Humber/Ontario Real Estate Course 3 Exam Practice

Which statement is true about the concept of agency in real estate?

1. Agency arises from common law.

2. Agency involves general and regulatory duties but not fiduciary duties.

3. Agency is discussed in detail under agency responsibilities in regulations.

4. Agency is created between the seller as the agent and the brokerage as the principal.

The correct answer is: Agency arises from common law.

The correct understanding regarding the concept of agency in real estate is that agency arises from common law. In the context of real estate, agency relationships are fundamentally based on legal principles established through common law, which refers to laws developed through judicial decisions rather than through legislative statutes. This means that the foundational aspects of agency—such as the responsibilities and rights of an agent and principal—are deeply rooted in long-standing legal precedents. Agency does indeed involve fiduciary duties, which are essential responsibilities of an agent to act in the best interests of their client. While regulations and specific statutes may define and expand upon the duties and responsibilities of agents, the fundamental agency relationship is primarily based on common law principles. Additionally, the relationship is not established between the seller as the agent and the brokerage as the principal; typically, the agent represents the principal, who is usually the client (buyer or seller), with the brokerage acting as the intermediary that facilitates the transaction. Therefore, the understanding that agency is rooted in common law is crucial for comprehending the legal framework that governs broker and agent conduct in real estate transactions.