The confidentiality of promises to purchase
Nicole went ahead as usual. As soon as she knew that two buyers wanted to submit promises to purchase, she notified her selling client and agreed with him on a meeting with the two other brokers. They wanted to present their respective clients' promises to purchase themselves, as was their right. Nicole was very pleased. After a few weeks of depressing calm, these two promises to purchase, "two" more promises, were just what she needed. And what's more, one of them was submitted by her office colleague and great friend, Françoise.
Nicole wanted to follow proper procedure, and also maintain harmonious relations with her peers: Françoise who she knows well, and Normand, a very proper competitor. She invited them to lay their cards on the table, as she normally would in this type of situation. There was no question of doing something that could be interpreted as showing preferential treatment to her office colleague, even if a sale concluded with her would ensure a higher commission to their agency. Françoise and Normand would each read their clients' promises to purchase. No hidden, private meetings. Everything would be up front for everyone, since everyone was seated at the table. Just like usual. - Who wants to start?
Although Nicole had scrupulously adhered to the rules by quickly informing her client of the submission of two promises to purchase for her home, although her impartiality in the way she dealt with Françoise and Normand is an honour to the profession, and although the good faith of the three real estate brokers does not seem to be called into question, they nevertheless committed an error by not respecting the rule of confidentiality of a promise to purchase. Nicole should not have asked her colleagues to reveal the contents of their promises to purchase in the presence of a third party, especially when the third party was interested in purchasing the property. Nor should the representatives of the buyers have agreed to do this. This is one case where the law must be obeyed, despite the custom of disclosure.
The details of a promise to purchase are confidential, and only concern the party who has signed it, the seller to whom it is addressed, and their respective brokers. This rule is contained in section 96 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising. Violation of this rule may result in a disciplinary complaint. But if everyone is in agreement, as in our example, who could complain?
Many people believe that, in addition to promoting healthy relations between brokers, this practice provides an advantage for the seller by encouraging the submission of promises to purchase. But it can also be a disadvantage to the highest bidder who would not have had to raise his price if all the promises had been kept confidential. This is one reason that could lead him to ask the Office of the Syndic of the OACIQ to conduct an investigation. And this is only one possibility among many.
By imposing confidentiality regarding the contents of promises to purchase, the statute helps real estate professionals avoid a number of traps. If a broker knows the contents of another buyer's promise to purchase, how can he honestly allow his client to submit a counter-proposal that is lower or significantly higher than the proposal that has already been offered? The rule of confidentiality preserves the relationship that brokers enjoy with their clients. It eliminates situations where the broker runs the risk of unduly influencing the evolution of a transaction. It also preserves the balance of power between the buyer and seller.
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