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.
Mark Weisleder is a senior partner, author and speaker at the law firm RealEstateLawyers.ca LLP. Contact him at mark@realestatelawyers.ca or toll free at 1-888-876-5529.
