Brian Madigan LL.B., Broker
BRMadigan@iSourceRealEstate.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300
Toll Free: 1-888-507-0817

 

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Buyer Representation Agreement Explained (Ontario) 6A COMMISSION

April 8, 2015

 

Buyer Representation Agreement Explained (Ontario) Part 6A COMMISSION

 

We will tackle this paragraph in two steps. The first part runs down to the end of page 1, and the second part starts with “IF” at the top of page 2. Here’s the paragraph in its entirety:

 

2. COMMISSION: In consideration of the Brokerage undertaking to assist the Buyer, the Buyer agrees to pay commission to the Brokerage as follows: If, during the currency of this Agreement, the Buyer enters into an agreement to purchase or lease a real property of the general description indicated above, the Buyer agrees the Brokerage is entitled to receive and retain any commission offered by a listing brokerage or by the seller. The Buyer understands that the amount of commission offered by a listing brokerage or by the seller may be greater or less than the commission stated below. The Buyer understands that the Brokerage will inform the Buyer of the amount of commission to be paid to the Brokerage by the listing brokerage or the seller at the earliest practical opportunity. The Buyer acknowledges that the payment of any commission by the listing brokerage or the seller will not make the Brokerage either the agent or sub-agent of the listing brokerage or the seller.

If, during the currency of this Agreement, the Buyer enters into an agreement to purchase any property of the general description indicated above, the Buyer agrees that the Brokerage is entitled to be paid a commission of.......................% of the sale price of the property or ................................................................................................................................................................................................................ or for a lease, a commission of ........................................................................................................................................................................ The Buyer agrees to pay directly to the Brokerage any deficiency between this amount and the amount, if any, to be paid to the Brokerage by a listing brokerage or by the seller. The Buyer understands that if the Brokerage is not to be paid any commission by a listing brokerage or by the seller, the Buyer will pay the Brokerage the full amount of commission indicated above. The Buyer agrees to pay the Brokerage such commission if the Buyer enters into an agreement within .................................days after the expiration of this Agreement (Holdover Period) to purchase or lease any real property shown or introduced to the Buyer from any source whatsoever during the term of this Agreement, provided, however, that if the Buyer enters into a new buyer representation agreement with another registered real estate brokerage after the expiration of this Agreement, the Buyer’s liability to pay commission to the Brokerage shall be reduced by the amount paid to the other brokerage under the new agreement. The Buyer agrees to pay such commission as described above even if a transaction contemplated by an agreement to purchase or lease agreed to or accepted by the Buyer or anyone on the Buyer’s behalf is not completed, if such non-completion is owing or attributable to the Buyers default or neglect. Said commission, plus any applicable taxes, shall be payable on the date set for completion of the purchase of the property or, in the case of a lease or tenancy, the earlier of the date of occupancy by the tenant or the date set for commencement of the lease or tenancy. All amounts set out as commission are to be paid plus applicable taxes on such commission. This Agreement applies for the purchase or lease of one real property. Notwithstanding the foregoing, in the event that the Buyer leases a property, this agreement remains in force as set out herein for the purchase of the leased property or a property of the general description indicated above. The leasing of a property by the Buyer does not terminate this Agreement with respect to the purchase of a property.

 

Part 6A review

 

I will break up the paragraph and offer my commentary in “italics” as usual.

 

2. COMMISSION:

 

This reference to commission is just the title.

 

In consideration of the Brokerage undertaking to assist the Buyer, the Buyer agrees to pay commission to the Brokerage as follows:

 

This seems straightforward. The reference to consideration is to ensure that we have a contract. It is noteworthy that the “deal” is for “assistance”. It is not an agreement for a completed transaction, but just assistance. And finally, there is the reference to pay commission.  

 

If, during the currency of this Agreement, the Buyer enters into an agreement to purchase or lease a real property of the general description indicated above,

 

The operative period of time for this particular paragraph is the currency of the agreement; that means start to expiration. There is a CONDITION here and that is the entry into an agreement by the Buyer. A purchase or lease are both covered. The property would have to fit the general description, meaning type and geographical location. You will recall the potential lease problem if a tenant simply decides to stay in his own space.

 

the Buyer agrees the Brokerage is entitled to receive and retain any commission offered by a listing brokerage or by the seller.

 

Off the top is an understanding that if indeed there is a commission offered by either a listing brokerage or a seller then it will be received by the buyer’s agent. Also, it will be retained. That means the buyer’s brokerage will keep it. There’s no cashback or rolling the money around to other people. This says quite simply, the buyer’s brokerage gets the money and keeps the money.

 

This means that if you are a consumer and you think that your part-time agent and fulltime taxi driver, or your cable TV company or your appliance repairman (well connected to someone in real estate) is going to GIVE YOU some MONEY, then this provision will have to change.

 

The Buyer understands that the amount of commission offered by a listing brokerage or by the seller may be greater or less than the commission stated below.

 

The amount of the commission will really be set out later in the agreement. The offered commission payment could be higher or lower. It doesn’t matter. That’s not the agreement. The real agreement on commission is whatever is set out later.

 

The Buyer understands that the Brokerage will inform the Buyer of the amount of commission to be paid to the Brokerage by the listing brokerage or the seller at the earliest practical opportunity.

 

Remember when we talked about the fiduciary duties? Accounting was one of them, and the duty of accounting requires this particular disclosure. The agent is not employed to make a secret profit. There is no such thing a s a secret profit. The obligation to account requires the agent to disclose and remit to the Principal the entire commission, then, the Principal will pay later. Well, that was the principle at common law, if nothing was said otherwise. Here, you will find a slight change later in this agreement.

 

Also, this information is to be provided at the earliest practical opportunity. That doesn’t mean as soon as possible, and it doesn’t mean “now”, nor does it mean “whenever”. At the very least, it means BEFORE an Offer is to be submitted. But, when does it really mean? It would be a reasonable time before the Offer is submitted.  The information is relevant at the time the numbers are being reviewed and under consideration.

 

The Buyer acknowledges that the payment of any commission by the listing brokerage or the seller will not make the Brokerage either the agent or sub-agent of the listing brokerage or the seller.

 

Don’t follow the money! Just because the money flowed directly to the agent, that doesn’t mean that the agent’s integrity is compromised in any way. So, your buyer’s agent is STILL your agent. It used to be commonplace in the 1990’s before Buyer Agency, for all the agents, no matter who they were to be working for the seller. And no one worked for the buyer.

 

This provision reinforces the change. It is the buyer’s agent, EVEN IF the seller pays. Now, you might also conclude quite quickly that the same thing would be true if all the commission money offered were simply paid directly to the buyer and the buyer could pay his own agent. That is quite true! But, that’s not going to happen.

 

 

Brian Madigan LL.B., Broker

www.iSoutceRealEstate.com


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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

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