Client incapacity in the course of the brokerage contract
The broker’s duty to act with diligence and competence means that he must act in his client’s best interest, follow his instructions, and provide any explanations needed to ensure his services are clearly understood1.
But how can a broker discharge his ethical duties when he has serious doubts as to his client’s capacity in the course of the brokerage contract?
Regulatory and jurisprudential framework
Section 30 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising (chapter C-73.2, r. 1) states that the licence holder has an obligation to verify and ascertain the legal capacity of the party represented (or the party’s representative) for the proposed transaction, as well as the legal capacity of the other parties to the transaction if the latter parties are not represented by an OACIQ licence holder. Where the client is under protective supervision, the broker must follow the instructions of the client’s legal representative.
But even if the client seems to have the legal capacity to enter into a real estate transaction, certain actions, comments, or atypical behaviour can sow doubt as to the client’s factual capacity to express valid consent and understand the consequences of the act of selling a property. Such signs could appear during the term of the contract.
[Tr.] “It could be someone suffering from alienation, mental disorder, or weakness of mind, or someone who is under the influence of drugs or alcohol at the time of contracting, or simply someone who is in shock, dazed or devastated during the transaction, but who has never been the subject of a judgment limiting their capacity or placing them under the protection of the law. However, mere psychological discomfort does not constitute sufficient grounds for invalidating someone’s consent.”2
Professionals must be alert to warning signs such as short-term memory loss, problems communicating (repeating, searching for words) or calculating, confusion, etc. Emotional signs may include aggression or inappropriate behaviour. Behavioural signs may include periods of delirium, hallucinations, or poor hygiene.3 On the other hand, close attention should be paid to older people in whom memory loss is not necessarily a sign of incapacity. In addition, some people suffering from hearing or vision loss may not be comfortable mentioning their deficiency.
Obligations of the broker
A broker cannot be willfully blind when faced with a person who is clearly not of sound mind. In such a case, negligent behaviour could expose the professional to liability.4
A person’s capacity can certainly vary over time and depending on the topics being discussed. In case of doubt, the broker must act with great caution by checking from time to time his clients’ ability, not only to communicate and express their wishes, but also to understand the information and issues at stake and the consequences of their choices.
It is extremely delicate for a broker to make a judgment on the capacity of a client, especially given that contacts are generally limited to a short period of time, preventing the broker from assessing the source of the client’s behaviour.
A broker representing an agency must share his concerns with the agency’s executive officer so that together they can determine what action to take in the circumstances.
However, the broker is advised to approach the situation respectfully with his client, and to recommend that the client consult sources of information on how to get help, such as the sites of Éducaloi (www.educaloi.qc.ca), the Québec Bar Association (www.barreau.qc.ca), the Public Curator (www.curateur.gouv.qc.ca), or the Chambre des notaires (www.cnq.org).
In some situations, the suggestion can be made for the client to be accompanied by a person of trust with whom the broker can communicate in certain cases determined in advance with the client. It is preferable that such a person have no stake in the client’s assets. However, the person of trust cannot make decisions for the client or act on the client’s behalf.
It is also important to respect the pace of a vulnerable client and to be patient, making sure that the client understands the explanations provided.5
IMPORTANT: Having serious doubts as to a client’s capacity in no way changes or diminishes a licence holder’s ethical duties.
Finally, the broker can suggest that his client take the property off the market for a period of time, or until the brokerage contract expires, in order to protect the client’s interests. Taking the property off the market does not terminate the brokerage contract, but it does suspend some of the broker’s obligations. Explanations can be provided to the client in this regard (see article titled: Property off the market, termination of contract and property temporarily unavailable: Concepts not to be confused).
The most radical solution consists in cancelling the brokerage contract before its expiration date. By opting for this solution, the broker must act with caution and seek the assistance of a legal advisor, as it could have consequences on the broker’s professional liability.
1 S. 62 and 78 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising (Chapter C-73.2, r. 1).
2 V. KARIM, Les obligations, Éditions Wilson & Lafleur, 3e édition, 2009, p. 313.
3 G. LeBRUN and M. SHEEHAN, Alzheimer, troubles cognitifs et vieillissement : l’impact sur la responsabilité professionnelle, in Développement récents en déontologie, droit professionnel et disciplinaire (2014), Barreau du Québec – Service de la Formation continue, Cowansville, Y. Blais, volume 384, p. 34.
4 Bertrand v. Opération Enfant Soleil, 2004 CanLII 20540 (QCCA) précitée.
5 Protecting vulnerable clients – A practical guide for the financial services industry, Autorité des marchés financiers, www.lautorite.qc.ca.
- Reference number
- 208333
- Last update
- December 22, 2020