April 5th - 2006

Making agreements: Forms reflect changes under new statute

For as long as listings have existed, many real estate practitioners have been of the opinion that, since a listing agreement is really a contract, the broker should sign as a party to the agreement as well as the seller.

For as long as listings have existed, many real estate practitioners have been of the opinion that, since a listing agreement is really a contract, the broker should sign as a party to the agreement as well as the seller.

But that has not been the case. The listing agreement was created as an authority from the seller in the first person and the broker’s signature was not necessary. The form stated, “I hereby give you the exclusive and irrevocable right to act as my agent….” This format has withstood the test of time and countless court cases have upheld that a listing agreement is enforceable, even without the signature of one of the parties to the agreement (the brokerage).

However, the introduction of the new Real Estate and Business Brokers Act, 2002 has resulted in substantive changes to the OREA forms. For representation agreements and customer service agreements, the Code of Ethics section of the Act states “the brokerage shall, at the earliest practicable opportunity, and before the seller/buyer makes an offer, reduce the agreement to writing, have it signed on behalf of the brokerage, and submit it to the seller for signature.”.

As a result, the listing agreement has been completely redesigned as an agreement between seller and brokerage. The requirement that it be “signed on behalf of the brokerage” does not necessarily mean a broker or manager will sign it. The salesperson listing the property will likely sign the form and the Standard Forms Committee has identified the signature as “Authorized to bind the Brokerage”. Brokerage policies must ensure that the salesperson is in compliance with the requirements of the brokerage when agreeing to the terms of the listing. As well, since the salesperson is signing on behalf of the brokerage, there would be no point to the salesperson also witnessing the seller’s signature, and this feature has been removed from the listing expire.

Privacy law
Members will notice additional changes to the listing form; among them the inclusion of a provision resulting from a recent ruling of the federal Privacy Commissioner, for sellers to consent to other salespeople contacting them, should the listing.

The Commission Agreement for Property Not Listed has been revised and is now the Seller Customer Service Agreement. It is important for members to understand that the new Act requires them to use customer service agreements the same way they would use representation agreements. If a member is working with a customer under a verbal understanding, before the customer makes an offer, the Act requires the brokerage to reduce the customer service agreement to writing, have it signed on behalf of the brokerage, and submit it to the customer for signature.

Previously, this requirement applied only to clients and representation agreements.

Since the Act obviously applies to both residential and commercial members, this requirement has resulted in the OREA Standard Forms Committee creating two new forms; Form 535- Seller Customer Service Agreement- Commercial and Form 545- Buyer Customer Service Agreement- Commercial.

To learn more, OREA offers a three-hour, three-credit course, OREA Standard Forms, that can guide you through their use. Check the course listings in the Continuing Education section of www.oreacollege.com and contact your local board to register.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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