Just Who is the Buyer: A Consortium?
Figuring out who your client may happen to be seems straightforward, but in some cases, it can be complicated.
A real estate agent will make arrangements to have a Buyer sign a Buyer Representation Agreement or BRA. This appoints the Brokerage as the “agent” for the Buyer in the transaction.
So far, so good. But, what if there are two Buyers at the same time?
In this case, the situation becomes more complex. Typically, a husband and wife will sign the same BRA and will agree upon the purchase of a house, and everything will go through uneventfully.
However, consider the following situations:
- Residential. Jim and Martha have been going out for over a year and have just decided to live together. They think that things will work out well, and with today’s interest rates it’s just about as cheap to buy as to rent. Martha’s mother is a real estate agent, but because you have two listings in the condo building, Jim called you. You got both Jim and Martha to sign a BRA.
- Commercial. Ozzy and Ed are both builders. Sometimes they work alone on their own projects and sometimes they work together as “ABC Homes”. It all depends what’s out there. They each deal with about 10 agents who bring them opportunities. You get ABC Homes to sign a BRA.
So, the question going forward is to determine whether the BRA still applies if Jim and Martha aren’t together, or Ozzy and Ed decide to deal independently.
First issue, is that the BRA will be construed against the interests of the person who drafted it, explained it and presented it, in any case of uncertainty.
In our first scenario, Jim and Martha have decided not to live together. Martha decides that she will go it alone and try to purchase one of the apartments in the condo or one across the street. Naturally, she wants to use her mother.
One of Ozzy’s other real estate agents brings him a deal. He buys the property as OZZ Homes. Ed is not part of the deal. Are you entitled to a commission on your BRA? Ozzy and the other agent say “no”. You were only covered in a deal with “ABC Homes”, that meant Ozzy and Ed together.
There are two choices here:
- A + B, and
That’s from algebra, and the important question is whether you are inside or outside the brackets. In legal terms, this is often expressed as “jointly, severally and both jointly and severally”. So, the deal is up to you! What do you want it to be?
Martha says she was only dealing with you in the BRA, “IF” she was with Jim. No Jim, then you fall under #2.
Ozzy says the same thing. If he is doing business with Ed as “ABC Homes” then he has a BRA with you, otherwise he is free to be on his own. Again, that would fall under #2.
Let’s look at the standard Form BRA (OREA) and see if we can pull this out of the fire for you. Here are some of the relevant provisions. My comments appear in italics:
Buyer Representation Agreement: that was singular.
This is an Exclusive Buyer Representation Agreement: again still singular.
Description of Parties
BUYER(S):..........................................................................................................., hereinafter referred to as the Buyer,
So here, BOTH buyers will be called “Buyer” singular.
The Buyer hereby gives the Brokerage the exclusive and irrevocable authority to act as the Buyer’s agent.
Nothing helpful here, still singular.
The Buyer hereby warrants that the Buyer is not a party to a buyer representation agreement with any other registered real estate brokerage…..
DEFINITIONS AND INTERPRETATIONS:
For the purposes this Buyer Representation Agreement (“Authority” or “Agreement”), “Buyer” includes purchaser and tenant, ….
Not the issue.
This Agreement shall be read with all changes of gender or number required by the context.
This is the right spot to define “jointly and severally” BUT, there is no such reference.
For purposes of this Agreement, Buyer shall be deemed to include any spouse, heirs, executors, administrators, successors, assigns, related corporations and affiliated corporations.
Not really applicable. If Jim and Martha are going ahead, they agree to use you.
Related corporations or affiliated corporations shall include any corporation where one half or a majority of the shareholders, directors or officers of the related or affiliated corporation are the same person(s) as the shareholders, directors, or officers of the corporation introduced to or shown the property.
This doesn’t help our Ozzy and Ed situation. If the buyer is ABC Homes, they will be bound by the BRA.
The Buyer acknowledges that the Brokerage has provided the Buyer with written information explaining agency relationships, including information on Seller Representation, Sub-Agency, Buyer Representation, Multiple Representation and Customer Service.
But the very interesting thing is that the entire issue of whether it is A+B inside or outside the brackets is never discussed.
REFERRAL OF PROPERTIES:
The Buyer agrees that during the currency of this Buyer Representation Agreement the Buyer will act in good faith and work exclusively with the Brokerage for the purchase or lease of a real property of the general description indicated above.
The Buyer agrees that, during the currency of this Agreement, the Buyer shall advise the Brokerage immediately of any property of interest to the Buyer that came to the Buyer’s attention from any source whatsoever, and all offers to purchase or lease submitted by the Buyer shall be submitted through the Brokerage to the seller.
While this may be true, what is the right type of property for the pair? Any property chosen by Jim and Martha as a pair or ABC Homes, may not be suitable for one of those parties alone.
The Buyer is hereby notified that a Consumer Report containing credit and/or personal information may be referred to in connection with this Agreement and any subsequent transaction.
The two parties together are different from each of the two. Jim might have a very good job while Martha has a substantial inheritance.
Ed may prefer very large custom builds while Ozzy may prefer Townhouses, but together as ABC Homes they would be looking for 4 or 5 side by side lots to build 3,000 to 4,000 sf homes. Individually their requirements and interests are much different.
USE AND DISTRIBUTION OF INFORMATION:
The Buyer consents to the collection, use and disclosure of personal information by the Brokerage for such purposes that relate to the real estate services provided by the Brokerage to the Buyer including, but not limited to: locating, assessing and qualifying properties for the Buyer; advertising on behalf of the Buyer; providing information as needed to third parties retained by the Buyer to assist in a transaction (e.g. financial institutions, building inspectors, etc...); and such other use of the Buyer’s information as is consistent with the services provided by the Brokerage in connection with the purchase or prospective purchase of the property.
This paragraph is similar to the above. Inside or outside the brackets? It matters!
CONFLICT OR DISCREPANCY:
If there is any conflict or discrepancy between any provision added to this Agreement and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement, including any provisions added to this Agreement, shall constitute the entire Agreement between the Buyer and the Brokerage. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein.
This provision begs for the issue to be addressed somewhere. So far, we haven’t found it in the “fine print’.
.......................................................................................................................... attached hereto form(s) part of this Agreement.
Ideally, we should deal with this issue in a Schedule. That would be clear and would add certainty.
THE BROKERAGE AGREES TO REPRESENT THE BUYER IN LOCATING A REAL PROPERTY OF THE GENERAL DESCRIPTION INDICATED ABOVE IN AN ENDEAVOUR TO OBTAIN THE ACCEPTANCE OF AN AGREEMENT TO PURCHASE OR LEASE A PROPERTY ON TERMS SATISFACTORY TO THE BUYER.
The reference to Buyer is still singular and the inside or outside the brackets issue is not addressed.
The Buyer(s) hereby acknowledge that the Buyer(s) fully understand the terms of this Agreement and have received a true copy of this Agreement on the ……............................... day......….…………...................…………, 20 …...........................………...
This particular method of execution of the document says Jim understands it and Jim also says that Martha understands it as well.
Martha says the same thing about Jim. This is also true of Ozzy and Ed.
Given that situation, one would think that it would be more likely that both Jim and Martha and Ozzy and Ed are within the brackets, meaning that if they are not together on a deal, they are each free to go their separate ways.
The issue was never actually addressed in the BRA. If you were the Judge would you let Martha and Ozzy go?
That seems easy enough, because it would have be simple to address the issue and keep them in the Agreement.
Simply put “joint and severally” under their names on the first page, and/or the signing page. Add a schedule and say “jointly and severally”.
It’s the “severally” part that we need. They are both bound together. We need to confirm that if they are not together that they are still bound to the BRA as individuals.
Also, we could sign two separate BRA’s. That would work! One name on one, and the other person on the second similar BRA.
Given the fact that it would be so easy to make sure that the issue is covered, when an agent fails to do so, do you have any sympathy?
Brian Madigan LL.B., Broker