It’s vacation time! - Planning your replacement

When a broker is going to be absent for vacation or for any other reason, he is looking to entrust his transactions to another broker on whom he can rely. He also wants to do so in a way that will be legal and secure for all parties involved. This issue often comes up at this time of year, and there are many obligations to consider. Here are a few recommendations on what you should do before you leave.

This capsule is intended mainly for independent or franchised agencies and brokers acting on their own account. In such a case, the only alternative is to designate a replacement to oversee the transactions. This person must be employed by another agency or can be another broker acting on his own account (for instance an executive officer of ''Les Immeubles Rive Nord RV Inc.'' Agency is going on vacation and asks another broker from his franchisor agency ''Les Immeubles Rive Nord Inc.'' to act as his replacement during his absence.)

While it is easier to replace brokers who work for the same agency, the replacement must still be overseen by the executive officer, who will designate a replacement and, if appropriate, will recommend that a written agreement be signed outlining the terms of the replacement and the sharing of compensation. Some of the recommendations below also apply when managing the replacement of brokers working in the same office (such as notifying clients of one’s absence).

Your obligations

AVAILABILITY

According to section 77 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising, a broker or agency executive officer must demonstrate a reasonable degree of availability or otherwise designate another licence holder as a replacement, and must take the necessary measures to ensure that all communications are dealt with in his or her absence and that all files are properly followed up.

PRESENTING A PROMISE TO PURCHASE

Under section 102 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising and the mandatory brokerage contract (for residential immovables containing less than five dwellings, for divided and undivided co-ownerships), the agency or broker agrees to submit to the seller, as soon as possible, any written promise to purchase, lease or exchange. In case of a prolonged absence, this obligation can obviously be jeopardized, hence the need to be replaced.

VISITS

Clause 8.8 of brokerage contracts mentioned in the previous paragraph provides that the seller gives the agency or broker exclusive rights to show the immovable at any reasonable time, with any appointment being arranged directly with the occupant. However, the agency or broker can allow other agencies or brokers to exercise that right in whole or in part. Still, this right to transfer the right to visit to another agency cannot be interpreted to allow a broker employed by this other agency to engage in brokerage transactions on behalf of the replaced broker.

ONE EMPLOYER

It is also important to note that under section 11 of the Real Estate Brokerage Act, a broker acting for an agency cannot at the same time be acting for another agency or on his own account. Therefore a broker cannot engage in brokerage transactions on behalf of a broker he is replacing.

COMPENSATION TO THE BROKER

The broker acting for an agency must immediately pay the compensation he receives for a transaction to the agency for which he is working. This means that it’s the agency that will issue a cheque in his name. Therefore, the broker acting for an agency cannot directly receive compensation.

Recommended practices

1. AT THE SIGNING OF A BROKERAGE CONTRACT

Explain to the seller that you may have to be away for several days at some point during the term of the brokerage contract (tell him whether this is due to vacation or other) and that you have an internal procedure to designate a broker from within the agency or, if you are acting on your own account, a broker employed by another agency to replace you. Stress the fact that you will only appoint reliable individuals who will be able to advise him properly if needed. The seller will appreciate your organization, foresight and professionalism.

2. IF YOU ARE ABSENT

Message handling service
It is recommended that you hire a telephone message handling service that will refer your clients to your replacement. It is also advisable to program an automatic email response informing senders of your absence and providing your replacement’s contact information. If the address of your establishment is different from that of your replacement, you can give your replacement or another trustworthy individual access to your premises or your mailbox to check your business mail. If applicable, also make sure that your Immocontact messages and any other real estate communications are redirected to your replacing broker.

Active brokerage contracts
First, you must contact the sellers to notify them verbally of the length of your absence and the name and contact information of the broker (and his agency, if applicable) who will be replacing you. Second, you must confirm everything in writing to your clients. Do the same with your buying clients who have transactions pending or for whom you have initiated a property search.

Take the opportunity before you leave to discuss and plan any potential amendments to brokerage contracts, including regarding selling prices, compensation or contract extensions. In order to secure the replacing broker’s right to compensation, the signing of a replacement and compensation agreement is suggested. This agreement should identify the potential brokerage transactions that will be carried out by the replacing broker (always on behalf of the agency of the broker replacing you). Such an agreement will prevent any potential dispute. Its main purpose is to settle compensation sharing issues in advance in the following situations:

• Brokerage contract signed by the replacing broker with one of the clients taken care of in the absence of the replaced broker;
• Promise to purchase submitted by the replacing broker on the replaced broker’s listing;
• Promise to purchase submitted by the replacing broker to a client of the replaced broker on the listing of a third party broker;
• Work performed on the files of the replaced broker’s buyers during his absence.

It is important to reiterate that the replacing broker remains in the employ of his agency and cannot engage in brokerage transactions on behalf of the replaced broker and his agency, if applicable. Violating this rule could lead to civil liability and disciplinary procedures and create problems with professional liability insurance coverage.

Some examples illustrating this

• The replacing broker provides information on one of the replaced broker’s listings on behalf of his agency;
• If a visitor is interested in presenting a promise to purchase, the replacing broker can draft it and submit it, but he will be acting as a representative of his agency and the promise to purchase will clearly identify the name of the replacing broker and that of his agency;
• In case of negotiations in transactions already in progress, the replacing broker can advise the absent broker’s selling client, but always on behalf of his own agency;
• The replacing broker could make amendments to existing brokerage contracts on behalf of the absent seller’s broker, such as amending the selling price of the immovable or the amount of compensation. However, any such amendments should be made under the agreement with the replaced broker prior to his departure. It’s not up to the client to verify the things agreed upon between brokers. The client must trust that his broker chose a trustworthy broker to replace him.

Signing of a brokerage contract during the broker’s absence

In this case, the safest route for all parties involved is to draft the brokerage contract in the name of the replacing broker’s agency only, and mention under clause 11 that the name of the replaced broker’s agency (or of the broker acting on his own account) will be added as a co-lister upon his return, conditional upon his acceptance to be a party to the contract. Upon the broker’s return, his name and the name of his agency, if applicable, will be added using an Amendments form.

Other considerations

A broker who is planning an absence must make sure to give the replacing broker all the files pertaining to his brokerage contracts and transactions in progress. He must also provide his replacement with a list of his potential clients. For his part, the replacing broker must review all the files to be able to respect his ethical obligations. These recommended practices are designed to prevent conflict situations for agencies and their brokers concerning compensation sharing and their respective responsibilities. We urge everyone to act with prudence and, especially, to be upfront with their clients.

Enjoy your vacation!