Changing agencies successfully

In March 2016, Alexandre Despard, a real estate broker with an agency in Fleurimont, gets excellent news: his spouse, who is a medical specialist, has been offered a position in Sherbrooke. Mr. Despard decides to go work in Sherbrooke as well, for the agency Accès des Sommets. The official date of his agency change will be June 1, 2016.

Mr. Despard enjoys an excellent professional relationship with his clients, and he is confident that they will continue to do business with him. He currently has two residential sales contracts in progress. There are no promises to purchase on his listings at the moment.

In addition, in two other files, two separate buyers whose promises to purchase have been accepted are  about to fulfill the conditions of their respective promises to purchase. One of these two buyers is bound to Mr. Despard by an Exclusive brokerage contract – Purchase.

Although Mr. Despard is very happy with his future prospects, he has many questions as he tries to plan his transition. For example:

• Does he need to inform his agency executive officer of the change right away?
• How should he inform his clients?
• How will he receive his remuneration?

Mr. Despard feels that this is a delicate situation and decides to ask an information agent at the OACIQ Info Center for guidance.

Answers

The first thing the information agent tells him is that the best practice for a broker is not to change agencies while he has transactions in progress. He should inform his agency executive officer as soon as possible because the agency is the one with the obligation to send the agency change notices to selling clients, so that they may exercise their options. If the agency does not do so, Mr. Despard will have to send the notices to his clients, but he must not do so without his agency’s knowledge. In addition, when discussing the change with his current executive officer, Mr. Despard can agree with him on the terms of his departure.

Here are more detailed answers based on a few common situations.

Residential brokerage contracts to sell without promises to purchase in progress

NOTICES TO BE SENT

The information agent mentions that the sellers must be informed in writing prior to the agency change that they have the option to:

• continue to do business with the current agency (with another broker who will be appointed to their file); or
• continue to do business with their current broker (Mr. Despard) at his new agency;
• terminate the brokerage contract.

The clients must make their choice by the date of the agency change at the latest, in this case June 1, 2016. Failing this, their contract will be automatically terminated, in accordance with the applicable clauses [section 10 of the residential form brokerage contract – Sale (exclusive and non-exclusive)].

If the selling clients reply in time, Mr. Despard will not have to have them sign an Amendments form or a new brokerage contract to sell. If they choose to follow him to his new agency, they will be bound to the agency on behalf of which he will be acting, according to the same terms.

A copy of the brokerage contract records will be given to Mr. Despard for his new agency (the initial agency will keep a copy). If so requested by the clients, the agency to which they were initially bound must also give them a copy of their record.

REMUNERATION

If the clients decide to continue doing business with the current agency (and therefore another broker), Mr. Despard may still be entitled to remuneration: it depends on what was agreed with his agency executive officer in his hiring contract or prior to his departure. An agency executive officer is allowed to agree to remunerate a broker leaving the agency for brokerage contracts that were in force while this broker was authorized to act on the agency’s behalf.

Written promises to purchase in progress for residential properties

NOTICES TO BE SENT WHEN NO BROKERAGE CONTRACT TO PURCHASE (BCP) HAS BEEN SIGNED

NOTE: Since June 10, 2022, licensees are prohibited from representing a client without signing a brokerage contract with him (s. 26 of the Real Estate Brokerage Act is amended to specify that any verbal brokerage contract is void).

A broker without a brokerage contract is considered as a “collaborating broker without a contract. He works de facto for the seller. He can only treat the buyer fairly.

In this situation, the information agent mentions that, out of courtesy, the buyer should be notified in writing prior to the agency change that he has the option to:

• continue to do business with the current agency (another collaborating broker will be appointed); or
• continue to do business with the current broker at his new agency;
• In both cases, the buyer should be reminded that neither the broker nor his (current or future) agency will be able to represent his interests in the transaction unless he has signed a written brokerage contract.
  Or
• cease doing business with the broker or the agency. In this case, the broker representing the seller will continue the transaction alone. However, it is recommended that the brokers agree in writing on the appropriate remuneration sharing.

The transaction documents will be retained by the agency identified in the promise to purchase. If the buying client decides to follow the broker to his new agency, a copy of the document will have to be given to the new agency.

The information agent adds that the seller’s broker must also be notified of the agency change, as well as any other person involved in the transaction (e.g. notary, building inspector).

NOTICES TO BE SENT WHEN A BROKERAGE CONTRACT TO PURCHASE (BCP) HAS BEEN SIGNED

In the case of the buyer to whom Mr. Despard is bound by a brokerage contract to purchase, Mr. Despard will have to notify him in the same way as the sellers in the procedure described here. Thus the buyer must be informed in writing prior to the agency change that he has the option to:

• continue to do business with their current broker (Mr. Despard) at his new agency;
• continue to do business with the current agency (with another broker who will be appointed to them); or
• terminate the brokerage contract.

The clients must make their choice by the date of the agency change at the latest, in this case June 1, 2016. Failing this, their contract will be automatically terminated, in accordance with the applicable clauses (section 9 of the residential form Exclusive brokerage contract – Purchase).

REMUNERATION

The agency on whose behalf the broker was acting (with or without a BCP) at the time the promise to purchase was drafted could be obliged to pay him remuneration. It depends on what was agreed in his hiring contract with his agency or on any agreement made prior to his departure.