Humber/Ontario Real Estate Course 3 Exam Practice

What is a brokerage's role in an agency relationship under common law?

1. A brokerage is the principal in an agency relationship

2. A brokerage owes only fiduciary duties to a client in an agency relationship

3. A brokerage is an agent under common law

4. A brokerage is a third party in an agency relationship

5. A brokerage acts as a guarantor in real estate transactions

6. A brokerage has no legal standing in real estate transactions

The correct answer is: A brokerage is an agent under common law

The correct answer highlights that a brokerage functions as an agent under common law. In an agency relationship, the brokerage represents clients in real estate transactions, acting on their behalf and working to advance their interests. This role is shaped by established legal principles where the brokerage must perform duties and responsibilities that align with the client's best interests, while also adhering to legal and ethical standards. The classification of a brokerage as an agent is crucial in understanding how it interacts with both clients and third parties. Agencies are vested with the authority to act on behalf of their clients, including negotiating deals and facilitating communications, which underscores their active role in the transaction process. Other options describe roles or functions that do not accurately represent the brokerage's position within the agency relationship. For instance, a brokerage is not the principal, which would imply that it is representing its own interests rather than those of the client. Additionally, characterizing the brokerage as solely owing fiduciary duties to a client disregards the broader range of obligations and interactions involved. The idea of the brokerage as merely a third party or a guarantor also misrepresents its function since the brokerage is directly engaged in the representation of the client and not just facilitating transactions passively. Lastly, suggesting that a brokerage has no legal standing contradict