Termination of a brokerage contract
Sometimes a seller decides that he no longer wishes to sell his immovable and wants to terminate the brokerage contract by which he entrusted the sale of his immovable to a broker or agency. A buyer or lessor can also sometimes wish to terminate a brokerage contract. This is possible in certain situations, including by invoking the right to cancel allowed under the Real Estate Brokerage Act (hereafter “the Act”) or pursuant to a provision included in the brokerage contract.
Under the Act, a seller, buyer or lessor, despite any stipulation to the contrary, always has three days after receiving a duplicate of the brokerage contract to cancel (or terminate) the contract, at his discretion, by sending written notice to this effect to the broker or agency. This is known as the right to cancel.
Apart from this case, in principle a contract cannot be terminated before the expiry date stipulated therein. However, article 2125 of the Civil Code of Québec states that, in the case of a contract for services, the client can unilaterally terminate the contract.
It should be noted that most mandatory brokerage contracts stipulate under clause 2.1 that: “Unless otherwise stipulated in clause 11.1, this contract can be terminated.”
This means that, with the client’s agreement, the agency or the broker may make the brokerage irrevocable simply by adding a statement to this effect under clause 11.1 “Other declarations and conditions” of the Exclusive Brokerage Contract – Sale or under clauses 10.1 of the brokerage contract to sell or of the brokerage contract to lease to the same effect. This statement could read as follows: “This contract is irrevocable.”
Therefore the mandatory brokerage contract to sell, purchase or lease can, in principle, be terminated by the client at any time, but the latter may be required to pay for any costs and expenses incurred and for the value of the work performed to that point.
In such a case, it would be preferable for the client to agree in advance on the costs and expenses he will reimburse to the broker or agency, and on any other amount he may have to pay to compensate the broker for any prejudice suffered due to the cancellation of the contract. Even though the Civil Code of Quebec gives the client the right to unilaterally terminate a service contract, it also recognizes that the client has certain obligations towards the provider of services, in this case the broker or agency:
“2129. Upon resiliation of the contract, the client is bound to pay to the contractor or the provider of services, in proportion to the agreed price, the actual costs and expenses, the value of the work performed before the end of the contract or before the notice of resiliation and, as the case may be, the value of the property furnished, where it can be returned to him and used by him.
For his part, the contractor or the provider of services is bound to repay any advances he has received in excess of what he has earned.
In either case, each party is liable for any other injury that the other party may have suffered.”
In addition, the broker or agency could be entitled to remuneration should the immovable be sold, exchanged or leased, as the case may be, within 180 days following termination of the brokerage contract to a person who became interested in the immovable while the brokerage contract stipulated as exclusive was in force.
It should be noted that the broker or the agency may also terminate the brokerage contract, in accordance with the terms of article 2126 of the Civil Code of Québec.
We also invite you to read the following articles:
- Property off the market, termination of contract and property temporarily unavailable: concepts not to be confused
- The real estate broker’s right to compensation after the expiry of the brokerage contract