May 24th - 2017

Legal Beat: Make sure clients understand BRA before signing

The clients said they did not understand what they were signing when presented with a Buyer Representation Agreement. A judge offers advice to Realtors to prevent this all-too-common complaint.

Legal beat

The clients said they did not understand what they were signing when presented with a Buyer Representation Agreement. A judge offers advice to Realtors to prevent this all-too-common complaint.

by Merv Burgard

Legal beat

In this case, the buyer clients said they did not understand what they were signing when they were presented with a Buyer Representation Agreement (BRA).

A salesperson and his broker of record gave confusing evidence as to whether the BRA was explained to these first-time home buyers. This was the salesperson’s second deal and everyone in the transaction spoke English and Urdu. The brokerage sued for overholding commission and lost.

In his 21-page decision, the Brampton small claims court judge referred to the usual issues of credibility and Non Est Factum [a lack of understanding], as noted in several prior decisions.

Century 21 People’s Choice Realty Inc. v Saleem 2016 CanLII 30103 (ON SCSM)

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MERV’S COMMENTS

Although not necessary to his ruling, the judge in this case offered suggestions to real estate salespeople. He advised registrants on the handling and explanation of the BRA to consumers who may not have English as a first language and/or to consumers who are inexperienced in real estate transactions.

“I will now comment by way of obiter dictum [a side comment], what agents and their brokerages should do if they are to avoid the defence of Non Est Factum when it comes to execution and delivery of buyer representation agreements. They must, at a minimum, ensure they do the following:

a) Explain in very clear terms that the representation agreement is different in form and purpose from any offer to purchase that might be discussed when the representation agreement is tabled;

  • Sign the representation agreement in an office environment, not in, or on, a car;
  • Explain to the buyer that the representation agreement is how the agent gets paid for their services;
  • Explain in the buyer’s native tongue, (where necessary), the main terms of the agreement, namely the term, commission rate, exclusive nature of their representation, and draw the buyer’s attention to the nature and purpose of the holdover provision;
  • Make it absolutely clear to the buyer that, under the holdover provision, their obligations under the representation agreement will continue, even if the relationship between agent and buyer breaks down, and
  • Physically separate, and distinguish, the representation agreement from any offer to purchase, if successive signature of both cannot be avoided.

    • Mervin Burgard Q.C.

    To my mind, if these simple steps are taken, it would make enforcement of buyer representation agreements much easier. It is not enough to rely upon the “acknowledgment” provision toward the end of these agreements as evidence of the buyer’s understanding and acceptance thereof. This provision itself has to be explained if reliance thereon is sought.”

    Is that what happens with all of your Representation Agreements with buyers and sellers? This might make a good topic for discussion at your next office meeting.

    Merv Burgard, Q.C.

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