What forms should be used for the sale of an enterprise?

The Real Estate Brokerage Act and brokerage transactions relating to the sale of an enterprise

Under the Real Estate Brokerage Act, the sale of an enterprise remains subject to this Act only if the enterprise’s property, according to its market value, consists mainly of immovable property.

Thus, the sale marketing of an enterprise that does not include an immovable (formerly called “business assets sale”) is not a brokerage transaction subject to the Real Estate Brokerage Act as the sale of an enterprise whose assets do not mainly consist of immovable property.

Furthermore, if a broker chooses to act as an intermediary in the sale of an enterprise that does not include an immovable, he must comply with certain ethical rules. In fact, a broker who acts outside of real estate brokerage activities is always subject to certain ethical obligations, including prudence, diligence, competence, integrity, and spirit of cooperation.

Brokers engaging in brokerage transactions relating to the sale of an enterprise can proceed as follows:

A) Forms to be used in the case of the sale of an enterprise of which one of the assets consists of one or many immovables (regardless if it is the main asset according to the market value)

1- The brokerage contract and its annexes

Brokers who want to take a contract for the sale of an enterprise, of which one of the assets consists of one or many immovables (regardless if it is the main asset according to the market value) can use the OACIQ recommended form Exclusive brokerage contract – Sale of an immovable.

The broker must supplement his contract by adding, as an annex, clauses dealing with the terms and conditions specific to the enterprise. For example, we should find attached as an annex the clauses relating to:

• Summary description of the enterprise;
• Details of items included in the selling price;
• Seller’s declarations and obligations specific to the sale of enterprise.

In this regard, recommended standard clauses were designed by the OACIQ to supplement the OACIQ Exclusive brokerage contract - Sale of an immovable form without amendment and avoid repeating information already indicated in this form.

It should be noted that when these standard clauses are used, the selling price of the immovable specified in the brokerage contract form must cover the selling price of the entire enterprise, including the immovable (and not only the immovable’s selling price).

Standard Clauses

The standard clauses that can be annexed to the Exclusive brokerage contract - Sale of an immovable form are available at the following link: Standard clauses to be added - Sale of an enterprise. They are also available on the OACIQ electronic forms’ platform.

2- The promise to purchase and its annexes.

Similar to what is provided for the brokerage contract, the OACIQ recommended form Promise to purchase – Immovable can be used for the purchase of an enterprise of which one of the assets consists of one or many immovables (regardless if it is the main asset according to the market value).

This form must also be supplemented by annexing clauses dealing with the terms and conditions specific to the enterprise. For example, we should find attached as an annex the clauses relating to:

• Summary description of the enterprise;
• Details of items included in the selling price;
• Any loan or balance of the selling price other than those secured by hypothec and already mentioned in the Promise to purchase – Immovable;
• The buyer’s and seller’s declarations and obligations specific to the sale of enterprise.

In this regard, recommended standard clauses were designed by the OACIQ to supplement the OACIQ Promise to purchase - Immovable form without amendment and avoid repeating information already indicated in the form.

It should be noted that when these standard clauses are used, the purchase price of the immovable specified in the Promise to purchase - Immovable form must cover the purchase price of the entire enterprise, including the immovable (and not only the immovable’s purchase price).

It should also be noted that the amount that the broker enters, in clause 5.2 under the METHOD OF PAYMENT section of the Promise to purchase - Immovable form, as additional sum, must include, in addition to the mortgage loan specified in clause 6.1 of the form, the amount of any other loan to be obtained by the buyer and which would be indicated in the annex (a standard clause is provided to indicate such a loan).

Similarly, any amount indicated as selling price balance, in clause 5.5 under the METHOD OF PAYMENT section of the form, shall include any selling price balance granted by the seller and indicated in the annex, other than the selling price balance secured by immovable hypothec and already specified in section F2.4 of Annex F - Financing if applicable (a standard clause is provided to indicate any selling price balance other than the one already mentioned in section F2.4 of Annex F - Financing).

In addition, the ACAIQ Annex B – Enterprise form remains available and can be used as is.

Standard Clauses

The standard clauses that can be annexed to the Promise to purchase - Immovable form are available at the following link:  Standard clauses to be added - Sale of an enterprise. They are also available on the OACIQ electronic forms’ platform.

B) Forms to be used in the case of the sale of an enterprise excluding any immovable

If you carry out brokerage transactions relating to the sale of an enterprise which does not include an immovable, you may continue to use the ACAIQ forms i.e., Exclusive brokerage contract – sale of an enterprise excluding any immovable and Promise to purchase – Enterprise excluding any immovable, by proceeding as follows:

1- Brokerage contract and its annexes

Concerning the sale of an enterprise without an immovable, the broker may continue to use the ACAIQ form Exclusive brokerage contract - Sale of an enterprise excluding any immovable. However, the following clause must be added to clause 11.1 of the contract or, if there is no space, to Annex G – General of the OACIQ so the broker can fulfil his ethical obligations:

“In case of dispute between the AGENCY or the BROKER and the SELLER, the Organisme d’autoréglementation du courtage immobilier du Québec may act as conciliator or mediator upon request by the parties. The OACIQ may also arbitrate between the AGENCY or the BROKER and the SELLER.”

This standard clause is available at the following link: Standard clauses to be added - Sale of an enterprise.

Moreover, it should be mentioned that clause 11.3 of the form should not be completed. It should be crossed out and initialed by the parties (broker and seller) since it is not applicable, given that the transaction does not include any immovable.

In order for the broker to fulfill his ethical obligations relating to identity verification, the Identity verification form can be used. 

2- The Promise to purchase and its annexes

Concerning the sale of an enterprise that does not include an immovable, the broker may continue to use the ACAIQ form Promise to purchase – Enterprise excluding any immovable. However, the clause 11.3 of the form should not be completed. It should be crossed out and initialed by the parties (buyer and seller). This clause is not applicable since the transaction does not include any immovable. Finally, although it is not mandatory in this case, Annex F – Financing can be used when assuming existing mortgage obligations.

C) Professional liability insurance and other information

The Fonds d’assurance responsabilité professionnelle du courtage immobilier (FARCIQ) provides liability insurance to brokers and agencies for activities governed by the Real estate Brokerage Act. As of May 1, 2021, where there was no coverage until now, policyholders will benefit from a coverage sub-limit of $1,000,000 when a transaction involves the sale of an enterprise whose assets are not principally immovable property. However, note that some enterprise sales could be subject to laws administered by the Autorité des marchés financiers (AMF), which could result in additional obligations. Check with the AMF.

For more information about your insurance, please check your insurance policy or contact FARCIQ directly by telephone at 450-656-5959 or 1-866-956-5959 or by fax at 450-656-5746 or by email at assurance@farciq.com.