It is more important than ever to understand the rules regarding real estate commissions so that you and your clients are protected this year. Here are answers to some common questions I receive related to commissions.



Can I get paid commission without a signed BRA or Listing Agreement?

Without a signed agreement, it is very difficult to claim commission. This includes situations where you may have had a signed agreement but the buyer or seller did the deal after expiry of the holdover clause. In most cases, in order to collect commission, you will have to prove that you did more than just introduce the buyer to the seller.

You will have to demonstrate that you assisted in the preparation and delivery of the offers and that there was a verbal commitment to pay commission. Make sure you keep a copy of any email or text message that may have been sent relating to commission. At the very least, have the parties sign the confirmation of co-operation and representation at the time you present the first offer, which also confirms that you are acting for them. This has been held to be enough to later support a claim for commission. Better still, don’t work with anyone until you have something signed in writing.

Can a buyer avoid paying commission even with a signed BRA?

There have been cases where buyers have tried to avoid paying commission by saying that the BRA was not properly explained, and that they thought commission would only be paid on the one property where an offer was submitted, but later rejected. The buyers claim that they had no idea that the agreement lasted for 6 months and they were not given a copy for their records.

To succeed, develop good habits right now. Always get the buyers to initial the term, even if it is 6 months or less and then give them a copy. If you do it the same way every time, it becomes easier to defend against this later. Some buyers also try to sign the BRA in a corporate name and then buy under a different corporation. Make sure you get the President or other authorized signing officer for the corporation to personally sign your BRA as well, to avoid this from happening. Similarly, get both spouses to sign your BRA, to avoid a situation where the spouse who does not sign with you ends up buying the home later and refuses to pay commission.

Can I collect commission if I am a listing agent, the seller accepts the offer but buyer cannot close?

The answer is no. The seller will not have to pay commission. Even if the seller ends up keeping part of the deposit as compensation from the buyer, they do not have to pay commission. It is important to make sure that all buyers are properly qualified. Do not be afraid to ask the buyer salesperson if that is the case, or whether these buyers are just paying 5% down. If you have serious buyers, your deals will close. If you were representing the buyer and the buyer could not close, you could sue the buyer for commission. However, if the buyer can’t close, it is also likely they do not have the money to pay you either.

Can I collect commission if the buyer wants to close but the seller refuses to close?

In this case the listing brokerage can collect commission from the seller, as it is provided for in the listing agreement.

Do I have to sign the mutual release?

A brokerage does not have to agree to sign a mutual release, but must follow any direction to pay over a deposit to either a seller or buyer, if it is signed by both the seller and the buyer. By signing a mutual release, you will forfeit any right you may have to claim commission later.

Can a seller change their mind about paying the balance of commission just before final closing?

The answer is no. The seller has irrevocably directed their lawyer in the agreement of purchase and sale to pay any balance of commission before any money is paid to the seller. If the lawyer pays the money to the seller, then the lawyer can be sued personally for the money. If you have any questions about commissions, please do not hesitate to call or email me for advice.

10 COMMENTS

  1. Great informative video for our realtor friends to protect their commission. as we all know in alberta sales are down compare to last year and this video will provide lot of value to agents on securing their commission.

  2. This video is fantastic, and it has helped me in protecting my commission. I know some friends that will be pleased to learn about the commission, so I will share this incredible video with them as soon as I can.

  3. Dilemma: just one of several with the new disqus REM system … Since articles are closed to comments… I don’t know where is relevant to post this current comment, so this is the closest perhaps related subject:

    I would have meant for this link in today’s news to have been posted here:

    See below: link for today’s news.
    But not being able, here it is, worth noting for some readers, perhaps …

    http://www.remonline.com/protect-yourself-from-insurance-claims/

    http://www.remonline.com/black-olive-bread-sprouts-and-tapas/

    In today’s news:
    http://toronto.ctvnews.ca/mobile/homeowners-should-consult-with-insurance-provider-before-traveling-1.2817295

    This is an interesting news note trigger for REALTORS(r), also.

    What is often the first thing you do when you return home from a holiday? Head for the fridge? And a fresh cool drink from the magic water filter line? Or did your existing seller ask you to babysit their house/your listing while they are on holidays?

    Should it be, or is it, an insurance company requirement, that policy holders be required to inform their insurance company when the homeowner lists their house for sale (all those strangers in and around the house?)?

    And another thing to note about going on holidays: it’s no different than what is required of agents representing relocation corporate transfers, listing vacant houses.

    And yet another note: does your insurance company know you have tenants in the basement? Or that you rented out the whole house, the one you lived in when you took out the policy? Or that your holiday is arranged as a house-swapping event? Yours for theirs, maybe even in another country?

    And last but not least: are there squatters in your community? And what’s the rest of that (insurance) story?

    Carolyne L ?

  4. The “Commission Holdover Clause” was an included clause designed to protect the consumer from inadequate and incompetent representation. Of the dozens of issues holdover clauses remedy, it must be remembered it is the obligation of the listing brokerage to ensure the Seller is fully aware and informed of the Seller’s own obligations that begin the moment a listing agreement is signed. I think Mark has simply exposed how few Sellers are adequately informed and then thus legally entitled to an out.
    cseepe is describing a case where clearly the Seller, the Listing Brokerage, the Listing Sales Rep, The Co-operating brokerage and rep, the buyer and who ever supplied the opinions that resulted in the cseepe scenario example lacked any knowledge of the MLS rules and regs, legal precedent, forms and clauses, and even the simplest HST rules on when and how HST is to be remitted. cseepe has cleverly illustrated the inadequacy and incompetence he thinks this clause is being used under today.
    Alan M. suggests “unscrupulous” sellers instead of “unscrupulous” brokerages were the cause of the holdover clauses birth. It was in fact the “unscrupulous” and “incompetent” brokerages that OREA lawyers were addressing when this clause was created.

    Consumers view the “holdover clause” as a clause used by greedy realtors to grab commissions they don’t deserve when in fact the “holdover clause” is a form of consumer protection inserted in all listing agreements to ensure a Seller does not become an UNKNOWING party to an illegal act.

    • Not sure who TWH is but hopefully it isn’t the video author. He clearly didn’t understand what I wrote. I didn’t even mention HST. TWH’s response is nothing more than a tirade and insulting response without any constructive input or feedback. He/she cites rules and regs, etc. without stating what they are–typical bureaucratic fluff without substance. People who are familiar with my many articles will know that I undertake substantial research in such topics as these. From my investigations with four legal advisors so far, there is no established legal precedence that anyone is aware for the scenario I described. There is some potential applicability of the legal precedence of ‘unjust enrichment’, most commonly found in construction-related cases. A 2015 court decision also expanded on the theme of ‘acting in good faith’ even when it isn’t in the listing agent’s best interest to do so. It’s possible that the LA has a higher contractual obligation to ensure that the cooperating brokerage is paid, as per the OREA standard listing agreement. The situation is far more complex than the simplistic rant TWH provided here.
      TWH’s response about the holdover clause bears validity though. I’d agree that most consumers likely wouldn’t know enough to realize that they could torpedo the holdover clause. Such consumers would invariably receive such advice from the next brokerage that wanted the listing.

      • CSEEPE, I did not intend my reponse to be combative. So I will try to clarify…

        “What happens when the seller knowingly breaches a signed APS” – There are numerous court decisions on this already and the case law is now fully entrenched. I thought everyone knew this. The Seller either closes or pays massive damages including all commission payable. ( I would add here that the Co-operating broker has a legal obligation to inform their buyer client to seek Legal advice on this matter to ensure the APS is enforced)

        “the seller refuses to close, the seller keeps the listing with the current listing agent (LA)” – A Listing Brokerage would violate your MLS rules and regs to relist this property because Clear Title could no longer be established unless “Release” documents that were issued under the review of legal council were signed by all parties or by court order. Those documents would not be signed unless the Co-Operating Brokerage agreed to sign them ( ie forego commission payable)

        (The reason why Assignments are possible today and are being done right now is because properly executed Agreements of Purchase and Sale are fully enforceable through the courts. Imagine in the situation CSEEPE describes where the property was subsequently Assigned one or more times?? Damages and more Damages keep adding up )

        ” the listing agent doesn’t want to sue the seller because (a) the listing agent knows they’ll get their commission from the next buyer”- I am assuming when you use the word agent you are referring to the Salesperson and not the Brokerage ( although in Ontario the only Agents are the Brokerage itself). Most Sales Reps operate under an independent contractor agreement which now for over 30 years has included a legal and financial obligation for the contractor to collect commissions due and payable or in any event remunerate the Brokerage for their share if not collected. Now I know this is seldom or ever enforced but a contingency on ICs RevCan certification was this specific clause because it established a non-employee relationship on the collection of earnings (of course this is applicable to REVCAN only, as you are still employees under the act).
        ALSO, Brokerages are businesses and although the practice over the last 50 years has been to ignore common law, a simple Small Claims court decision for the Co-Operating Brokerage against the Listing Brokerage for failure to collect monies owed as a result of MLS rules and regs and forms, would be a cheap alternative to recover at least $10,000.

        “they don’t want to hurt their long-standing client relationship”- If a Registrant wants to continue to deal with clients who are breaking the law “knowingly” then they better hope RECO does not receive a complaint from the Original Co-Operating Brokerage that the listing brokerage has knowingly re-listed a property on the MLS system and is promoting it as being available to the public to purchase. Misrepresentation is something RECO takes seriously when someone takes a few minutes to issue a complaint.

        “they don’t want to incur the time and expense of a legal proceeding”- assuming again we are talking about the listing sales rep his IC commits them to the time and expense already. In fact should the Agent (Brokerage) seek compensation from the seller, the sales rep is responsible for those costs as noted in the IC agreeement.

        Co-Operating Brokerage- before comment on this the answer to the question “Was there a Buyer Brokerage Agreement in place that facilitated the transaction in question?” must be provided. I say this because you can have a Buyer Client without a Buyer Brokerage Agreement in place, as has been repeatedly communicated by legislators for more than 2 decades now.

        In the five instances I experienced this specific situation ( on one side or another) in all 5 instances a letter sent to the Seller’s lawyers cleared these misunderstandings up within 48 hours ( of course the letter included a 48 hr response window). There was never a need to go to court. In all cases the Sellers ended up Closing. In all cases both Brokerages were remunerated as per the contracts they operated under.

        Why HST matters is because it easily explains what obligations a Listing Brokerage has to collect commissions. RevCan wants their money and they want the paperwork to support it. HST is payable to RevCan on the closing date irregardless of whether the deal closes or not. Every accountant in Canada knows this ( so ask them to verify). Now Receivables that remain unpaid can be accounted for in your HST reporting but you need the backup paperwork to support it. In this case the only backup paperwork would be a Court Order or Signed Release that states no commission will ever be payable.
        Now I don’t know if RevCan has ever been asked to rule on a Brokerage willingly agreeing to forego earned incomes and how that impacts HST payable. I would leave that answer to someone who has experience or expertise in that area.

        The entire Co-Operative Listing Service was built on a trust between brokerages. A trust to treat one another with respect, equality and fairness. All MLS systems rules and regs ( which are brokerage specific not sales rep) were developed and revised to reflect this co-operative nature. While I understand post 2010, these underlying principles have been increasingly ignored, the fact remains rules are rules.

        The Listing Brokerage you used in this example was clearly and with indignation willing to ignore 50 years of Co-Operation between fellow Brokerage members of MLS systems. The Listing Brokerage you referenced should have faced complaints through their MLS system, Provincial Regulator and the Provincial Courts.

        That said if your example had the Co-Operating Brokerage functioning under a duly executed and enforceable Buyer Brokerage Agreement the problem for the Listing Brokerage and the Seller only grows.

        • That was an excellent response TWH and I sincerely appreciate the detailed reply and the time it took for you to write it. I apologize for misconstruing your original reply.
          To clarify, yes, the cooperating brokerage has an OREA-standard Buyer Rep Agreement and that buyer-client chose to remain with the cooperating brokerage after the deal collapsed. Since the buyer wouldn’t materially benefit from (and would in fact create more problems in a subsequent lease-back arrangement) forcing the seller to close, the buyer signed the mutual release with the seller so they could get their deposit back. The cooperating brokerage didn’t sign the mutual release, which signature isn’t required by RECO in order to release the deposit.
          I refer to the ‘agent’ as the brokerage, not the sales rep, for the reason you specified. I expect it will be the listing brokerage who has to decide how (or if) to collect the co-op commission from either the sales rep or the seller-client if they were forced to pay the cooperating brokerage commission.
          The seller’s lawyer in this situation already made a declaration that they deemed the APS terminated (not null and void) because certain conditions weren’t waived. The co-op brokerage’s counterpoint was that there was no point in waiving conditions on an APS that was already breached.
          Your point about a listing agent’s obligation of trust and to act in good faith to the cooperating brokerage is exactly the prevailing issue at law. I believe this matter will be going before the SCC and it will likely be the Listing Agent that is sued since there is no contractual connection between the Seller and the cooperating brokerage. Still, it ultimately rests with the court to decide if an obligation exists as described above and whether it has to be proved via the list agent’s trial that the Seller breached the APS. That would mean calling the Seller as a witness and possibly effectively putting them on trial when they’re not the defendant … an interesting matter of legal process.

          • cseepe,

            The Buyer owes the Buyer Brokerage any fees payable under a properly executed and legally enforceable Buyer Representation Agreement. While the Buyer can seek compensation or contract fulfillment from the Seller, the Buyer in the end still owes, must pay and can make their own choices.
            Whether the Seller committed fraud by signing a properly executed and legally enforceable Agreement of Purchase and Sale that sets out where Purchase Price paid is to be directed (ie the Buyer Brokerage fees payable being included in the Purchase Price), is something that the Buyer in your case may have provided an out to the Seller through the Mutual Release Form that was used. Certainly if an OREA copyrighted Mutual Release was executed the Buyer is now the one fully responsible for any Buyer Brokerage fees outstanding, irregardless.

            A little known fact:
            The reason why co-operating listing service rules and regs grants the Buyer side of the transaction the right to its own advocacy at the Offer Table is to ensure the terms of the Offer are accurately communicated to the Seller without erroneous interpretation happening. Asking a Listing Agent to interpret the underlying conditions that an APS was contingent upon being signed under, is impossible and only renders the presentation format as a high risk to all involved. Certainly when $10,000 or more of Buyer Brokerage Commissions payable are a contingency in an APS, the Seller has every right to be fully aware of what the Buyer’s INTENT was at the time of signing.

            In the end cseepe what I think this all boils down to is a Listing Brokerage who has failed to meet their requirements under the act in Ontario. In that case I believe you have two choices.

            1) Sign a mutual release with your Buyer that releases them of any obligations on that failed transaction to the Buyer Brokerage while keeping the Buyer Representation in place and enforceable on other properties.
            or
            2) Issue a complaint to RECO in order to allow the discovery of who is responsible for the fraud committed. I do not use that word lightly but if through the carelessness of the Listing brokerage the seller was never informed of the Buyer’s INTENT in the APS, the Seller was presented with fraudulent information. If the Listing Brokerage ensured the Buyer’s INTENT included in the APS was relayed then it was the Seller who committed the Fraud.

  5. What happens when the seller knowingly breaches a signed APS, the seller refuses to close, the seller keeps the listing with the current listing agent (LA), and the listing agent doesn’t want to sue the seller because (a) the listing agent knows they’ll get their commission from the next buyer, (b) they don’t want to hurt their long-standing client relationship, and (c) they don’t want to incur the time and expense of a legal proceeding?

    The cooperating brokerage (CB) appears to have no recourse for getting paid their commission after bringing a valid offer, which didn’t close through no fault of them or their buyer client. The CB can’t sue the seller since there’s no contractual relationship between the seller. If the CB tries to sue the LA, the LA will respond that they never received a commission payment so there’s nothing to collect on.

    The LA has no practical reason (except perhaps an ethical one but how many brokerages will wreck a client relationship just to collect a CB’s commission) to try to collect.

    So, what’s the CB’s option(s) for getting paid?

  6. Mark,

    The “holdover clause” is a well established clause that was designed to protect an agents commission against unscrupulous seller’s. However, I suspect that most Registrant’s haven’t stopped to realize that the “holdover clause” has essentially been made redundant by “mere postings”.

    When a seller who has had the benefit of a Full Agency Relationship is excused from their Listing Agreement or it expires, and they decide to sell privately but sign a “Mere Posting Agreement” they can basically nullify the “holdover clause” for just a token sum of money!

    Mark, is their some way that you would recommend to reinforce or rebuild the “holdover clause” so that it can’t be easily contravened or circumvented, for a token sum of money — without the initiative potentially being seen as anti-competitive, due to the Competition Bureau’s status as the guardian for “mere postings”?

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