A licensee becomes aware of a conflict of interest in a transaction they are handling. What should they do?
Correct Answer
C) Disclose the conflict in writing to everyone it affects
A licensee's fiduciary duty (rule 6.1) requires a conflict of interest to be disclosed so the client can decide how to proceed. Section 136 of the Real Estate Agents Act 2008 requires written disclosure to every prospective party of any financial benefit the licensee or a related person may gain. Written disclosure to everyone affected meets both duties and leaves a clear record.
Why This Is the Correct Answer
A licensee's fiduciary duty (rule 6.1) requires conflicts to be disclosed so the client can decide how to proceed, and s 136 requires written disclosure to every prospective party of any financial benefit the licensee or a related person may gain. Written disclosure gives a clear record.
Why the Other Options Are Wrong
Option A: Continue with the transaction and reduce their commission to compensate
A fee cut does not tell the client about the conflict or let them decide whether to continue.
Option B: Withdraw immediately from acting for any party, without explanation
Withdrawal is not automatically required; disclosure lets the client make an informed choice.
Option D: Get the Real Estate Authority's approval before going any further
The Authority does not pre-approve conflicts; disclosure to the affected parties is what is required.
Deep Analysis of This Professional Conduct Question
This question tests understanding of conflict of interest management under the Real Estate Agents Act 2008 Code of Professional Conduct and Client Care. Conflicts of interest are situations where a licensee's personal interests or duties to one party may compromise their ability to act in the best interests of another party. The REA Code emphasizes transparency and informed consent as the foundation of ethical practice. Rather than automatically prohibiting all potential conflicts, the Code recognizes that disclosure allows parties to make informed decisions about whether to continue with the licensee's services. This approach balances practical business realities with consumer protection, ensuring clients understand any factors that might influence their agent's advice or actions. The disclosure requirement maintains trust in the real estate profession while allowing legitimate business relationships to continue with full transparency.
Background Knowledge for Professional Conduct
Real Estate Agents Act 2008: s 134 (a licensee or related person may acquire the client's property only with the client's consent in the prescribed form and an independent valuation), s 136 (written disclosure of any financial benefit to the licensee or a related person), s 137 (who counts as related). Client Care Rules: rule 6.1 (fiduciary obligations) and rule 9.14 (no acting in a way that attracts more than one commission in the same transaction, so a licensee cannot act for both buyer and seller).
Memory Technique
Remember WRITE: When a conflict arises, you must WRITE it down and disclose it. Just like you wouldn't hide a crack in a wall from a buyer, you can't hide conflicts from your clients. Think of disclosure as 'writing the truth' - it must be documented in writing to all affected parties.
When you see conflict of interest questions, immediately think WRITE - the answer will almost always involve written disclosure rather than withdrawal, commission reduction, or seeking authority approval.
Exam Tip for Professional Conduct
For conflict of interest questions, look for the disclosure option first. The REA Code emphasizes transparency through written disclosure rather than automatic withdrawal or regulatory approval.
Real World Application in Professional Conduct
A salesperson will receive a referral fee if the buyer takes finance through a particular mortgage adviser. Before giving the buyer the sale and purchase agreement, the salesperson discloses the fee in writing to the vendor and the buyer, as s 136 requires.
Common Mistakes to Avoid on Professional Conduct Questions
- •Thinking withdrawal is always required for conflicts
- •Believing oral disclosure is sufficient
- •Assuming REA pre-approval is needed for conflicts
Related Topics & Key Terms
Key Terms:
More Professional Conduct Questions
According to the REA Code of Professional Conduct and Client Care, what is the primary duty of a real estate licensee?
A licensee receives confidential information about their client's financial difficulties. When can this information be disclosed to third parties?
During a complaint investigation, what is a licensee's obligation regarding cooperation with the Real Estate Authority?
A licensee discovers that a competing agent has made false statements about a property they have listed. What is the most appropriate course of action?
A licensee is charged with misconduct for serious breaches of the Code. During the disciplinary hearing, they argue that their actions were directed by their branch manager. How will this affect the Tribunal's decision?
- → A licensee keeps working while a complaint against them goes to the Real Estate Agents Disciplinary Tribunal. If misconduct is proved, what can the Tribunal do?
- → A licensee working for Agency A learns confidential information about a client’s financial difficulties. They then move to Agency B and are asked to give market advice on that client’s property to a prospective buyer who is a client of Agency B. How should they handle this situation?
- → A licensee working for Agency A learns confidential information about a client's urgent need to sell due to financial difficulties. The licensee then moves to Agency B and uses this information to approach the former client with a lower offer through a contact. This scenario primarily involves a breach of which professional obligation?
- → An agent receives two written offers on the same property at the same time: one from the agent's personal friend at $50,000 below the asking price, and one from an unknown buyer at the asking price. The agent presents only the friend's offer. Under the Real Estate Agents Act 2008, this most likely amounts to:
- → According to the REA Code of Professional Conduct and Client Care, what is the primary purpose of the Code?
- → In what situation would the Real Estate Agents Disciplinary Tribunal have jurisdiction to hear a complaint against a former licensee?
- → James, a branch manager, becomes aware that one of his salespeople has been providing misleading information to clients about settlement timeframes. Under the REA Code, what is James's primary obligation?
- → Under section 121 of the Real Estate Agents Act 2008, what must appear on every advertisement an agent publishes?
- → When can a licensee disclose confidential client information to a third party?
- → A client asks their real estate agent to not disclose a known flooding issue to potential buyers. What should the agent do?
People Also Study
Property Law & Legislation
56 questions
Agency Practice
89 questions
Sale & Purchase Process
63 questions
Property Management
85 questions