A Realtor's Fiduciary Obligation To The Client - A Review Of Court Perspectives On Agents Submitting Offers On Properties Their Clients Are Also Interested In

Case Analysis: Zhong v Alan Hu Personal Real Estate Corporation, 2025 BCSC 40

Realtors in Ontario have professional obligations to act in their clients' best interests. Those obligations, however, are not always followed.

In a recent BC Supreme Court case, a realtor was found to have breached his fiduciary duty to his client by putting his personal financial interests above his client's. In Zhong v Alan Hu Personal Real Estate Corporation, the plaintiff, Pei Hua Zhong hired the defendant, Alan Hu, a local realtor, to help sell his house in South Surrey and purchase a new home in Grandview Heights.¹ In December of 2017, Zhong made an offer to purchase a property and put his current house up for sale a few days later.² The offer was accepted subject to Zhong securing financing, but he was not able to sell his house quickly enough for the necessary downpayment, so he attempted to secure a bridge loan and instructed Hu to pay the downpayment when he received approval for the loan from the bank.³ Hu was on vacation in Las Vegas at the time with a family friend, Lingxia Tao.⁴ The financing subject was not removed from the contract by the expiry date, so the contract lapsed.⁵ They put in a second offer of $2,050,000 on the house, which was not subject to financing this time.⁶

Unbeknownst to Zhong, Hu had referred Tao to another real estate agent so Tao could bid on the property and her offer for $2,098,000, which contained a provision that she had to right to assign the contract to someone else, was accepted over Zhong's.⁷ Tao assigned her offer to purchase to Hu and when Hu took possession of the house a few months later they both signed an Investor Agreement stipulating equal ownership in the property.⁸ Hu also got a $19,245.25 referral fee from Tao's realtor.⁹ Four years later, Hu sold the property for $3,350,000, receiving a profit of over $1.2 million.¹⁰ Zhong found out and sued both Hu and Tao.¹¹

The court held that Zhong's claim was not statute barred as he had brought the action within the two-year limitation period under section 6(1) of the Limitation Act.¹² Justice Francis determined that Hu had a fiduciary duty to act in Zhong's best interest¹³ and Hu profoundly breached that duty by instructing Tao to make a competing bid on the property so that he could take ownership of it himself through the assignment.¹⁴ Hu was required to pay back the commission he took from Tao's realtor¹⁵ and disgorge the profits he made on the sale of the home to Zhong,¹⁶ although the exact amount could not be calculated as there was an ongoing lawsuit between Hu and Tao over the amount owing under the Investor Agreement at the time.¹⁷

Obligations and Duties under RECO

Under the Real Estate Council of Ontario ("RECO"), realtors have four overarching duties to their clients:

1. Undivided loyalty;
2. Disclosure;
3. Confidentiality; and
4. Avoiding conflicts of interest.¹⁸

In essence, realtors must put their clients' interests ahead of their own, disclose any information that could impact their clients' decisions, keep all client information confidential (even after the business relationship ends), and actively avoid any situation that would affect their duty to act in their clients' best interest.¹⁹

Realtors are expected to act with integrity, honesty, good faith and courtesy, and to provide conscientious and competent service, including advising their clients to obtain professional service with someone else if the realtor is not able to address the situation effectively themselves.²⁰

When working with a self-represented party, a realtor has an obligation to inform them that any information they share will be shared with the realtor's client.²¹ In addition, realtors cannot be a party to fraud, cannot intimidate or discriminate, and must avoid misrepresentation.²² If the realtor represents the seller and there are competing offers, the realtor must disclose the number of competing offers to every person making one of those offers, but they cannot share any personal information that would identify the parties making the offers.²³

Suggestions for Realtors

1. Document the history of all submitted offers;
2. Take detailed notes if an offer expires or lapses for any reason;
3. Respond to your client's questions quickly;
4. Be clear and transparent with your advice, or if you are representing the other side of the transaction; and
5. Ensure that you are managing your client's expectations throughout the whole process.

Suggestions for Residential Buyers

1. Confirm that your realtor is registered in Ontario by using RECO's public register;²⁴
2. Be clear with your realtor about what you want and do not want in a property;²⁵
3. Respond to your realtor's questions quickly;²⁶
4. Document the details of all submitted offers;
5. Take detailed notes if an offer expires or lapses for any reason;
6. Seek professional advice before you decide to self-represent.²⁷ If you choose to self-represent, know that you can change your mind and hire a realtor at any point in the process;²⁸ and
7. Inquire about any defects or other considerations in a property that could impact your decision. Under the doctrine if caveat emptor ("buyer beware"), a buyer who does not take the initiative to protect themselves will be out of luck for recourse, unless they were a victim of fraud.²⁹ Research the history of any property you are considering and talk to the neighbours.

Footnotes

1. 2025 BCSC 40 at para 7.

2. Ibid at paras 9—10.

3. Ibid at paras 11—17.

4. Ibid at para 14.

5. Ibid at para 21.

6. Ibid at para 22.

7. Ibid at paras 23—29.

8. Ibid at paras 32, 34.

9. Ibid at para 31.

10. Ibid at para 35.

11. Ibid at para 2.

12. Ibid at paras 66, 77.

13. Ibid at para 82.

14. Ibid at para 96.

15. Ibid at para 97.

16. Ibid at para 112.

17. Ibid at para 126.

18. RECO, "RECO Information Guide (Residential)" (1 December 2023), online: (reco.on.ca) [Information].

19. Ibid.

20. RECO, "Bulletin No. 1.1: Professional conduct" (1 December 2023), online: (reco.on.ca).

21. Ibid.

22. Ibid.

23. RECO, "Bulletin No. 4.1: Number and content of competing offers" (1 December 2023), online: (reco.on.ca).

24. RECO, "Make sure your real estate agent is registered" (1 December 2023), online: (reco.on.ca).

25. Information, supra note 18.

26. Ibid.

27. Ibid.

28. Ibid.

29. Fraser-Reid v Droumtsekas, 1979 CanLII 55 at 722 (SCC).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.