What you absolutely need to know about the new real estate brokerage rules!
06 Dec 2022
Are you thinking of buying real estate or do you want to sell your property? Read this article carefully to better understand how the introduction of new rules affecting real estate brokerage has changed the day-to-day reality of real estate brokers and their clients since they came into effect in the summer of 2022.
Before getting into the concepts behind these bills, it’s important to review the definition of an exclusive real estate brokerage contract.
What is an exclusive brokerage contract?
According to the OACIQ (Organisme d'autoréglementation du courtage immobilier du Québec), an exclusive brokerage contract is, “when selling, buying or leasing a residential immovable containing less than five dwellings or a co-ownership property… the means by which you agree to give a broker the right to act as an exclusive intermediary to assist you.”
This means that once the contract has been signed between the two parties, no other real estate broker has the right to solicit you directly.
To ensure that we provide you with impeccable service, our team only works with exclusive contracts!
What does a brokerage contract contain?
Again, according to the OACIQ, “each brokerage contract for the sale, purchase or lease of a residential property must, among other things, include the following”:
Source: https://www.oaciq.com/en/articles/whats-an-exclusive-brokerage-contract
The Real Estate Brokerage Act amended to further protect buyers
To adapt to the constantly changing real estate market in recent months, the Real Estate Brokerage Act administered by the OACIQ has been amended.
Adopted by the National Assembly on June 10, 2022, Bill 5 introduces two major amendments aimed at further protecting the interests of the public.
- The end of double representation, meaning that real estate brokers can no longer represent both a buyer and a seller in residential real estate transactions, as well as a landlord and a tenant in a rental transaction. Commercial brokerage (buildings with five or more units, commercial and industrial spaces) is excluded from the bill;
- Brokers must establish a written brokerage contract with their client, whether buyer, tenant, landlord or seller, in order to represent them. A verbal agreement is no longer possible. However, the listing broker may still accompany a direct buyer or tenant, if the latter so requests, for the drafting of their promise to purchase or lease, thus “providing fair treatment”, but does not defend their interests and cannot negotiate on their behalf.
These measures aim to avoid a potential conflict of interest and ensure the confidentiality of the information and data provided by the client to their broker.
The advantages of signing a brokerage buying contract (BBC)
- The broker-buyer represents you, defends and protects your interests;
- The broker's obligations are clearly specified in the contract;
- The buyer's criteria are defined in the contract;
- The broker can solicit properties that are not on the market;
- The broker can advise you on the fair price of the property because you will have access to comparable properties sold and an extensive market valuation;
- The broker can advise you and negotiate the purchase price and all other conditions on your behalf;
- The broker will offer you personalized service adapted to your needs.
In short, you will have better knowledge of the real estate market in order to deal with multiple situations, you will have access to exclusive information thanks to the research done by your broker, and you will benefit from advice and recommendations throughout the buying process. There are many advantages to using the services of a broker-buyer.
What is double representation?
This is when a broker has a brokerage contract to both buy and sell the same property. In fact, even before Bill 5, brokers could not place themselves in a conflict of interest situation. The real estate broker must be bound to the interests of only one party. Bill 5 simply served to clarify this principle.
In the case of a sale, the broker represents either the seller or the buyer; in the case of a rental, the broker represents either the landlord or the tenant.
Am I obligated to sign a brokerage contract with a broker?
Yes and no… it depends on the situation.
If you want to rent or sell, you can always represent yourself and do business through promotional websites or classified ads.
However, if you want to benefit from the services and expertise of a broker, or advertise your home on Centris and Realtor.ca, then YES, you will have to sign a brokerage contract – with one exception, for buyers, as explained below.
If you are a seller or landlord
The law has not changed, you must continue to sign a brokerage contract.
If you are a buyer or a tenant
The law has changed on this point: to be represented, the written contract is mandatory.
UNLESS…
You are a well-informed buyer, and you want to carry out all the stages of the buying process on your own (research, visits, market analysis). However, if you visit a property listed by a listing broker, you can benefit from their services for the drafting of your promise to purchase or lease, without signing a contract. The broker will then provide fair treatment.
The broker does NOT REPRESENT YOU.
They represent the interests of their seller or landlord client and must therefore ensure that they do not disclose strategic information.
This only gives you objective factual information as needed and guides you in drafting your promise to purchase. The broker cannot give you an opinion.
Their role is limited. Beyond that, they would be in a conflict of interest.
So to summarize, for buyers and tenants, although it remains a personal choice and is not an obligation to be represented by a broker, our team will always advise you to do business with a broker-buyer for your protection. It's up to you to see what suits you best!
Is the verbal agreement still accepted?
No. It is no longer possible to be represented and advised by a broker-buyer without an exclusive written contract.
If a broker accompanies you without a contract, they are considered to be providing you with fair treatment and to be working “de facto” for the seller. That’s right: it’s written clearly in the OACIQ regulations. Even if they have never met the seller before, the broker is considered to be collaborating with the broker-seller and therefore does not really represent YOUR interests. Strange but true.
But the law is the law!
What happens if I am represented by a broker-buyer and the house they are selling interests me?
In the event that your broker is bound by a brokerage sale contract and a brokerage buying contract with you, and you wish to submit an offer on the property for which they have the mandate to sell, the broker must then terminate their contract with you, offering to work with another broker or providing you fair treatment.
Bill 96 and the obligation to draft contracts in FrenchSince June 1, 2022, brokerage contracts and promises to purchase or lease residential buildings must be written in French. However, these contracts and other documents may still be drawn up in English, subject to the express will of the parties and explicit mention in the forms. As of June 1, 2023, writing contracts in French will become mandatory. With regard to deeds of sale and other documents published in the Land Registry, such as declarations of co-ownership and modifications made since September 1, 2022, these documents must be written in French. If the party or parties wish to obtain a version in a different language, the translation must be certified by a translator. |
If you are planning a purchase soon and believe you are affected by this law, we will be happy to discuss it with you or refer you to a lawyer who can advise you in greater detail.
By Celina Machado, Marketing Director and Residential Real Estate Broker, Martin Dumont Real Estate Team
