Signing the Buyer Representation Agreement (A Judge’s Advice)
We have examined this document many times and INFORMED CONSENT is a necessary requirement.
The Buyer Representation Agreement is the contract through which a prospective Buyer retains a real estate professional to act as his agent in the acquisition of a property. It is like a “listing agreement”, but for buyers rather than sellers.
Oftentimes, there are problems. The prospective buyer didn’t fully understand and appreciate the commitment which was being undertaken. The real estate professional may not have explained the document and its implications.
Judge J.B. McNulty delivered a Judgment in the case of Century 21 People’s Choice Realty Inc. v. Saleem on 29 March, 2016. In this case a “non est factum” defence was used and was effective. This essentially means that the Buyer did not understand what he was signing.
On occasion, where a Judge reasonably believes that the case at hand is not a “one off”, but simply an example of a continuing problem which is likely to reach the Courts again and again, the Judge might offer some general advice. It’s not actually part of the decision, which is called the “ratio decidendi”, but is referred to as “obiter dictum”, or “obiter”, for short, meaning that it is offered by way of a side comment.
Proper Execution of the Buyer’s Representation Agreement – Advice
This is what Judge McNulty said:
“ I will now comment by way of obiter dictum, what agents and their brokerages should do if they are to avoid the defence of Non Est Factum when it comes to execution and delivery of buyer representation agreements. They must, at a minimum, ensure they do the following:
a) Explain in very clear terms that the representation agreement is different in form and purpose from any offer to purchase that might be discussed when the representation agreement is tabled;
b) Sign the representation agreement in an office environment, not in, or on a car;
c) Explain to the buyer that the representation agreement is how the agent gets paid for their services;
d) Explain in the buyer’s native tongue, (where necessary), the main terms of the agreement, namely the term, commission rate, exclusive nature of their representation, and draw the buyer’s attention to the nature and purpose of the holdover provision;
e) Make it absolutely clear to the buyer that under the holdover provision their obligations under the representation agreement will continue even if the relationship between agent and buyer breaks down, and
f) Physically separate, and distinguish the representation agreement from any offer to purchase if successive signature of both cannot be avoided.
 To my mind, if these simple steps are taken it would make enforcement of buyer representation agreements much easier. It is not enough to rely upon the “acknowledgment” provision toward the end of these agreements as evidence of the buyer’s understanding and acceptance thereof. This provision itself has to be explained if reliance thereon is sought.”
That advice is excellent. It drives home the issue of “informed consent”. Unless the Buyer understands the document that he signs, it’s not binding on him.
Far too many concentrate on the “paperwork”, and getting the document signed. It’s not the paperwork, it’s the PROCESS. And, the most important part of that process is the explanation. Can the agent prove that? Did the buyer understand? If so, then we have “informed consent”, and of course, a binding contract.
Brian Madigan LL.B., Broker