December 4th - 2006

OREA forms keep pace with REBBA

Whether the concern is disclosing interest on deposits, legibility of agreements, or defining relationships, changes to REBBA 2002, and subsequently to OREA Standard Forms, seek clarity for customers and clients.

Whether the concern is disclosing interest on deposits, legibility of agreements, or defining relationships, changes to REBBA 2002, and subsequently to OREA Standard Forms, seek clarity for customers and clients. Here are some of the changes made to help REALTORS® and make transactions go smoothly.

Regarding interest
The Act has brought the issue of interest on deposits to the fore. Though the legislation does not require brokerages to have an interest bearing trust account, it does require that brokerages fully and clearly disclose in writing to a person depositing trust money the terms of the account. If it bears interest, then the rate has to be disclosed, as well as the rate the beneficial owner (usually the buyer) will earn. If the account doesn’t bear interest, that, too, must be spelled out.

The existing 2006 Form 100- Agreement of Purchase and Sale states the deposit will be held “without interest”. Now that the Registrar has released new information on this issue that includes a number of suggested clauses, the Standard Forms Committee has expanded the “without interest” comment to include basically the same information in the Registrar’s suggested “Non-Interest Bearing Trust Account” clause. The same changes have been made to Agreements of Purchase and Sale- Form 101, 102, 103, 500, 501, 502 (Condo, Commercial etc.),

The Registrar also released additional clauses for deposits in interest bearing trust accounts, with or without possible reduction in interest earned or with or without a requirement for a minimum amount of interest. These clauses will be included in the OREA Standard Clauses basically as suggested by the Registrar. Members who are operating interest bearing trust accounts can use these suggested clauses as models for creating their own schedules for the Agreement of Purchase and Sale.

Selling brokerages must verify the policy of the listing brokerage before including a special clause in the Agreement of Purchase and Sale. If the selling brokerage includes a clause that conflicts with the policy of the listing brokerage, it can interfere with the negotiation between the buyer and the seller.

It has become common practice to obtain the listing brokerage’s schedule for deposits to be included by the co-operating brokerage in the buyer’s offer. A clause added to the schedule to the Agreement will over-ride the standard “Non-Interest Bearing Trust Account” clause that has been included in the deposit section of the agreement.

Only the clauses released by the Registrar have been included in the new standard forms. Members have implemented a number of different policies for interest on deposits and thus must create their own clauses if they have a policy that does not correspond exactly with what the Registrar has released. Members should deal directly with the Registrar to confirm the appropriateness of such clauses.

As the OREA standard Lease Agreements also make reference to the brokerage holding the deposit, the Registrar’s “Non-Interest Bearing Trust Account” clause was also added to the Agreements to Lease- Form 400, 510, 511, 515.

Seek clarity
In response to the Registrar’s concern about illegibility, the font size of Form 100- Agreement of Purchase and Sale has been increased. This has resulted in a five page document, rather than the existing four pages. The section for fixtures/chattels was also moved to the top of page 2 to increase legibility. This reformatting was also completed on the other Agreements of Purchase and Sale - Form 101, 102, 103, 500, 501, 502 (Condo, Commercial etc.), along with additional forms used with these forms; Schedule to Agreement of Purchase and Sale- 105, 505, and Option Commission Agreement- Form 104.

Who works for whom
REBBA 2002 simply defines a customer as someone with whom the brokerage has entered into a customer service agreement.

So, to simplify a very complicated issue, the term “and is providing customer service to the Buyer/Seller” has been removed from each section of the Confirmation of Co-operation and Representation- Form 320.

The form was also modified to move the section providing consent for multiple representation to the end of the form, where the acknowledgement is signed by the buyers and sellers. The wording of the consent has been revised and can even provide consent for representation of multiple buyers, provided that an explanation is added to the section for additional Comments and/or Disclosures. REBBA 2002 requires disclosure when a registrant is representing or providing customer service to more than one buyer or seller in respect of the same trade and the section for Additional Comments and/or Disclosures by Listing and Co-operating brokerage can be used to describe these circumstances.

The revised forms will be available on the OREA Web site by the end of the year. Visit the My OREA page, under FORMS, Downloadable Forms.

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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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