have become the property of the Provincial Crown. This will not show up on the title search.

Know your client Witnesses: Ensure all contracts and addendums are in writing, signed by the parties to the contract and properly witnessed NEVER sign as witness if you were not present to witness the signature. These are basic requirements, but sometimes they get missed or misunderstood.

Know your client Signatures: If signing on behalf of client, have written authorization, Rule 5-3 NEVER imitate a client’s signature Sign “As agent for” the client Confirm consent for electronic signatures If you are signing on behalf of a client, Rule 5-3 requires that you have written authorization for this from the client or an authorized agent of the client. Keep the written record setting out the specific authorization, instructions, and limits of your authority on their behalf. When signing on behalf of a client, never sign their name. If your client has authorized you in writing to sign on their behalf, sign you own name and then indicate beside your signature that you are signing “as agent for” the client. If a family member signs on behalf of another who is unavailable, make sure the person signing is authorized to do so, and keep a reliable written record of it. The family member signing must also sign in their own name “As agent for” the absentee relative. With Docusign and other secured forms of electronic signatures, password control provides a high level of assurance that the party signing is in fact the party authorized to do so. It’s also advisable to have some other record to confirm consent.

Know your client Marital status: Verify client’s marital status before listing property Former spouse may have an interest. Obtain a copy of any agreements. Consult a lawyer. Verify the client’s marital status before you list a property for sale. A former spouse, whether by marriage or common-law, may have a beneficial interest in the property under the Family Law Act, even though there is only one name on the title. If there’s an agreement to the contrary, get a copy of it and keep it on file. Whenever there is a person with a beneficial interest in a property, consult a lawyer to help in drafting the contract documents.

Know your client Powers of Attorney: Treat with caution Consult a lawyer to establish validity of PoA Don’t act as your client’s PoA Powers of Attorney are common – treat them with caution. They authorize one person to make legal and financial decisions on behalf of another. There are different types – regular for a specific transaction or time frame; enduring for an unspecified period of time. There are several steps to establishing the validity of a Power of Attorney. It’s best to consult a lawyer for assistance. The Real Estate Council of BC recommends that you do not act as your client’s Power of Attorney. Instead, a family member or close friend of the client should take on that role.

Know your client Capacity to enter into a contract: Person must be able to understand nature of contract, and its effect on their own circumstances. If concerned, consult a lawyer A person’s mental capacity can be affected by many things, including age, illness or injury. The law requires a person to have the capacity to enter into a contract. They must not only be able to understand the nature of the contract, but also the effect it will have on their own circumstances. Similarly, if a person is making a gift, they must be able to understand its nature as well as the effect that giving the gift will have on their own circumstances. There can be significant interplay between incapacity and undue influence. If you are concerned that a proposed transaction is the result of undue influence, consult a lawyer.

Know your client Protect yourself: Remember who you’re acting for Recognize when details are testing your limit of expertise Recognize when your client will benefit from other professional advice With an increasingly global marketplace and more complex transactions, there are more chances than ever that you might encounter pitfalls. There’s no way to eliminate all risk factors, but common sense will both reduce the chance of something going wrong as well as lessen your exposure to liability if something does. So remember who you’re acting for. Recognize when details are testing your limit of expertise and reach out for assistance. Recognize when your client would benefit from other professional advice, whether from a lawyer, tax advisor, accountant or other, and recommend they seek it. Record your recommendation in your notes.

Know your client Other resources: “Knowing your client” in September 2018 issue of Risk Report Professional Standards Manual Your managing broker A lawyer To find out more on this topic, you can consult the article “Knowing your client” by lawyers Scott Twining and Lindsay Nilsson, which is in the September 2018 issue of Risk Report and available on the E&O website. Remember, the password for the site is ‘eno.’ Some of these situations are covered in the Professional Standards Manual, also available online. If you aren’t able to find answers on your own, consult your managing broker. Get legal advice when you’re not sure of something.

Questions? Thank you. Are there any questions about anything covered in the presentation? Thanks for your attention!