Brokers wishing to buy or sell a property for themselves

[PROFESSIONAL PRACTICES SERIES]

Each year, the OACIQ Info Center receives many calls from real estate brokers who wish to buy or sell a property for themselves and want to know what the Real Estate Brokerage Act has to say in this regard, in order to make sure that the transaction complies with the regulations. Please note that under section 18 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising, a broker must disclose his quality as broker in all cases. Based on the principle that a broker who buys for himself or sells his own property is not acting as an intermediary, here is a brief summary of six potential scenarios:

1. A broker wishing to buy directly from an owner (FSBO)

In this scenario, there is no brokerage contract and no intermediary. Therefore, there can be no remuneration. In addition to section 18, section 21 of the Regulation states that the broker acquiring a direct or indirect interest in an immovable or enterprise cannot represent the seller. Here, the broker has the following obligations:

• Disclose his quality as broker in accordance with section 18 of the Regulation
• Act in good faith.
• Take all necessary measures to avoid causing a prejudice to the seller.
• Advise the seller to seek representation by a licence holder of his or her choice.

The ACAIQ recommends acting prudently. Licence holders should use OACIQ forms and amend the promise to purchase by crossing out the words ''through _______, real estate broker, represented by ________'' from clause 2.1 and to cross out clause 7.3.

2. A broker wishing to buy his own listing

In this second scenario, under section 22 of the Regulation, the broker must terminate the brokerage contract. At that point, there is no intermediary, and therefore there can be no remuneration. However, the broker cannot terminate the brokerage contract to present a transaction promise if he is collaborating with another broker or if there are transactions in progress on the immovable or enterprise. All OACIQ obligations and recommendations listed in scenario 1 above apply.

3. A broker wishing to buy a property listed by a broker from the same agency

In this third scenario, the buying broker is not an intermediary. He is not acting on behalf of the agency and is not entitled to remuneration since he is buying for himself, his spouse or a legal person controlled by him or his spouse (section 23 of the Regulation). However, since the contract is held by the agency, the latter is entitled to remuneration as seller’s agency. The buying broker may be represented by another broker. In this case, the buyer’s broker is entitled to remuneration. In addition to the obligation to disclose one’s quality as broker, the OACIQ recommends that its forms be used. Clause 2.1 of the promise to purchase should indicate the name of the agency and the broker representing the buying broker or, if not represented, the name of the seller’s broker. The name of the buying broker must never appear in clause 2.1 of the promise to purchase.

The buying broker must complete the notice of disclosure and have it signed by the seller at the first opportunity i.e., before the seller enters a contract agreement. Therefore, he must complete the notice of disclosure and have it signed by the prospective contracting party (seller) prior to the acceptance of the promise to purchase.

4. A broker wishing to buy a property listed by another agency or another independent broker

Here again, a broker buying for himself is not an intermediary. He is not acting on behalf of the agency and therefore is not entitled to any remuneration. The buying broker may be represented by another broker. In this case, the buyer’s broker is entitled to remuneration. Finally, the OACIQ recommends that its forms be used and that clause 2.1 of the promise to purchase be amended, depending on whether or not the broker is represented. Clause 2.1 of the promise to purchase should indicate the name of the broker representing the buying broker or, if not represented, the name of the seller’s broker. The name of the buying broker must never appear in clause 2.1 of the promise to purchase.

The buying broker must complete the notice of disclosure and have it signed by the seller at the first opportunity i.e., before the seller enters a contract agreement. Therefore, he must complete the notice of disclosure and have it signed by the prospective contracting party (seller) prior to the acceptance of the promise to purchase.

5. A broker selling his own immovable on SIA/MLS systems

The selling broker is not an intermediary. He is not acting on behalf of the agency and is not entitled to any remuneration. The broker may give the brokerage contract to his own agency and be represented by a colleague. He may also give the contract to another agency or another independent broker. Either one is entitled to remuneration.

• IT IS NOT RECOMMENDED for a real estate broker to act as seller’s broker for marketing his own immovable due to the conflict of interest. The legality of the brokerage contract when the broker designates himself as the seller’s broker or agency representative could be called into question (contract concluded by the broker with himself and absence of intermediary).

• The broker who still chooses to act as seller’s broker for his own immovable and completes a brokerage contract in which he is designated as his agency’s representative is not covered by his professional liability insurance. As owner, the broker is not acting within the framework of his professional activities under the Real Estate Brokerage Act considering that the service is not provided to others. In addition, this broker is bound by all the obligations of a seller’s broker, notably all ethical obligations towards buyers and brokers representing them, including the obligation to collaborate and provide fair treatment to the buyer.

• Due to the conflict of interest, NO BROKER listing his own property may represent the buyer (section 20 of the Regulation). The broker must inform the buyer that he may seek representation by a licence holder of his or her choice. If the buyer refuses, the broker may give the forms to the buyer (for example: Promise to Purchase, Annex G, Annex A, Annex B) to complete them himself. However, he should keep a proof in the file to the effect that he has informed the buyer that he could not represent him in any way or draft documents for him.

• The broker must disclose his quality as broker (section 18 of the Regulation) at the first opportunity i.e., before the buyer enters a contract agreement. Therefore, he must complete the notice of disclosure and have it signed by the prospective contracting party (buyer) before drafting the promise to purchase.

6. A broker selling his own immovable without intermediary (private sale)

Whether or not in the course of a broker’s functions, regulations apply: instructions concerning disclosure must be followed (section 18 and 20 of the Regulation), as for the previous case.

Additional note regarding disclosure

Since May 1, 2010, section 18 of the regulation states that the notice must state, if applicable, the fact that the licence holder, for his account, is negotiating, has negotiated or intends to negotiate the resale or alienation of the immovable he proposes to acquire. Therefore, you must inform the seller if you are already trying to resale the coveted immovable or if you plan to do so quickly.

The disclosure notice model edited by the OACIQ includes all references and declarations provided by the law and regulations. 

A continuing education activity to find out more
The scenarios summarized above come from an OACIQ continuing education activity entitled ''The broker who buys or sells''. This activity helps clarify various principles that come into play when a real estate broker has an interest in a real estate transaction.