9. Remuneration
9.1 Compliant sharing of remuneration
9.2 Waiver or reduction of remuneration
9.3 Remuneration of the buyer’s broker
9.4 Remuneration of a collaborating broker without a brokerage contract
9.5 Avoiding disputes as to "efficient cause"
9.1 Compliant sharing of remuneration
To facilitate the completion of a transaction, a broker must collaborate with any other licence holder who requests it, according to reasonable conditions previously agreed upon between them1, whether or not the other licensee has entered into a brokerage contract to purchase.
To comply with his collaboration obligations, a licence holder must, in his brokerage contract to sell, provide for reasonable remuneration for the licence holder with whom he collaborates, whether or not the latter has entered into a brokerage contract to purchase.
Due in part to his loyalty obligation toward his client, but also to his duty to collaborate, the licence holder must not offer to share his remuneration in a manner that could be detrimental to the completion of a transaction.
For example, a remuneration sharing scheme with conditions that are unreasonable toward other agencies or brokers could reduce their interest in proposing the immovable to their clients. By acting in this way, the seller’s broker would be failing to fulfil his obligation to protect his client’s interests. To maximize his client’s chances of obtaining the best price at the best possible conditions, the seller’s broker must make sure his client can offer his property to as many potential buyers as possible.
For this reason, the seller’s broker must not share or offer to share his remuneration in a way that disadvantages one of the parties to the transaction2.
1-2 Section 95 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising
9.2 Waiver or reduction of remuneration
A licence holder may not waive the remuneration to which he is entitled if such waiver stands to disadvantage the other parties to the transaction or results in one proposal being favoured over another. For example, he cannot propose a reduction in remuneration for transaction proposals emanating from him or received directly by the seller3 concurrently with full remuneration on offers presented through other licence holders.
In the event that promises to purchase emanate only from unrepresented buyers and none are presented by other licence holders, the seller’s broker may reduce his remuneration. He may also choose to reduce it when all promises to purchase are submitted through other licence holders.
The reduction in remuneration must not disadvantage any of the parties to the transaction. Therefore the broker may not reduce it in order to favour the completion of one transaction over another. The reason is that since the seller’s broker must provide fair treatment to all parties to the transaction, the reduction in remuneration must be applied to all, regardless of which promise to purchase is accepted or of the buyer’s identity. The seller’s broker must inform his client that a remuneration waiver or reduction will not apply in these cases, and include the following clause4, which is found in the recommended form Annex RCOM – Reduced compensation:
“If a promise to purchase is submitted through the broker or the broker representing the agency identified in section 1 during the term of this contract and in fact leads to the sale of the immovable, the broker undertakes to only claim from the seller a remuneration amount of _____ %. Notwithstanding the foregoing, there shall be no reduction in remuneration in the event that one or several promises to purchase are submitted through other agencies or brokers, concurrently with a promise to purchase submitted through the broker or the broker representing the agency identified in section 1.”
And finally, to avoid disputes regarding remuneration sharing, the licence holder must make sure to have a written document signed by the parties confirming the amendment to the initial remuneration agreement and use an Amendments form for this purpose.
3-4 Section 39 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising
9.3 Remuneration of the buyer’s broker
The buyer’s broker’s remuneration is set out in the brokerage contract to purchase (BCP). Based on what is indicated in the BCP, he can also receive the remuneration due to him under the brokerage contract to sell (BCS). In this case, the remuneration set out in the BCP will be reduced by the amount that the seller’s agency or broker is sharing under the BCS.
If the remuneration indicated under section 6 of the BCP is lower than the shared remuneration (e.g. 0.5% under the BCP versus 2% under the BCS), the buyer’s broker will receive the remuneration set out in the BCS. In this example, the buyer’s broker will receive 2%.
Conversely, if the remuneration indicated in the BCP is higher than the shared remuneration (e.g. 3% under the BCP versus 2% under the BCS), the buyer’s broker will receive 2% from the seller and the remaining 1% will be payable by the buyer.
In this case, clause R2.5 of Annex R could be used for the financing of the portion in excess of the provision included in the BCS. In all cases, the seller’s broker must clearly explain to his client the breakdown set out in clause R2.5 and the calculation of the remuneration to make sure the client understands what he will receive after deductions are made.
It can be tempting for the buyer’s broker to enter on his clients’ promise to purchase the percentage of remuneration that he expects to receive if the proposed transaction goes through. Licence holders sometimes use this method to establish the remuneration sharing when they fear that the seller’s broker will challenge their rights to this share by invoking the rules of efficient cause of the sale.
This practice goes against the principle under which any amendment that a licence holder may make to a contract, transaction proposal or form must concern only the object concerned by the terms and conditions thereof.
Since the object concerned by the terms and conditions of the promise to purchase is the sale of an immovable, and the sharing of remuneration between brokers does not concern the sale of the immovable, the sharing arrangement cannot be included on this form. Furthermore, licence holders are not parties to the contract that is the promise to purchase.
The purpose of clause 11.4 of the promise to purchase is to allow the notary to pay the seller’s broker from the product of the sale; without this clause, the product of the sale would have to be paid to the seller. The name of the buyer’s broker and the remuneration percentage must not be included here, since doing so would modify the text of the mandatory content of the promise to purchase, which is contrary to the Act. In addition, this approach is detrimental to both buyers and sellers, who may be trapped by the situation if a dispute arises between the brokers.
9.4 Remuneration of a collaborating broker without a brokerage contract
If the transaction occurs between an unrepresented buyer (i.e. who has not entered into a brokerage contract to purchase with a licence holder) and a seller represented by a licence holder, but a collaborating broker without a brokerage contract has been involved in the transaction and provided fair treatment to the buyer, the collaborating broker’s remuneration is based on the remuneration sharing arrangement outlined in the brokerage contract to sell. There must be no distinction between the amount of remuneration for a collaborating broker without a brokerage contract and that of a broker bound to a buyer by a brokerage contract to purchase.
9.5 Avoiding disputes as to "efficient cause"
The seller’s broker represents the interests of his client and must provide fair treatment to the buyers, whether represented or not. He must clearly inform the buyer of this fact as soon as possible and recommend that the buyer retain the services of another licence holder to represent and protect his interests.5
Unfortunately there are instances where the buyer does not receive this information clearly from the seller’s broker, and chooses to be represented by his own broker once the transaction is underway, or cases where the buyer fails to mention to the seller’s broker that he is already represented. This can cause a dispute concerning remuneration sharing between brokers and their agencies.
To avoid this situation, when a buyer calls directly to get information on a listing or make an appointment to visit a property, the seller’s broker must:
- immediately ask the buyer if he is represented by a broker;
- explain that his role is to defend and promote the interests of the seller, and not those of the buyer;
- recommend that the buyer retain the services of a broker to represent him.
The seller’s broker will also have to collaborate with the broker who will represent the buyer. The brokers should agree in advance, between themselves and with their respective agencies, on how the remuneration will be shared.
Concerning the “efficient cause of the sale,” the OACIQ does not intervene in disputes concerning remuneration between brokers or agencies, regardless of whether they are members of the Quebec Professional Association of Real Estate Brokers (QPAREB). If brokers are members of the QPAREB and a dispute arises regarding the payment of remuneration, they can turn to the association’s conciliation and arbitration service.
