The real estate broker’s right to compensation after the expiry of the brokerage contract
The Info OACIQ information centre often gets calls from selling owners inquiring about the risk of signing a new brokerage contract upon the expiry of the initial contract. They wonder if they are therefore released of their obligation to pay compensation under the first contract.
Everything will depend on the circumstances. Indeed, clause 7.1.3. of different brokerage contract forms edited by the OACIQ provides that, even after the expiry of the brokerage contract, the seller undertakes to pay compensation referred to therein, and under certain conditions:
“7.1.3. where a sale takes place within 180 days following the expiry date of this contract with a person who was interested in the IMMOVABLE during the term of this contract, unless, during this period, the SELLER concluded in good faith with another agency or another broker a contract stipulated to be exclusive for the sale of the immovable; or” (emphasis added)
For the compensation to be paid:
1) The sale should take place within 180 days following the expiry date of the contract;
2) The sale should be made with a person who was interested in the immovable during the term of the contract;
The concept of interested person usually refers to the person who visited the immovable. The broker should have spoken to this person to make him take interest in the immovable. Simply submitting a description sheet to a potential buyer, or giving him the address to pass in front of the property, is not enough to conclude that the person was interested in the immovable.
3) The seller should not have concluded, in good faith, a brokerage contract during this period with another agency or broker.
Thereby, if the selling owner signs a new brokerage contract, it’s the concept of good or bad faith that will be decisive regarding the right of the agency to claim compensation. This concept is determined with regard to the selling owner’s conduct.
For example, the selling owner may particularly be considered in bad faith if he quickly signs a new contract with the agency or the broker representing the buyer at reduced compensation, without any real marketing, to circumvent the application of the initial contract and therefore deprive the first agency or the first broker from compensation. It should be noted that in this context, the agency or the broker who signed the new contract could also be subject to a disciplinary complaint.
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
- Termination of a brokerage contract