Remuneration payable by the buyer: Exclusive brokerage contract – Purchase

The brokerage contract to purchase contains specific provisions concerning the circumstances where the remuneration is payable.

The remuneration is payable in the following situations:

1. An agreement in accordance with the conditions specified in the brokerage contract is accepted, even if the buyer has signed the promise to purchase without the assistance of his broker. It is important to note that the buyer has undertaken not to, either directly or indirectly during the term of the contract, enter into any agreement concerning the purchase, exchange or leasing of the property without the services of the agency or broker.
    
2. A promise to purchase is accepted, within 180 days following the expiration or termination of the brokerage contract, for a property in which the buyer had expressed an interest during the term of the contract unless, during this period, the buyer has entered into a new brokerage contract in good faith with another agency or broker for the same property.
   
   In other words, if the buyer visited a property or made a promise to purchase during the term of the contract, he can be deemed to have been interested in the property. The 180-day period is calculated from the expiration date stipulated in the brokerage contract. If the contract was modified to extend its term, the period is calculated from the new expiration date. In the case of a cancellable contract where the buyer has exercised his right to terminate the contract, the 180-day period begins on the date of cancellation.
    
3. A voluntary act on the part of the buyer prevents the performance of the brokerage contract.
   
   This clause applies when the buyer deliberately acts to sabotage or block the process set out in the brokerage contract, such as the steps involved in obtaining a mortgage loan, which could have an impact on the performance of the contract or prevent the signing of the deed of sale, even if all the other conditions of the promise to purchase are fulfilled.

Note that in some cases, the broker representing the buyer has no remuneration claim from the buyer, for instance where the remuneration shared by the seller’s broker is equivalent to that stipulated in the brokerage contract (offset), or if the standard clause 1.12, which provides for such remuneration not to be claimable, is indicated¹ in the brokerage contract.

Percentage of the sale price

This is the most common. For example, if the sale price indicated in the promise to purchase is $375,000 and, after negotiations, the seller ends up accepting a promise to purchase for $390,000, the percentage indicated in clause 6.1 of the brokerage contract will be applied to the sale price accepted by the seller, i.e. $390,000. If the calculation in clause 6.1 is based on a promise to purchase amount of $390,000, the fee payable will be $11,700 if the percentage is 3%, or $7,800 if the percentage is 2%, plus applicable taxes.

Lump sum

This is a specified remuneration amount stipulated in the brokerage contract, rather than an amount based on the accepted sale price set in the promise to purchase. This amount is taxable.

Other: hourly rate according to services rendered, etc.

In this case, it’s important to record in detail everything the buyer agrees to pay to his broker: hourly rate, additional flat fee, object of the remuneration, frequency of performance, etc. For example, if the buyer asks to visit several properties, especially if these are located over long distances, or if special arrangements need to be made for the visits, the broker could charge an hourly rate for the time spent accompanying the buyer on these visits, or for additional services not included in the standard package, such as in-depth property search, coordination of inspection or appraisal services, etc.

It is also important to remember that the Annex RC – Remuneration and costs form allows the real estate agency or the broker acting on his own account to provide for methods of remuneration in addition to those stipulated in the brokerage contract form, and, where applicable, to have specific costs paid by the buyer. This form must be attached as an appendix to the brokerage contract if this method of remuneration is agreed to between the parties.

In all cases, the real estate broker must explain to his client the remuneration clauses and the situations in which they apply, emphasizing that the remuneration is taxable.

Note that under the Real Estate Brokerage Act² a brokerage contract signed with remuneration terms of 0% would not be considered a binding contract, and therefore the broker could not represent the buyer.

Method of payment

• Payment made directly to the real estate agency or the broker acting on his own account
• Financing of the remuneration

If the remuneration provided for in the brokerage contract is higher than the share offered by the seller, or if the seller is not represented by another broker, the remuneration could be financed as part of the purchase price by way of a specific clause³ in the promise to purchase, or paid by the buyer at the signing of the deed of sale. At that time the notary would allocate the sums due to the real estate agency or the broker acting on his own account.