Published on: April 06, 2017
Reference number: 200031

The commercial real estate brokerage: A world on its own

The professional authorized by the OACIQ who works in commercial brokerage handles the purchase, sale or leasing of commercial properties, warehouses, offices, and land for industrial or commercial use. This professional is governed by the Real Estate Brokerage Act and must pass an entrance examination before being licenced to practice. In addition, he must complete many training activities under the Continuing Education Program developed by the OACIQ.

While you go about your business, the real estate broker:

  • Analyzes the market (competition, strategic location, leasing policies, buyer or seller behaviours, etc.);
  • Finds purchasing, selling or leasing opportunities for commercial or industrial properties for you;
  • Helps you determine the most advantageous price;
  • Follows up on your transaction until its successful completion.

Main differences between residential real estate brokerage and commercial real estate brokerage

Here are some of the differences between professional practices in both sectors. One thing remains the same though: brokers and agencies have the same ethical obligations, regardless of their field of practice.

The OACIQ mandatory and recommended forms
Unlike in residential real estate, for commercial or industrial immovables (such as immovables comprised of five or more dwellings), brokers and agencies are allowed to use their own forms, although the OACIQ publishes a number of recommended forms, which are adapted to these various situations.

The use of OACIQ forms is not mandatory for commercial real estate brokers. However, the regulations stipulate that certain clauses must be included in a brokerage contract or a transaction proposal, such as identification of the parties and the immovable, broker’s remuneration method, price and terms of the sale.

Cancellation of the promise to purchase
In residential real estate brokerage, there are mechanisms that allow the buyer, in some cases, to cancel his promise to purchase.

In commercial real estate brokerage, the buyer benefits from a greater power to cancel his promise to purchase, since there is, in this case, a so-called “due diligence”period that follows the promise to purchase.

During this period, the buyer reserves the right to make the necessary checks, including financial statements, state of premises, environmental inspections, zoning, obtainment of permits, etc. Ultimately, he could cancel his promise if he is not “completely” satisfied with his observations.

Visit of the immovable
In residential real estate brokerage, it is normal for the buyer to visit the property before presenting a promise to purchase, as the inside of the property is an important factor in the buyer’s decision. For an income property, the buyer is more interested in the investment aspect of the deal. The visit of the premises is often conditional upon acceptance of a promise to purchase: the parties agree on the price and terms of the sale, and then the buyer visits the premises. This also avoids disturbing the tenants several times.

Information and duty to collaborate
A broker must collaborate with another broker upon request; he must provide all relevant information without delay. In commercial real estate however, to ensure that the financial information regarding his income property or business doesn’t fall in the hands of a competitor, the seller may make the disclosure of this information conditional upon the signing of a confidentiality agreement. The signing of such a document by a prospective buyer reassures the seller regarding the information that will be disseminated. Therefore the condition of signing such an agreement before information is provided does not go against the broker’s ethical obligations.

Putting a property on the market
The way a property is put on the market is different in commercial real estate. In residential real estate, the broker normally uses standard marketing techniques such as newspaper ads, signs, etc., whereas in commercial real estate, the broker generally issues a call for proposals. The same goes for the awarding of the brokerage contract: commercial real estate favours calls for applications and sales pitches.

Your transaction is protected

A real estate broker has a mandate to protect your interests, whether he is working in commercial or residential real estate brokerage. By using his services, you have access to Info Center and you can also ask for help from the OACIQ Assistance Department, if needed.

Commercial real estate brokers. like residential real estate brokers, are governed by the Real Estate Brokerage Act. They pay into the Real Estate Indemnity Fund (FICI) and are covered by professional liability insurance through the FARCIQ.

It is important to know that in order to constitute a brokerage transaction within the meaning of the Act, a transaction for the sale of an enterprise must include the sale of one or more immovables, which must represent the enterprise’s main asset in terms of their market value. If this is not the case, the transaction will not be covered by the FARCIQ.

For more information in this regard, we recommend that you contact the FARCIQ directly by phone at 450 656-5959 or 1 866 956-5959, by fax at 450 656-5746, or by email at assurance@farciq.com.