What is dual agency and is it legal for business brokers in Canada?
Dual agency — where a single broker represents both seller and buyer — is permitted for business brokers in Canada, but the legal framework governing it depends on whether the transaction involves real property. When real estate is part of the deal, provincial legislation applies and requires written informed consent. When no real property changes hands — as in most share sales and many asset sales — dual agency is governed by common law fiduciary duty and industry codes such as the CABB Ethics Guidelines rather than provincial real estate legislation.
What dual agency means in business brokerage
Dual agency occurs when a single broker or advisor represents both the seller and the buyer in the same transaction. This means the broker acts as the agent for both parties simultaneously, rather than representing only the seller (the typical arrangement when a business is first listed).
Legal framework: real-property deals vs. share or asset-only deals
The governing framework differs significantly depending on deal structure.
When real estate is involved: Ontario's Real Estate and Business Brokers Act, 2002 (REBBA 2002) and British Columbia's Real Estate Services Act apply to transactions involving real property interests. Under these statutes, dual agency requires written, informed consent from both parties, and brokers are subject to oversight by RECO (Ontario) and the Real Estate Council of BC. Where a business sale includes a commercial property, these regulatory requirements apply.
When no real property is involved: For share sales and asset sales that do not include real estate — the majority of small and mid-market business transactions — REBBA and BC's RESA do not apply. REBBA's scope is defined by its application to real property transactions, not the transfer of corporate shares or business assets without a real property component. In these transactions, dual agency is governed by common law fiduciary duty principles and, for CABB members, the CABB Ethics Guidelines. The practical disclosure and consent obligations remain the same, but the regulatory enforcement mechanism shifts from provincial real estate regulators to common law remedies and CABB's self-regulatory framework.
Disclosure and consent requirements
Both the seller and buyer must provide informed consent in writing after receiving full disclosure of what dual agency means and how it limits the broker's ability to advocate for either party. The disclosure requirement means the broker must inform both parties in writing that they will not be able to provide undivided loyalty to either party and that confidential information may be limited.
The broker in a dual agency relationship typically cannot disclose confidential information such as the seller's lowest acceptable price or the buyer's maximum offer without permission. Failure to properly disclose a dual agency relationship can result in regulatory sanctions, loss of commission, and potential legal liability for breach of fiduciary duty.
Why dual agency creates conflicts of interest
Dual agency creates an inherent conflict of interest because the broker cannot advocate exclusively for either party's best interests when both are clients. While the broker can facilitate the transaction and provide information to both sides, they cannot negotiate aggressively on behalf of one party to the detriment of the other.
When dual agency most commonly occurs
Dual agency most commonly arises when a broker who has listed a business for sale is later approached by a buyer they have an existing relationship with, or when a buyer inquires about a listing the broker is representing. In these situations, the broker must disclose the dual agency relationship and obtain written consent before proceeding.
Alternatives to dual agency representation
Some business owners decline dual agency arrangements and require the broker to refer the buyer to another broker to maintain full advocacy on their behalf. This ensures the seller retains a broker who can negotiate exclusively in their interest.
In a designated representation model, different brokers within the same brokerage can represent the buyer and seller separately, avoiding dual agency while keeping the transaction within one firm. Where provincial real estate legislation applies (deals involving real property), this arrangement is recognized under RECO and Real Estate Council of BC rules. For share or asset-only transactions, the same structural separation can be used and is recognized under CABB guidelines.
Transaction brokerage or facilitator models, where the broker assists with the transaction but represents neither party, are permitted in some provinces but require explicit written agreement.
This article is for informational purposes only and does not constitute legal or business advice. Before agreeing to a dual agency arrangement or making decisions about broker representation, consult a qualified professional familiar with your specific situation and provincial requirements.
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