Exclusive brokerage contract: can the broker authorize his client to offer the immovable for sale by himself?
Some owners wishing to sign a brokerage contract ask to be able to market their immovable to find prospective buyers, too. We are not talking here about a seller who himself interacts with the buyer, but about a seller who can market an immovable. Complication risks arising from a mismanagement of this potential double marketing are significant. Hence, it is necessary to be very cautious before consenting to such a request of the seller. The aim of the OACIQ is certainly not to encourage this practice.
It is important to note that the real estate broker must always fulfill his ethical obligations towards the parties to the transaction. Remember that a Brokerage contract – Sale can be amended to authorize the client to offer his immovable for sale by himself without affecting the exclusive nature of the contract. Indeed, a decision rendered by the Court of Appeal stated that the exclusivity of a brokerage contract concerns only brokers and agencies. This means that it is possible to cross out the statement stipulating that the seller agrees not to offer the immovable for sale by himself, while preserving the exclusive nature of the brokerage contract.
The authorization allowing the owner to offer his immovable for sale must be well regulated to avoid any sources of conflicts regarding whether it is the broker or the seller who found the buyer, the right to claim remuneration or not, and the advertised selling price. It is essential that this authorization be defined in the brokerage contract by using the following statements under clause 11.1:
The BROKER authorizes the owner to offer his IMMOVABLE for sale. Should the latter himself find a buyer, the remuneration indicated in clause 7.1 of the brokerage contract will be reduced to ______% of the sale price or $_______.
Notwithstanding the foregoing, there will be no decrease of remuneration should:
a) one or many promises to purchase be presented through real estate brokers, including the broker(s) identified in the brokerage contract, concurrently with a promise to purchase submitted directly by a buyer; or
b) should the buyer choose to be represented by his own real estate broker.
In this case, the owner will pay the remuneration specified in clause 7.1 of the Brokerage contract.
The owner-seller agrees to notify immediately the agency or broker identified in the brokerage contract before accepting or refusing any promise to purchase submitted directly by a buyer. If applicable, the broker will complete the required mandatory forms.
The owner-seller agrees not to advertise any condition other than those contained in the brokerage contract, including the price, in any representations or advertisement he may make.
These clauses meet the requirements of Section 30 of the Real Estate Brokerage Act (1), which prohibits any broker from making the seller waive the rights indicated in the mandatory brokerage contracts and the regulation prohibiting brokers from amending such brokerage contracts to reduce broker’s obligations or increase those of the client (section 22 of the Regulation respecting contracts and forms).
The agency or broker authorizing the seller to offer the immovable for sale by himself may waive in whole or in part the remuneration to which he is entitled. However, he cannot waive the remuneration in the case where this would create a disadvantage for a buyer of another broker.
In addition, all the obligations of the agency or broker as described in the brokerage contract remain, including the obligation of presenting to the seller, as soon as possible, any proposals for the purchase, lease or exchange of the immovable.
To do this, a statement that the owner agrees to notify the agency or broker immediately upon becoming aware of the existence of a promise to purchase coming directly from his buyer, shall be included in the brokerage contract. This will allow the seller’s broker to assume his advisory role properly, protect the interests of his selling client adequately, and be fair to all prospective buyers.
Representation of the buyer
The broker representing the buyer, with or without a Brokerage contract – Purchase, must pay particular attention in this context. Remember that all brokers are required to collaborate with each other and the buyer’s broker cannot contact the seller directly because of the duty to collaborate. If the buyer’s broker is unable to be present during the visit, he might be deprived of his remuneration share for collaborating to the transaction should a dispute be submitted to arbitration. The good practice to adopt in an exceptional situation where the buyer’s broker is unable to be present during the visit is to inform the seller’s broker that a buyer will be present. The seller’s broker will inform his client to avoid any misunderstanding. The buyer’s broker could also be replaced by another broker of his choice to accompany the buyer during the visit.
To offer his immovable for sale, the owner may himself advertise it by any means he deems useful. However, a restriction shall be specified in the brokerage contract prohibiting him from promoting his immovable according to terms and conditions that are different from the ones stipulated in his brokerage contract, particularly in regards to the price, in order to be fair to all buyers. If he fails to accept this restriction, the broker or agency shall abstain from signing a brokerage contract.
The detailed description sheet (the one that is available only to brokers) must also state that the owner is authorized to offer his immovable for sale by himself.
Moreover, to avoid buyers’ confusion and any potential collaboration problems between brokers, the best practice is certainly not to allow the installation of two signs, namely the seller’s sign and the broker’s. Although this is not illegal, this situation should be avoided.
Information and keeping of transactional documents
As for all transactions, the agency or broker shall, even though it is the seller himself who found the buyer, send his notice of sale to the information dissemination service as described in the brokerage contract, if applicable, and keep all the relevant documents of the transaction on his records and make entries in his registers.
Deposit and collection of remuneration
Whether the buyer contacts directly the seller or does so through a broker, if he gives a deposit following the recommendations made by the seller’s broker, this amount shall be deposited in the trust account of his agency to protect the parties. Furthermore, the agency or broker may receive remuneration only in accordance with clause 7.1 of the brokerage contract or the agreement concluded with the client.
For more information on this topic, feel free to contact Info OACIQ email at email@example.com or by phone at 450-462-9800 or 1-800-440-7170.
(1) “30. A client may not, by special agreement, waive the rights conferred by this chapter.”