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

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

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300

Cell: 647-404-8150 
Toll Free: 1-888-507-0817

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RECO Toolkit #2

December 29, 2018 - Updated: December 29, 2018

RECO’s Toolkit #2
 

What follows is a series dealing with some publications by RECO to help the Consumer:
 

What You need to know about representation agreements
 

When you are looking to buy or sell a home with a registered real estate representative, your broker or salesperson will ask you to sign a buyer or listing representation agreement.
 

A representation agreement is the contract between you and the brokerage that permits them to market your current home or help you buy a new one. These agreements should be in writing to protect the interest of all parties.
 

Signing a representation agreement confirms in writing that you are a client of the brokerage and documents the terms, rights and obligations of the brokerage-client relationship. As a client, the brokerage has a special responsibility to follow your instructions, protect your confidential information and promote and protect your best interests.
 

So what’s in the agreement?
 

There are three pieces of information that all representation agreements must include:

  1. The date the agreement will take effect and expire.
  2. The commission or fees that will be payable to the brokerage and how they will be paid (for buyers, the commission is typically paid by the seller, but that is not always the case, so be sure you understand your obligations),
  3. The services that will be provided by the brokerage.
     

Before you sign
 

Your broker or salesperson wants to provide you with the best service he or she can. To make the most of this relationship, it’s important to be clear about your needs and expectations.

Discuss all of the services that will be provided and understand what won’t be. This is the time to clarify fees and costs related to these services and make sure the written agreement is clear. You should also take time to ask what the broker or salesperson expects from you as part of the agreement.
 

Representation agreements are legally binding
 

Remember that you are entering into a legally binding agreement with the brokerage, authorizing them to represent your interests in the purchase or sale of a home. You can expect to receive a copy of the signed agreement at the time of signing.
 

Don’t sign if you don’t understand it
 

Take the time to read the agreement thoroughly. Ask questions. Your broker or salesperson can’t provide legal advice, but they are familiar with these agreements and should be able to answer your questions and explain what the clauses mean and what effect they will have. If there is something they can’t address, they can refer you to someone who can. Feel free to seek legal advice at any time.
 

A Customer Service Agreement
 

If you’re not comfortable with the terms of the representation agreement, you can enter into a Customer Service Agreement (CSA) with the brokerage instead. In this scenario, the obligations of the brokerage will be different. While they will still help you buy or sell a home, they won’t have the same level of responsibility to you as they would if you were a client. For example, the salesperson or broker would still show you properties and help you fill out paperwork, but they wouldn’t necessarily provide advice. While the brokerage will have less of a commitment to you, so will you to the brokerage.
 

Keep in mind, you and the brokerage have to agree on the type of agreement you choose to enter into. Neither of you are required to enter a specific type of contract, but you will have to agree on the approach if you want to work together. As with any contract, take the time to read and understand each clause of the agreement. If you’re unsure about something, ask questions or consider seeking legal advice before signing.
 

Holdover clause
 

Listing representation agreements typically include a “holdover clause.” Generally, it means that within a specified number of days after the agreement expires (the “holdover period”) if you sell to a buyer that was introduced to you during the term of the agreement, you would be responsible for paying commission to the brokerage. The length of the holdover period may vary and will form part of the agreement you enter into. As with other terms, it must be agreed to by both you and the brokerage. If you have questions or concerns about how a holdover clause works, consider seeking legal advice.
 

looking for more information?
 

For more information on how RECO protects the public’s interest, please visit www.reco.on.ca or call 1-800-245-6910.

 

Brian Madigan’s Annotated RECO Publication Toolkit #2
 

I have altered the presentation, but not changed any words, added italics and highlighting, as well as some “notes”.
 

Real Estate Council of Ontario
 

What You need to know about representation agreements
 

When you are looking to buy or sell a home with a registered real estate representative, your broker or salesperson will ask you to sign a buyer or listing representation agreement.
 

Note: there is a system of “registration”, so, sales representatives, brokers and Brokerages are all registrants. The contract here is between yourself and the Brokerage. The sales representative or broker (the person you know) is not a party to the agreement.
 

A representation agreement is the contract
 

  • between you and the brokerage
  • that permits them to market your current home or
  • help you buy a new one.
     

These agreements should be in writing to protect the interest of all parties.
 

Signing a representation agreement confirms in writing that
 

  • you are a client of the brokerage and
  • documents the terms, rights and obligations of the brokerage-client relationship.
     

As a client, the brokerage has a special responsibility to follow your instructions, protect your confidential information and promote and protect your best interests.
 

Note: “representation” is a defined term under the Real Estate and Business Brokers Act, 2002; it means “agency”, and if there is agency, then the agent owes the following fiduciary duties to the Principal (that’s you):
 

  • Disclosure
  • Obedience
  • Competence
  • Confidentiality
  • Accounting
  • Loyalty

 

So what’s in the agreement?
 

There are three pieces of information that all representation agreements must include:
 

  1. The date the agreement will take effect and expire.

 

Note: typically this is less than 6 months.

 

  1. The commission or fees that will be payable to the brokerage and how they will be paid (for buyers, the commission is typically paid by the seller, but that is not always the case, so be sure you understand your obligations).

 

Note: you will need to know this specifically. Sometimes Buyers are obligated to pay. In fact, that is the default position if there is no commission offered by the Seller.

 

  1. The services that will be provided by the brokerage.

 

Note: Frequently, this is not very specific.

 

Before you sign

 

Your broker or salesperson wants to provide you with the best service he or she can.

 

Note: well you can only hope, at least whatever level of service they do offer, they will likely claim it to be the best.

 

To make the most of this relationship, it’s important to be clear about your needs and expectations.

 

Note: you have a very important role here. You are the client. You are the one paying the money, so be sure to become an active participant.

 

Discuss all of the services that will be provided and understand what won’t be.

 

Note: yes, I do appreciate that it will be included in the price, that is, there will be no extra charge, but will it actually be done. You might want to measurable parameters here.

 

This is the time to clarify fees and costs related to these services and make sure the written agreement is clear.
 

Note: If you have never, ever seen such a document, then, perhaps, this is the time to seek legal advice.
 

You should also take time to ask what the broker or salesperson expects from you as part of the agreement.
 

Note: again, it’s important to be aware of the fact that you are entering an agreement with the Brokerage, not the person sitting across from you. What if the sales representative leaves the Brokerage, do you go with them to the new Brokerage? Is that their decision, the Brokerage’s decision or yours?

 

Representation agreements are legally binding

 

Remember that you are entering into a legally binding agreement with the brokerage, authorizing them to represent your interests in the purchase or sale of a home.

 

You can expect to receive a copy of the signed agreement at the time of signing.

 

Note: there are many different types of copies that you could obtain. At the very least, you should have a picture taken with your own camera.

 

Don’t sign if you don’t understand it

 

Take the time to read the agreement thoroughly. Ask questions.

 

Your broker or salesperson can’t provide legal advice, but they

 

  1. are familiar with these agreements and
  2. should be able to answer your questions and
  3. explain what the clauses mean and
  4. what effect they will have.

 

If there is something they can’t address, they can refer you to someone who can.

 

Feel free to seek legal advice at any time.
 

A Customer Service Agreement
 

If you’re not comfortable with the terms of the representation agreement, you can enter into a Customer Service Agreement (CSA) with the brokerage instead.
 

Note: this option is not always available.

 

In this scenario, the obligations of the brokerage will be different.

 

While they will still help you buy or sell a home, they won’t have the same level of responsibility to you as they would if you were a client.

 

For example, the salesperson or broker would still show you properties and help you fill out paperwork,

 

but they wouldn’t necessarily provide advice.

 

Note: the key word here is “advice”. No ADVICE whatsoever. They will simply provide you with information and then you are on your own.
 

While the brokerage will have less of a commitment to you, so will you to the brokerage.
 

        Note: the relationship is quite different. There is no agency agreement and all the fiduciary duties are gone. They do still owe you honesty, fairness and integrity.
 

Keep in mind, you and the brokerage have to agree on the type of agreement you choose to enter into.
 

Neither of you are required to enter a specific type of contract, but you will have to agree on the approach if you want to work together.
 

As with any contract, take the time to read and understand each clause of the agreement.
 

If you’re unsure about something, ask questions or consider seeking legal advice before signing.
 

Holdover clause

 

Listing representation agreements typically include a “holdover clause.”
 

Generally, it means that within a specified number of days after the agreement expires (the “holdover period”) if you sell to a buyer that was introduced to you during the term of the agreement, you would be responsible for paying commission to the brokerage.
 

Note: this is reduced by the amount of a commission that you pay as a Seller to your next Listing Brokerage. If you breach this as a Buyer, then you may have to pay the commission twice.

 

The length of the holdover period may vary and will form part of the agreement you enter into.
 

As with other terms, it must be agreed to by both you and the brokerage. If you have questions or concerns about how a holdover clause works, consider seeking legal advice.

 

looking for more information?

 

For more information on how RECO protects the public’s interest, please visit www.reco.on.ca or call 1-800-245-6910.

 

 

COMMENT
 

Here’s the link to the RECO website for a “PDF”:
 

http://www.reco.on.ca/wp-content/uploads/RECO-Buying-and-selling-representation-agreements.pdf

 

If you would like some additional information about any of the issues raised here, then please give me a call.

 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: reco toolkit representation agreements buying selling client customer agency ontario law
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

Phone: 416-745-2300

BRMadigan@Rogers.com

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