Instructions to the notary regarding remuneration sharing - Who can do what?

Please note that throughout this text, the term “broker” necessarily refers to the broker acting on his own account.

The seller’s broker or agency may instruct the notary to pay directly the buyer’s broker or agency from the proceeds of the sale.

Indeed, the clause 11.4 of the Promise to purchase form provides that:

11.4 AGENCY OR BROKER REMUNERATION – INSTRUCTIONS TO THE NOTARY – The BUYER and the SELLER irrevocably instruct the acting notary to pay directly to________, agency or broker of the SELLER, the remuneration amount set out in the brokerage contract to sell awarded by the SELLER from the available sums payable to the SELLER after payment of any prior or hypothecary claim and any disbursements or fees incurred by the notary to cancel these claims. Upon instruction from the agency or broker of the SELLER, the notary shall pay a portion of this remuneration to the agency or broker identified in clause 2.1. (emphasis added)

For a better understanding, let us recall some principles:

• The name of the agency or broker representing the buyer must not be indicated under clause 11.4; only the name of the agency or broker representing the seller can be indicated.
• The broker acting within an agency cannot under any circumstances be paid directly, whether he represents the seller or the buyer. The same applies to his business corporation, if applicable. In fact, the term “broker” used in clause 11.4 refers to the new concept of “broker acting on his own account”.
• The right to the remuneration of the seller’s broker results from the brokerage contract binding the broker to the seller. The right to the remuneration of the buyer’s broker arises rather from a second remuneration sharing agreement between the seller’s broker and the buyer’s broker or agency. This agreement appears generally in the description sheet when both brokers are members of a real estate board and the property is listed in the information dissemination service of this board.

To avoid: establishing or negotiating a remuneration sharing by using the Promise to purchase

It may be tempting for the buyer’s broker to indicate in his clients’ Promise to purchase the remuneration percentage he expects to receive if the proposed transaction is completed. Some licence holders sometimes use this approach to establish the remuneration sharing when they fear that the seller’s broker may contest their right to this sharing by invoking the rules of the actual cause of the sale.

However, this practice, which is not uncommon, violates section 46 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising (c. C-73.2, r.1) that stipulates that “Any amendment made to a mandatory form by a licence holder must pertain only to the object of the terms and conditions of that form.” 

As the object of the terms and conditions of the Promise to purchase is the sale of an immovable, but the remuneration sharing between brokers is not about the sale of the immovable, this sharing cannot therefore be indicated in the form.

In addition, the raison d'être of clause 11.4 of the Promise to purchase is to allow the notary to pay the seller’s broker from the proceeds of the sale; without it, the proceeds of the sale should be given to the seller. The buyer’s broker’s name and his remuneration percentage must not be indicated since by doing so we change the text of the mandatory content of the Promise to purchase, which constitutes a violation to the Act. Moreover, this approach affects buyers and sellers who may find themselves trapped in a situation in case of a disagreement between brokers.

Therefore, only the seller’s broker or agency may instruct the notary to pay directly the buyer’s broker or agency. The buyer’s agency or broker cannot under any circumstances require to be directly paid by the notary. He will send his invoice to the seller’s broker or agency.

Specifically, under clause 11.4, the seller’s broker or agency will send the notary:

• one invoice;
• written instructions to pay the buyer’s agency or broker who collaborates to the transaction. 

These instructions can be included in the invoice sent. Without these instructions, the notary will not pay the buyer’s broker or agency.

Here is a sample invoice including instructions to the notary.

Moreover, it should be pointed out that the notary may charge fees to carry out these payments. The agency or broker should therefore ask the notary to see whether he will charge them and how much.

Where necessary, this clause can be supplemented by clause R 2.5 of the Annex R – Residential immovable form. In this regard, we invite you to visit synbad.com and check the article Instructions to the notary regarding remuneration: a specific clause on this subject.