Humber/Ontario Real Estate Course 4 Exam Practice

In real estate, what is the source of the concept "agency"?

1. Agency is detailed under 'Agency Responsibilities' in REBBA.

2. Agency is established between the seller as the agent and the brokerage as the principal.

3. Agency arises from common law.

4. Agency involves only general and regulatory duties, not fiduciary duties.

5. Agency is defined exclusively by provincial statutes.

6. Agency is created within the Brokerage Representation Agreement.

The correct answer is: Agency arises from common law.

The concept of "agency" in real estate is primarily established through common law principles. Common law provides the foundational legal framework that governs the relationships between agents and principals, including those in real estate transactions. This foundational framework emphasizes the nature of fiduciary duties that agents owe to their principals, which is critical in a real estate context, where trust and reliance play significant roles. While statutory laws and regulations, including those outlined in the Real Estate and Business Brokers Act (REBBA), provide specific responsibilities and duties for agents, the underlying principles of agency—such as the authority of the agent to act on behalf of the principal and the responsibilities that come with that relationship—originate from common law. This includes the obligation to act in the best interest of the principal, maintain confidentiality, and provide full disclosure. Other options reference various aspects of agency, such as its description in REBBA, the roles of different parties within a transaction, or its establishment through specific agreements. However, these do not capture the broader and foundational nature of agency as derived from common law, which is essential for understanding the principles that govern all agency relationships in real estate.