What is an OREA Confidentiality Agreement?
The OREA Confidentiality Agreement is a legal contract used in Ontario, Canada’s real estate market to protect sensitive information during the process of selling or buying a property. This legally binding document is designed to maintain the privacy and confidentiality of the parties involved, as it allows one party to disclose confidential information to another with the assurance that the information will be safeguarded and not shared with unauthorized individuals. In the context of a real estate transaction, confidential information may include details about the residential property, such as the sale price, motivations of the seller or buyer, financial details, and other private information.
Becoming acquainted with the OREA Confidentiality Agreement is crucial for those who are new to the Ontario real estate market , listing or purchasing a property. It establishes a foundation of trust between the parties involved and protects them from any potential threats, such as inadvertent leaks of sensitive information that could undermine negotiations or facilitate unfair competition. Familiarizing yourself with the provisions of this agreement will not only ensure full compliance with the terms, but also enable you to make informed decisions throughout the process.
In terms of its enforceability, the OREA Confidentiality Agreement is legally binding under Ontario law. All parties must adhere to the provisions of the agreement or be subjected to the applicable legal repercussions. However, buyers and sellers must understand their respective rights and obligations clearly, in order to avoid inadvertently disclosing confidential information that could jeopardize the transaction.
OREA Confidentiality Agreement Components
The OREA Confidentiality Agreement is comprised of eight numbered paragraphs and an attached chart that outlines the confidential information being protected. The first paragraph defines what is meant by "the Agreement" in the remainder of the agreement. It also grants permission to the brokering agent to review the confidential information before the agreement is executed, so long as the brokering agent does not retain a copy after the agreement has been executed. Finally, the first paragraph requires anyone receiving confidential information to sign a copy of the on the chart referred to in Paragraph 2, which is attached on a separate page. So it does not form part of the agreement, so it does not need to be dated or signed, although it is often dated, signed and crossed reference as Schedule "A" to the agreement for clarity. It is a good idea to use the same chart for any other confidentiality agreements that you may be using. For example, an email or faxed version will require a line for each person signing to include their date of signature. In addition, if each agent receiving the confidential information is listed, there will be an additional line for each agent.
The second and third paragraphs of the OREA Confidentiality Agreement specify what constitutes confidential information, and make it clear that the confidential information discussed in the chart is not the only confidential information that the Seller party is disclosing.
Paragraph four sets out a list of circumstances under which the Seller party consents to the use of confidential information. This includes for the purpose of a Note of Interest or for submitting an offer to purchase. However, it also makes it clear that even though the Buyer party is consented to the use and disclosure of the confidential information, the Seller party does not give up its rights in respect of the confidential information. Paragraph five clarifies what happens to the confidential information following the signing of an agreement of purchase and sale. The confidential information may no longer be required, and so it shall be returned to the Seller party or destroyed. A Seller party may request the return of confidential information even before the offer has been accepted by the Seller party.
Paragraph six makes it clear that the Offer Agreement shall be drafted in such a manner so as to not breach any obligation of confidence that the Owner may have. Paragraph seven indicates the Seller party shall not be liable for any errors and omissions in the manner in which the confidential information is provided. The Buyer party also agrees that it will not sue the Listing Agent in respect of any information provided in the listing that the Buyer or Buyer’s representative relied on.
Paragraph eight states that regardless of whether an agreement of purchase and sale is entered into, the requirements that were set out in the OREA Confidentiality Agreement will survive. Thus requiring the parties to live up to the terms and conditions of the agreement indefinitely.
How do OREA Confidentiality Agreements Protect the Parties?
The OREA Confidentiality Agreement is a vital addendum to Listing Agreements and Buyer Representation Agreements that serves to protect the parties’ personal information and confidential commercial business information. When any agreement is signed, contractual and tort law creates duties on the parties to maintain the confidentiality of information that is not available to the public.
When a seller or buyer enters into an agreement with a buyer or seller, the parties will make disclosures to the other party. The forms are conveniently designed so that sellers and their representatives may insert information in text boxes that are designated "Seller’s Confidential Information". Similarly, buyers may complete a box labeled "Buyers Confidential Information". The parties may designate information, which may or may not be personal, confidential, or private as the parties believe to be relevant.
The Trade Secrets Act, RSC 1970 c. T-10, defines trade secrets broadly as any scientific or technical information, a formula, pattern, compilation of information, customer list, costumer method or process, financial data, or other information that the owner has taken reasonable steps to keep confidential. A trade secret need not be novel or unique to qualify for protection.
Both existing and potential customers have the right to expect that their personal information will be kept confidential by their suppliers. A breach of confidentiality by a listing or selling agent includes giving the seller’s home address to a customer through a third party or soliciting the customer to meet a new home builder. In such cases, the listing agent may be breaching his fiduciary duty to his client by revealing to others the addresses of other clients.
A stranger whose business is to buy or sell a financial investment, purchase an interest in a business, gain possession of a home or its contents may be a customer of a buyer’s agent and his REALTOR® representative. Without the protection afforded by the OREA Confidentiality Agreement (Form 143), there is a risk that a confidential or sensitive trade secret or business information of the buyer will be shared or disclosed in a manner that is contrary to their interest. The parties may wish to list all the types of additional confidential and/or sensitive information they want to protect under the agreement, such as:
Sometimes a buyer or seller seeks to obtain a copy of the confidential financial information of the other. For instance, a seller should not normally obtain personal income tax information of the buyer, the death certificate of the buyer’s spouse, the name of the deceased parent of the buyer, particulars of the buyer’s real estate owned including the financial details relating to the property or particulars of the principal residence exemption claimed by the buyer. There is no reason that the buyer’s private family information should be public knowledge even when the buyer is dead.
If the confidentiality agreement provided by OREA is not signed by the parties, then the parties may obtain copies of the document signed by one or both parties after the agreement has been terminated to show what was intended to be made public and what was to be kept confidential.
OREA Confidentiality Agreements: When Do You Need One?
The use of an OREA Confidentiality Agreement is nearly always advisable:
On the Sale Side – You should always insist on a signed OREA Confidentiality Agreement before sharing your listing (even to pre-qualified buyers) – in particular if the transaction is highly competitive and/or involves custom home-building elements, special inclusions with a substantial value, or any other elements which can over-complicate a transaction.
On the Buy Side – You may wish to use an OREA Confidentiality Agreement with the vendor respectful to any specific or general elements of their home which are highly proprietary and personal for them – in particular this might include the disposition of a family heirloom antique, special lease elements (e.g. "this is on a subsidy"), historical elements (e.g. "this barn was built in 1825"), artful inclusions/exclusions (e.g. "the light fixtures were made by my Grandfather"), unregistered elements (e.g. "there is an essential hidden compartment I could not cost effectively register under the 2012 Fire Codes"), and anything else the Listing Agent is being cagey about.
How to Draft and Enforce an OREA Confidentiality Agreement
The Confidentiality of pre-signing material information is of great concern to sellers and co-operatives. It is however important to note that the Information must not be disclosed to any party unless such disclosure is authorized by the seller. While it will be rare for a seller to grant such permission, it is important to consider that such permission will not defeat the obligation of the buyer to proceed on the basis of full disclosure. It is also important to note that if the buyer is an individual , the agent for that buyer can still be granted permission by the seller to receive copies of the pre-signing material information. It is also important to note that the buyers of a company, trust or unincorporated association will not be governed by the OREA Confidentiality Agreement and should be considered separately.
For the parties to protect themselves it is important to draft a comprehensive Confidentiality Agreement. Permission should be in writing and must be explicitly granted by the seller. The Agreement should also contain the permissions given by the seller. The permission should be carefully drafted to prevent all inadvertent disclosure.
Common Mistakes in OREA Confidentiality Agreements
There are several common pitfalls when it comes to OREA Confidentiality Agreements. The most simple of which is failing to have a confidentiality agreement in writing. I encourage all agents to have their clients read and sign a confidentiality agreement if they are contemplating making an offer to purchase on a property that isn’t listed on MLS. If the confidentiality agreement isn’t in writing, it’s enforceability in these circumstances is limited. Suing on an oral agreement for breach of confidence is an expensive and unpredictable exercise, even if you win.
Confidentiality agreements that are poorly drafted or aren’t comprehensive can also run into legal trouble. The following is a list of items that should be included in any comprehensive confidentiality agreement:
The consideration can be something as simple as a nominal sum of money; in practice, we see usually $10.00. It’s used in these circumstances to signify that there is something of value that both parties are getting out of the agreement. It is not a contingent promise to pay or thing of value.
As well, many agents forget to include the property in the confidentiality agreement. We’ve seen agents put together confidentiality agreements without even saying what property is the subject of the confidentiality agreement: "the undersigned agrees to keep the identity of the seller of the property located at TBD confidential." It seems so elementary, but I’ve seen this one too many times.
If you’re using an OREA form and filling in the blanks, I also recommend that you use a current version of an OREA form as templates get outdated; an OREA contract from 2013 or earlier should not be relied upon. Many people have a hard time finding the current version of an OREA form. Although OREA has recently improved its functionality on its website with regards to obtaining forms (you used to have to order them through the mail or phone OREA), I still find that most people visit forms.trebnet.com for the most current CREA forms.
Legal Consequences of an OREA Confidentiality Agreement Breach
The consequences of breaching an OREA confidentiality agreement hold significant importance for all parties involved. Confidences and obligations are inherently breached where confidential information is disclosed without consent and in violation of a confidentiality agreement. This is the general rule under contract law and remains relevant when OREA forms are used.
According to the rules articulated in Keeprite, Tse, Karam, and Bratt, you will likely be found in breach if it is proven that you had knowledge of the confidential information that you released upon third parties. But perhaps most significantly, if the information that you disclosed is confidential, you will be liable even if you did not actually have knowledge of its confidential nature.
At common law, when a trade secret is stolen or improperly disclosed the ultimate measure of damages is the profits earned by the subject of this information. However, if the party found at fault proves with satisfactory evidence that he or she was in no way involved in the disclosure of the information, then the aggrieved party must prove that he or she sustained damages as a result of the breach. If the party is unable to prove his or her damages as a result of the breach, then the party may be entitled to sue the subject of the information for either positive or negative injunction so that they may no longer use the information in any way possible.
Conversely, an agent who receives information that is in breach of a confidentiality type provision of their MLS, for instance, would be liable to a third party depending on whether the agent knew that the information was confidential. If the agent received the information without having knowledge of its confidential nature but somehow breached the duty of care, the agent may be liable for what economists call ‘positive’ damages. Positive damages are a direct monetary calculation of the profits the wrongful recipient of the confidential information realized because of the unlawful disclosure and use of the information. Where the agent wrongfully discloses the information to a third party and is deemed to have known about the confidential nature of the information, the agent may be liable for ‘negative’ damages. Negative damages are a calculation of the profits the aggrieved party lost in the marketplace as a result of the wrongful decision.
Therefore, a violation of the confidentiality imposed by OREA forms can expose you to a large contract. It is particularly important that you do not disclose or use this information in a way that may affect or endanger the interests of the owner.
OREA Confidentiality Agreements: FAQ
1. Can I use the OREA Confidentiality Agreement in commercial transactions?
Yes, it is appropriate for use in commercial transactions.
2. How long is the term of the confidentiality agreement?
The standard term is one year. That means the information must be kept confidential for one year.
3. Is the confidentiality obligation contained in the Standard Form of Agreement of Purchase and Sale (the "Agreement") sufficient to protect me?
No. Clause 21 of the Agreement states that the Buyer and Seller agree not to disclose the terms of the Agreement without the prior written consent of the other party. This obligation may be difficult to enforce against third parties.
4. Does the Seller’s listing brokerage have the right to review the Buyer’s purchase offer to allow the Seller to decide what to accept or reject?
No. The Seller’s listing brokerage or sales representative may not review any offer prior to the Seller accepting the offer. By signing the OREA Confidentiality Agreement, the Buyer is protecting the details of his/her offer. Even if the Buyer was willing to have his/her offer reviewed by the Seller’s listing brokerage or sales representative, they could not do so because of the Confidentiality Agreement.
5. Can a representation and warranty be given to the Buyer as to the condition of the property or other matters?
Even though the Buyer’s offer is confidential , the Seller may give the Buyer warranties and representations as part of Schedule "D." The Seller may choose to keep the offer in strict confidence, but without a confidentiality agreement, anyone who receives a copy of the Buyer’s offer may then share its contents with others—including the Seller. Since the Agreement is typically subject to a status certificate (for condominium transactions) or a home inspection, the Seller may be required to provide information to the Buyer or his/her representatives for their review of the Agreement. Also, the Seller may wish to give warranties and representations to the Buyer as part of Schedule "D" to protect the Buyer and the Seller.
6. Is the OREA Confidentiality Agreement a one-way protection?
Two parties need to sign the OREA Confidentiality Agreement for it to be binding on both. The Buyer may ask the Seller to sign the OREA Confidentiality Agreement to protect his/her offer. The parties may also decide to execute the OREA Confidentiality Agreement at the same time with the Agreement. To ensure both parties agree to the same term, consider picking one standard term agreed upon by both buyers and sellers in your office.
7. Do I have a right to see the full Agreement once signed?
No. Signing the OREA Confidentiality Agreement means that you will not see the Agreement.