Assignment of debt from an agency to its broker
(Update of the article published on September 2008)
The only persons who can receive remuneration from the client under a brokerage contract to sell or buy are the real estate agency or the real estate broker acting on his own account. When a client refuses to pay the remuneration agreed to in the brokerage contract, only these persons are authorized to initiate contractual civil proceedings against this client.
As for the broker acting on behalf of an agency, he may only claim his remuneration from the agency for which he is working on the basis of the agreement agreed upon to this effect. If a broker attempts to collect remuneration directly from a client, he is substituting himself for his agency. Courts have rejected such claims in the past, citing the principle by which the broker acting for an agency can never act on his own behalf, but only on behalf of the agency.
It may happen that a broker, in order to settle an impasse regarding non-payment of remuneration, gets from his agency a document by which it assigns the debt to him, allowing him, among other things, to sue the client himself. It is important to remember that, for the assignment of debt to be enforceable against the client and allow the broker to claim the payment of remuneration, the conditions and formalities required for this purpose under the Civil Code of Québec must have been observed, namely the client’s knowledge or acquiescence to the assignment of debt. To do this, the broker shall, among other things, notify the client by giving him a copy of the deed of assignment. The preparation of this document may be entrusted to a legal expert, if necessary.
However, this solution is to be avoided although the jurisprudence is mainly to the effect that the assignment of debt between the agency and the broker is valid and does not violate the Act.1
In addition, the agency that assigns its debt to its broker remains responsible for its contractual obligations towards its client despite the assignment of debt. In this context, its own civil and professional liability may still be incurred since it is not excluded that the client could turn against the agency, especially if the broker were to commit abuses in exercising his remedies and, by so doing, caused harm to the client.
Moreover, the broker who is not benefiting from an assignment of debt and suing a client in this manner would be violating section 35 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising of the OACIQ and thus committing an ethical offence.
For any questions, don’t hesitate to contact the OACIQ Info Center by email at [email protected] or by telephone at 450-462-9800 or 1-800-440-7170.
--------------------------------------
1 Groupe Phenix immobilier c. Paradis, 2012 QCCQ 3161; Gélinas c. 9184-7541 Québec inc., 2011 QCCQ 12028. Previous judgments have however already concluded that the assignment of debt violated the Real Estate Brokerage Act.
[social_media]
