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Representation Agreements Realty Brokers and Realty Buyers and Arguments of Enforceability
Question: Are commissions due under a Broker Representation Agreement (OREA Form 300) if a buyer uses a different broker?
Answer: The Buyer may owe commissions to both the original brokerage and any other brokerage involved. Legal disputes over this matter can fall under the jurisdiction of the Small Claims Court, with potential resolutions varying based on specific circumstances and legal interpretations. DK Legal Practice offers assistance for such legal issues. Get expert legal help today by contacting DK Legal Practice at (416) 906-6663.
Is a Buyer Under a Broker Representation Agreement (OREA Form 300) Liable For Commissions If the Buyer Acquires a Property Through Another Realty Broker?
Typically, Based Upon the Unique Case Details, a Buyer With An Active Broker Representation Agreement Is Required to Pay Commission to the Broker and If the Buyer Acquires Property Through a Different Broker, Then the Buyer Must Pay Commissions to Both...
Understanding the Enforceability of Broker Representation Agreements Involving the Ontario Real Estate Association Form 300
In Ontario, the Broker Representation Agreement or OREA Form 300 works to form a binding contract between a potential real estate buyer and a real estate brokerage for the purpose of establishing a services contract involving a specified geographic area and a specified timeframe. Allegations of breaching a Broker Representation Agreement frequently lead to legal disputes and are frequently heard within the Small Claims Court arena whereas the sums claimed, being purportedly owed commissions, usually fall within the Small Claims Court monetary jurisdiction threshold of thirty-five thousand ($35,000.00) dollars per Plaintiff. As for the usual outcome of these cases, the outcome will turn on the particular facts specific to each case.
The Law
The dispute in Sun v. Mani, 2024 CanLII 35486, serves as an example of issues involving commission payment under a Broker Representation Agreement. Observations from the Sun case include:
The Law Surrounding the Buyer Representation Agreement (OREA FORM 300)
[22] Disputes surrounding the Buyer Representation Agreement (hereinafter “BRA”) are frequent visitors to the Superior Court and the Small Claims Court.
[23] The front page of the BRA dictates the following, “The Buyer hereby gives the brokerage the exclusive and irrevocable authority to act as the Buyer’s agent commencing at 9 a.m. on the 3rd day of May, 2021 and expiring at 11:59 p.m. on the 31 day of August, 2021.”
[24] On the portion for commission, it reads (my emphasis added):
2. COMMISSION: In consideration of the Brokerage undertaking to assist the Buyer, the Buyer agrees to pay commission to the Brokerage as follows: If, during the currency of this Agreement, the Buyer enters into an agreement to purchase or lease a real property of the general description indicated above, the Buyer agrees the Brokerage is entitled to receive and retain any commission offered by a listing brokerage or by the seller. The Buyer understands that the amount of commission offered by a listing brokerage or by the seller may be greater or less than the commission stated below. The Buyer understands that the Brokerage will inform the Buyer of the amount of commission to be paid to the Brokerage by the listing brokerage or the seller at the earliest practical opportunity. The Buyer acknowledges that the payment of any commission by the listing brokerage or the seller will not make the Brokerage either the agent or sub-agent of the listing brokerage or the seller.
If, during the currency of this Agreement, the Buyer enters into an agreement to purchase any property of the general description indicated above, the Buyer agrees that the Brokerage is entitled to be paid a commission of 2.5% of the sale price of the property or [as per MLS] (entered term).
The Buyer agrees to pay directly to the Brokerage any deficiency between this amount and the amount, if any, to be paid to the Brokerage by a listing brokerage or by the seller. The Buyer understands that if the Brokerage is not to be paid any commission by a listing brokerage or by the seller, the Buyer will pay the Brokerage the full amount of commission indicated above.
In the dispute involving Sun, the Defendant argued that the documented Broker Representation Agreement was either initially inclusive of a verbal condition or was subsequently modified to include the verbal term that the contract would be unenforced. This argument was unaccepted by the judiciary whereas such an argument conflicts with the parol evidence rule which is an underpinning to the law of contracts and the need for certainty within contracts. For a purchaser, such as the Defendant in Sun, to successfully challenge the enforcement of a Broker Representation Agreement, a formally documented amendment to the agreement would be necessary. The invocation of the parol evidence rule, a legal precedent barring the supplanting of written accords with alleged verbal agreements, was stated in the Sun litigation, with reference to Fung v. Decca Homes Limited, 2019 ONCA 848, where within Fung, it was said.
[5] We see no error in the application judge’s application of the parole evidence rule in the circumstances of this case: Hawrish v. Bank of Montreal, 1969 CanLII 2 (SCC), [1969] S.C.R. 515, at p. 520. Even if there was a collateral oral agreement, something that is disputed by the respondent, that oral agreement could not contradict the written agreement. ...
Cases arguing the enforceability of a Broker Representation Agreement, such as Sun, among various cases cited within including Apex Results Realty Inc. v. Zaman, 2018 ONSC 7387, and First Contact Realty Ltd. v. Prime Real Estate Holdings Corporation, 2015 ONSC 5511, show that to gain court acceptance that the written terms within a Broker Representation Agreement were varied, the parol evidence rule must be satisfied by proving the existence of an amendment in writing. In this respect, these cases all state in similar fashion:
[35] In our matter, Mr. Mani alleges that Mr. Sun stated to him that the BRA was only a “formality” and that it would not enforced. This appears to me to be a modification of the fundamental terms and conditions of the contract. There is also no evidence in writing of this oral representation. The Parole Evidence Rule is applicable here, which holds that evidence of an oral agreement cannot prevail over the clear written contractual terms.[3]
[36] In Apex Results Realty Inc. v. Zaman, 2018 ONSC 7387[4], the brokerage brought a summary judgment motion in Superior Court for payment of commissions owed on two separate properties during the effective representation period of the BRA. Justice Turnbull ruled in the brokerage’s favour citing the terms of the BRA indicated that commission was payable to the brokerage by the buyer if the buyer purchased a property during the currency of the BRA.[5] In coming to his decision, Justice Turnbull cited a decision of Justice Healey in First Contact Realty Ltd. v. Prime Real Estate Holdings Corp., 2015 ONSC 5511. This was yet, another summary judgment motion wherein the Defendant buyer alleged that there was an oral agreement to terminate the BRA. Both Justice Healey and Justice Turnbull, in their requisite decisions cited application of the Parole Evidence Rule, restricting evidence of oral evidence in the face of a clearly written and executed contract between parties. Justice Turnbull’s decision was appealed and it was upheld by the Court of Appeal in Apex Results Realty Inc. v. Zaman, 2019 ONCA 766[6].
[53] The parole evidence rule exists to help parties avoid this type of allegation being made by a contracting party. It effectively precludes the admission into evidence of words which would vary or contradict the terms of a written contract between the parties. Without it, it would almost be impossible to have finality or certainty in contractual relations. It further limits the ability of a party to fabricate evidence to vary or change the terms of a written contract. The parole evidence rule centres the court’s attention on the contract and what the parties have reduced to writing. It creates contractual clarity and certainty.
[25] This evidence is insufficient to establish the essential elements of an agreement, as it lacks any specificity with respect to the terms of such agreement, as well as failing to outline the consideration for entering into such an agreement. Hinn provides no details in his affidavit, or elsewhere, of the particulars of such an exchange of ideas leading to the parties forming an intention to terminate the Buyer Representation Agreement. The details are lacking of when, where, how and why such alleged discussions took place.
A buyer, to successfully circumvent the enforcement of a Broker Representation Agreement, will generally need to provide a court with evidentiary support that the agreement was entered into under legally objectionable circumstances such as misleading conduct by a realty agent. Doing so will, generally, require proving a case that extends beyond mere regret for having entered into the Broker Representation Agreement and will need to lean upon legal principles specific to contract law if the court is to deem invalid the binding effect of a signed Broker Representation Agreement.
Conclusion
Engaging in real estate ventures often involves the Broker Representation Agreement, being the OREA Form 300. This contract document formalizes the relationship between a real estate broker and the the client as a buyer by specifying the scope of the duties and responsibilities of both the broker and the buyer. As a contract, the Broker Representation Agreement is governed by the conventional rules of contract law. Challenging the enforceability of a Broker Representation Agreement necessitates evidence that adheres to the general precepts of contract law; and despite specificity of the Broker Representation Agreement to real estate dealings, the agreement is without any peculiar exemption from general contract law principles and is evaluated under the same legal standards as other contractual commitments.
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