Fee payable by the buyer: Exclusive brokerage contract – Purchase

General principles

When entering into a purchase brokerage contract, the client has the option of negotiating the rate or percentage of the compensation to be paid to the broker. This compensation, often referred to as “commission,” is not regulated by the Real Estate Brokerage Act or by the OACIQ, or by any other law, since it is determined by free competition.

To ensure transparency and protect the buyer's interests, the buyer's broker must inform the buyer of the compensation that is offered in sharing through the seller's brokerage contract, before a promise to purchase is made. In fact, when the seller of the property is represented by a broker, the broker offers a compensation in sharing to the buyer's broker. In this case, the compensation provided for in the purchase brokerage contract is deducted from the amount offered by the seller and the buyer may not have any compensation to pay directly to his own broker.

The real estate broker has the obligation to advise and inform his client objectively by providing him with the explanations necessary for understanding all the clauses of the forms he has him sign and for evaluating the services he provides.

What are the situations that give rise to the payment of a fee under the Exclusive Brokerage Contract - Purchase ?

The purchase brokerage contract contains specific provisions regarding when compensation is due.

For the fee to be payable, it is necessary:

1. That an agreement in accordance with the specific conditions specified in the brokerage contract be accepted, even if the buyer signed the promise to purchase without the assistance of his broker. It is important to note that the buyer has agreed not to, directly or indirectly, during the term of the contract, enter into an agreement concerning the purchase, exchange or rental of the property without the services of the agency or the broker.

   
   

2. That a promise to purchase be accepted within 180 days following the end date or termination of the brokerage contract for the property and that the buyer had already expressed interest during the term of the contract unless, during this period, the buyer entered into a new brokerage contract for the same property in good faith with another agency or broker.

   
   
   
   

   In other words, if the buyer visited a property or made a promise to purchase during the term of the contract, it can be claimed that the buyer was interested in the property. The 180-day period is calculated from the termination date provided for in the brokerage contract. If the contract was amended during execution to extend its term, the period will be calculated from the new termination date. In the case of a terminable contract where the buyer exercised his right to terminate it, the 180-day period would begin from the termination date.

   
   

3. That a voluntary act of the buyer prevents the execution of the brokerage contract.

   
   
   
   

   This clause applies when the buyer acts deliberately to sabotage or block the process provided for in the brokerage contract, for example in the steps to obtain the mortgage loan, which could have consequences on the execution of the contract or prevent the signing of the deed of sale, even if all the other conditions of the promise to purchase are met.

It should be noted that in certain circumstances, the broker representing the buyer does not have to claim an amount of compensation from the buyer, in particular if there is a sharing of compensation from the seller's broker equivalent to what is provided for as compensation in the brokerage contract (compensation which takes place), or if standard clause 1.12 , which provides for the non-claim of compensation, is included1 in the brokerage contract.

What forms can the broker’s remuneration take under the Exclusive Brokerage Contract – Purchase ?

Percentage of the sale price

This is the most common. For example, if the sale price provided for in the promise to purchase is $375,000 and, following negotiations, the seller subsequently accepts the amount of $390,000 as part of a promise to purchase presented to him, the percentage indicated in clause 6.1 of the brokerage contract would then be applied to the sale price accepted by the seller, i.e. $390,000. For example, in clause 6.1, if the calculation is made on an amount of $390,000 provided for in the promise to purchase, the compensation due will be $11,700 if the percentage is 3%, or $7,800 if the percentage is 2%, in addition to applicable taxes.

Lump sum

This is a fixed amount where the remuneration due will correspond to the amount indicated in the contract, and not to the accepted sale price provided for in the promise to purchase. Taxes will have to be added to this amount.

Others: hourly rate according to services provided, etc.

In this case, it is necessary to list in detail everything that the buyer agrees to pay to the buyer's broker: hourly rate, additional flat-rate fees, purpose of the compensation, frequency of execution, etc. For example, if the buyer requests to visit several properties, especially if these are located over long distances or if special arrangements must be made for the visits, the broker could charge an hourly rate for his time spent accompanying the buyer on these visits or for additional services not included in the standard package, such as in-depth property research, coordination of inspection or appraisal services, etc.

It is also important to remember that the form Annex DR – Disbursements and remuneration allows the real estate agency or the broker acting on his own account to provide for other methods of remuneration than those provided for in the brokerage contract and, where applicable, to have specific disbursements paid by the buyer. This form must be attached as an annex to the brokerage contract if this method of remuneration is agreed between the parties.

In all cases, the real estate broker must explain to his client the clauses relating to remuneration and in which contexts they are applicable, emphasizing that taxes will be added in addition to this remuneration.

It is important to note that, according to the Real Estate Brokerage Act 2, the brokerage contract signed with 0% remuneration payment conditions would not be considered a contract binding the parties with obligations. In such a case, the broker could not represent the buyer.

Payment method

• Payment directly to the real estate agency or broker acting on his own account

• Funding of compensation

It is important to note that in the event that the remuneration provided for in the brokerage contract is greater than what is received in sharing or that the seller is not represented by another broker, it could be financed in the purchase price, by including a specific clause3 in the promise to purchase or paid by the buyer when signing the deed of sale. The notary will then take care of distributing the amounts due to the real estate agency or the broker acting on his own account.

1 1.12 – No claim for compensation in the event of compensation sharingNotwithstanding the compensation provided for in clause 6.1 of this contract, the AGENCY or the BROKER will not be entitled to any compensation from the BUYER in the event that it is entitled to compensation from another agency or another broker under a compensation sharing. Note: This standard clause may be used to provide for conditions for claiming compensation that are different from those provided for in clause 6.1 of the purchase brokerage contract. If it is used, it will be indicated in clause 10.1 of the purchase brokerage contract form.2 Section 1 Real Estate Brokerage Act 3 Clause R2.5 of the form Appendix R – Residential Building must be added to the promise to purchase, whether or not the seller is represented by another broker, when the compensation is subject to financing. If the seller is represented by a broker, this clause is required only if the buyer's broker's fee is greater than the seller's broker has agreed to pay him as a share of the fee according to the terms of the sales brokerage contract and as stated in the detailed description sheet. The amount of the fee will then be included in the purchase price and taken into account for financing.

Last updated: May 7, 2024

Item number: 266293