What to do in multiple promise to purchase situations?
If you are the SELLER
Your broker is required to promote your interests, including ensuring the best visibility for your property and the best price.
It is quite possible that you receive multiple promises to purchase, and your broker will need to advise you on the best possible approach to adopt in this situation.
He must present you with all proposals received, as soon as possible upon their receipt, and treat all promisor-buyers fairly. Thus, he is not allowed to reduce his share of compensation if competing promises to purchase are submitted through different brokers. This would have the consequence of favouring one promisor-buyer over the others.
Your broker MUST PRESENT YOU WITH THE PROMISES TO PURCHASE without taking into account:
- The chronological order of their receipt
- The identity of sellers or brokers representing them
- The circumstances surrounding the presentation of promises to purchase
In accordance with the Act, your broker is required to act with complete transparency and fairness at each step of a transaction. He must present immediately inform other brokers or potential buyers of the existence of any promise to purchase, but without disclosing the content thereof. As long as the initial offer is not accepted, expired or rejected, a buyer can modify it by making it more attractive by offering you a better price and/or better terms.
You may choose to wait before replying to it or request that the time period be extended. Of course, the promisor-buyer has the right to refuse this request. However, the promise to purchase has an acceptance period. If you do not respond to a promise to purchase, it becomes null and void, which means that as of the expiry of the time period, the promisor-buyer is no longer bound by the promise to purchase made to you. To reopen the discussion, you will have to make a counter-proposal, which the buyer can accept or refuse. This counter-proposal may be made within the acceptance period or after its expiry.
CAUTION: you may be tempted to use the strategy of receiving all promises to purchase at the same time, at a given date and time. This goes against the obligation to present every transaction proposal as soon as possible following receipt.
Note that you have the right to refuse a promise to purchase even if the price and conditions offered meet your expectations, as stated in your brokerage contract. Your broker may, however, claim compensation for his services, as indicated in clause 7.1.2 of your brokerage contract.
After presenting each promise to purchase, your broker MUST ADVISE YOU SO THAT YOU CAN MAKE AN INFORMED DECISION and MUST EXPLAIN THE POSSIBLE CHOICES when you receive more than one:
- Accept one promise to purchase and refuse the other, should one of them be acceptable to the seller and should he not wish to make a counter-proposal
- Set one promise to purchase aside and make a counter-proposal for a higher price on the other one, taking into account the various deadlines If the counter-proposal is refused, the seller may accept the first promise to purchase. But if the buyer accepts the counter-proposal, the seller will then have to refuse the promise to purchase he had set aside.
- Accept a promise to purchase for the sole purpose of having an alternative solution should the first PP become void. In this case, the seller will not want to take steps to cancel the first promise already accepted. The OACIQ suggests that brokers respond to the second promise to purchase with a counter-proposal, by checking off clause P2.4.
*IT IS IMPORTANT NOT TO RUSH THE CONCLUSION OF A TRANSACTION. In many cases, the time period allotted to accept the promise to purchase can be used to your advantage.
Your broker must therefore advise you properly to ensure that you get the best price for your property by taking advantage of the various opportunities available, such as presenting counter-proposals at the right time after receiving and presenting the other promises to purchase, as applicable.
If you are the BUYER
Several promises to purchase may be presented to the seller at the same time as yours. The seller’s broker must present them to his client as soon as possible upon receipt, regardless of the chronological order of their receipt, the identity of buyers and brokers representing them or the circumstances surrounding their presentation.
The broker must treat all prospective buyers fairly, whether they are represented by a brokerage contract to purchase or not. He must inform you or your broker of the existence of any other promise to purchase. This way, you will be able, if you wish, to enhance your promise by offering a better price and/or better conditions.
Whether you are bound by an Exclusive brokerage contract – Purchase with your broker or not, the seller's broker must still allow your broker to present your promise to purchase to his client, unless exceptional written instructions to the contrary are given by his client. If you are bound to him by a BCP, your broker will be able to go further because he must protect your interests. He will give you the necessary explanations as to the conditions you are offering the seller, while informing him of your motivations and the reasons for choosing your promise to purchase.
The seller's broker works in line with his client's interests by advising him on the price and conditions of all offers presented. Ultimately, it is up to the seller to accept one offer over another.
► SELLER'S OBLIGATIONS TOWARD THE BUYER
The seller’s broker must always act with integrity and transparency to ensure that he does not endeavour to have the promise to purchase of an unrepresented buyer accepted so as to favour his own interests rather than those of his client. The broker may not reduce his compensation in order to favour the conclusion of the transaction. This would be an unfair practice against the other broker and his buying client.
The confidentiality rule governing the promise to purchase applies to any buyer. Under these circumstances, although the seller’s broker knows the terms of all promises to purchase, he may not use this information to the benefit of a particular buyer.
An unrepresented buyer may not ask for the seller’s broker’s advice regarding the amount he should offer on his promise to purchase. The seller's broker must be loyal to his client and must therefore treat all buyers fairly, so that everyone has the same information and an equal opportunity to acquire the desired property. The seller's broker must inform the unrepresented buyer that he must protect and promote the interests of the party he represents. He must suggest that the buyer should instead be represented by another broker by signing an Exclusive brokerage contract – Purchase.
If the buyer chooses not to be represented by his own broker, the seller's broker must advise the seller that he has an obligation to keep confidential any information contained in a promise presented by any other buyer. His role with this buyer will be limited. The only advice that he may give him without violating this confidentiality obligation is to present a promise to purchase in the amount and conditions of his choice that he may record in writing. He can also objectively explain the various options available to the seller when several promises are presented to him and explain that presenting a PP creates no obligation for the seller.
In addition, the seller's broker must allow the buyer's broker, who obtained a written transaction proposal from his client, to participate in the presentation of the proposal. However, in certain special and exceptional situations, a seller may request in writing that his broker be the only one allowed to present any promise to purchase.