Termination of a brokerage contract

Sometimes a seller decides that he no longer wishes to sell his immovable and wants to terminate the brokerage contract by which he entrusted the sale of his immovable to a broker or agency. A buyer or lessor can also sometimes wish to terminate a brokerage contract. This is possible in certain situations, including by invoking the right of withdrawal allowed under the Real Estate Brokerage Act (hereafter “the Act”) or pursuant to a provision included in the brokerage contract.

In residential real estate, under the Act, a seller, buyer or lessor, despite any stipulation to the contrary, always has three days after receiving a duplicate of the brokerage contract to terminate (or put an end to) the contract, at his discretion, by sending written notice to this effect to the broker or agency. This is known as the right of withdrawal.

Apart from this case, in principle a contract cannot be terminated before the termination date stipulated therein. However, article 2125 of the Civil Code of Québec states that, in the case of a contract for services, the client can unilaterally terminate the contract at any time.

It should be noted that the mandatory brokerage contract stipulates under clause 2.1 that: “Unless otherwise stipulated in clause 11.1, this contract may be terminated at any time without reason by the SELLER. In such a case, the SELLER may be required to pay the costs and expenses incurred to that point by the AGENCY or the BROKER, or to pay compensation for any damage suffered.”

Therefore, the mandatory brokerage contract to sell, purchase or lease can, in principle, be terminated by the client at any time, but the latter may be required to pay for any costs and expenses incurred and for the value of the work performed to that point.

In such a case, it would be preferable for the client to agree in advance on the costs and expenses he will reimburse to the broker or agency, and on any other amount he may have to pay to compensate the broker for any prejudice suffered due to the termination of the contract. Even though the Civil Code of Quebec gives the client the right to unilaterally terminate a service contract, it recognizes that the client has certain obligations towards the provider of services, in this case the broker or agency:

“2129. Upon resiliation of the contract, the client is bound to pay to the contractor or the provider of services, in proportion to the agreed price, the actual costs and expenses, the value of the work performed before the end of the contract or before the notice of resiliation and, as the case may be, the value of the property furnished, where it can be returned to him and used by him.

For his part, the contractor or the provider of services is bound to repay any advances he has received in excess of what he has earned.

In either case, each party is liable for any other injury that the other party may have suffered.”

In addition, the broker or agency could be entitled to remuneration should the residential immovable be sold, exchanged or leased, as the case may be, within 180 days following the expiry of the brokerage contract to a person who became interested in the immovable while the brokerage contract stipulated as exclusive was in force.

It should be noted that the broker or the agency may also terminate the brokerage contract for a serious reason, under the terms of article 2126 of the Civil Code of Québec.

Making the contract non-cancellable: Precautions to be taken

With the client’s agreement, the agency or broker can make the brokerage contract non-cancellable by adding, before the contract is signed, a statement to this effect in clause 11.1 “Other declarations and conditions” of the brokerage contract to sell or in clause 10.1 of the brokerage contract to purchase or to lease, which have the same effect.

The statement could read as follows: “This contract is non-cancellable.”

Caution: Before the contract is signed, the real estate broker must clearly inform his client of his legal right to terminate the contract at any time by drawing his attention to clause 2.1. He must also ensure that his client clearly understands the consequences of waiving this right, namely that the contract will be terminated only if mutually agreed to by the parties.