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4. Duty to disclose the licence holder status of the broker involved in the transaction and the nature of his interest in the transaction

4.1 Obligation to disclose

4.2 Mandatory content of the notice of disclosure

4.3 Form Notice of disclosure - Purchase-Sale-Exchange

4.4 Register of disclosure notices

4.5 Distinguishing between the duty to disclose the licensee's status and the duty to disclose a conflict of interest

4.6 Prohibition from receiving remuneration for a broker acting on his own behalf

4.7 Conditions for liability insurance coverage by FARCIQ


4.1 Obligation to disclose

A licensee who is a party directly or indirectly involved in a real estate transaction must disclose his status as a broker and the nature of his interest in the transaction.

Following are examples where the broker must disclose his status as licensee and the nature of his interest in the transaction:

  • When selling a property that is owned by him or by a legal person in which he holds an interest.
  • When purchasing an immovable, either personally or through a legal person in which he holds an interest.

The aim of the duty to disclose the licensee status is to disclose to the other party that they are dealing with a person who has real estate brokerage expertise.  

This duty is especially important to observe when the licensee is acting on his own behalf and the other party is not represented by a real estate broker.

The Court thus explains the reasons why the licence holder’s status must be disclosed:

[Tr]. “Disclosure of status is necessary to restore the balance between the parties in the context of a real estate transaction involving a real estate broker, for example, when a broker wishes to acquire a property for himself or for the purpose of resale1.”

The licensee has an advantage over the other parties to a transaction because of his knowledge and experience in the real estate brokerage field, especially if they are not represented by a broker.

In fact, the unrepresented parties do not benefit from the objective and independent advice of a real estate broker who would protect their interests. Furthermore, if the licensee is not himself represented by a broker, he cannot treat the parties fairly since he is personally involved in the transaction.

There are four scenarios where the licensee must disclose his broker’s status and the nature of his interest in the real estate transaction:

  1. The broker acts for himself (he has a “direct financial interest” in the transaction);
  2. The broker acts for a natural or legal person with whom he has a financial link (he has an "indirect financial interest" in the transaction ) (e.g.: sale of his spouse's immovable; purchase of an immovable by a business corporation he controls);
  3. The broker who acts for himself and for a natural or legal person with whom he has a financial link (he has a "direct financial interest" in the transaction) (e.g.: sale of his immovable which he owns with his spouse);
  4. The broker acts or proposes to act as a lender for a loan secured by immovable hypothec either personally (he has a "direct financial interest" in the transaction) or through a natural or legal person with whom he has a financial link (he has an "indirect financial interest" in the transaction).

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4.2 Mandatory content of the notice to disclosure

In accordance with the Act, the notice of disclosure of the licensee's status and the nature of his interest in the transaction must be in writing, transmitted by the licensee immediately and state the following1:

1. The name of the licence holder;

2. The type of licence held and its number;

3. The address of the holder’s establishment;

4. The name and contact information of the prospective contracting party;

5. The purpose and nature of the transaction;

6. The nature of the interest the holder has or proposes to acquire;

7. The date and time of receipt of the notice; and

8. The signature of the broker or agency executive officer, as the case may be.


If applicable, the notice of disclosure shall also include:

9. An indication that the broker does not represent the buyer2 or seller3 and that the buyer or seller may seek representation by a licensee of their choice (when a licensee sells, exchanges, leases or acquires an immovable or enterprise in which he holds a direct or indirect interest);

10. An indication that the broker  is negotiating, has negotiated or intends to negotiate on his own behalf the resale or alienation of the immovable he proposes to acquire.


The following cases are non-limitative examples:

  • The real estate broker presents a promise to purchase to a seller for a piece of land. The broker already has an agreement to resell it to a developer;

  • The real estate broker presents a promise to purchase to a seller for an immovable. He already knows at the time of the purchase that he will transfer the property under the name of one of his companies;

  • The broker is the developer/builder who buys and plans to build one or more new constructions on the site, which will then be offered for sale;

  • The real estate broker buys a property with the intention of subdividing it into several lots, and reselling these once the subdivision is completed;

  • The real estate broker buys a property with the intention of renovating it, and reselling it once the renovation is completed;

  • The real estate broker buys a property with the intention of donating it to his child;

  • Etc.


The information included in the notice of disclosure makes the other parties to the transaction aware that they may not be negotiating on an equal footing and that it might be in their best interest in this situation to seek the advice of another licence holder or financial professional when the object of the transaction is about a loan secured by immovable hypothec

This disclosure is very important because failure to provide this notice or to comply with all the above regulatory requirements regarding the content of this notice may have significant consequences. Indeed, as long as the contract has not been signed by the parties, the party to whom this information must be provided may withdraw, without penalty, from any offer or promise, whether accepted or not, relating to the immovable, the enterprise or the loan, by sending or delivering a written notice to the other party.

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4.3 Form Notice of disclosure - Purchase-Sale-Exchange

The licensee’s notice must be delivered by any means that provides evidence of the date and time of receipt.

Licensees may use the Notice of disclosure - Purchase-Sale-Exchange form. Remember that this form was not designed to disclose a situation where the licensee's interests are in conflict with those of a client, but to:

  1. disclose his status as a licensee because of his brokerage expertise (section I);
  2. disclose the nature of the interest the holder has or proposes to acquire (alone or with a relative) (section II);
  3. disclose the nature of the relationship between the broker and the natural or legal person he represents, if any;
  4. disclose the nature of the interest the person with whom the broker has a financial link holds or proposes to acquire (section II);
  5. inform the unrepresented party that the broker cannot represent him or her in this transaction (section II);
  6. inform the unrepresented party that they may enlist the services of another licensee (section II);

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4.4 Register of disclosure notices

The licensee’s notice must be kept in the notice of disclosures record maintained by the broker or the agency for which he is acting and recorded in the register of disclosure notices.

No later than March 31 of each year, and each time the Organization so requests, the licence holder must send a copy of his register of disclosure notices to the Organization.

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4.5  Distinguishing between the duty to disclose the licensee's status and the duty to disclose a conflict of interest

It is crucial NOT TO CONFUSE, AND TO DISTINGUISH between, two major ethical obligations:

Disclose in writing and without delay the licensee status of the broker involved in the transaction and the nature of his interest in the transaction.

Disclose in writing and without delay any conflict of interest that the licensee cannot avoid;

These are two distinct obligations that serve two different purposes.

The duty to disclose the licensee's status and the nature of the licensee’s interest in the real estate transaction does not arise from his duty to avoid a conflict-of-interest situation. And even if the licensee's status and the nature of his interest are disclosed, he is not allowed to place himself in a conflict of interest.

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4.6 Prohibition from receiving remuneration for a broker acting on his own behalf

A licensee who is party to a transaction may elect to be represented by another licensee (which is strongly recommended) or to act on his own behalf. If he is acting for himself, he cannot do so as a licensee since he is not acting as a representative of a party and cannot sign a brokerage contract with himself.

When a broker acts for himself, he is not entitled to remuneration because he is not acting as intermediary, but rather as a party to a transaction. Note that a broker who acts in part in this capacity (he is a co-owner of an immovable) for the marketing of an immovable may, however, be compensated for his services.

A broker may not claim or receive remuneration when he, his spouse or a legal person or partnership controlled by him or his spouse becomes a lessee, obtains a loan secured by immovable hypothec or acquires an interest in the immovable or enterprise.1

The notion of control of a company encompasses two aspects that must be taken into account: de jure control and de facto control. The determination of control can be complex and may require special expertise. A broker who has an interest in a company that proposes to acquire a property and who intends to exercise his right to remuneration should discuss the matter with the seller’s broker as early as possible in the transaction and ensure that he provides proof of his right.

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4.7 Conditions for liability insurance coverage by FARCIQ

In order for a claim to be covered by the FARCIQ‘s liability insurance, the real estate broker’s professional services must have been performed for the benefit of third parties. Thus, if the real estate broker acts as one of the parties to the transaction (either as buyer, seller or lessor), any claims he submits while acting in this capacity will not be covered by the FARCIQ.

This rule is not limited to properties that are wholly-owned by the real estate broker. It extends to other types of brokerage transactions. Thus, excluded from coverage are claims arising from a real estate brokerage transaction involving property or a right in which an insured holds an interest:

  1. as the owner of more than 10%; or

  2. if such property or interest is owned by a corporation, as a shareholder holding more than 10% of the voting shares; or

  3. as a creditor having a real right in such property or right.

This exclusion is not enforceable against any real estate broker who does not hold such an interest.

However, it should be noted that a real estate broker who is entrusted with a mandate to represent a fellow real estate broker (who is then either a seller or a buyer), must himself respect his own ethical obligations in the context of the transaction.

It is important to remember that the criteria used to determine professional liability are different from those regarding ethics. Although the real estate agency or broker may be covered by the insurance policy in the event of a claim, they must still fulfill their ethical duties and obligations.

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Last updated on: January 13, 2022
Numéro d'article: 208714