Amendments to the Real Estate Brokerage Act

Source: OACIQ Amendments to the Real Estate Brokerage Act

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In June 2022, the Minister of Finance proposed amendments to the Real Estate Brokerage Act (REBA) to strengthen consumer protection by prohibiting dual representation and verbal brokerage contracts in residential real estate brokerage in Quebec.

Similar to the British Columbia regulator, Quebec prohibits real estate brokers from simultaneously representing both parties in a real estate transaction and being bound by a brokerage contract with each of them.

Real estate brokerage regulators in Alberta, Saskatchewan, Manitoba, Nova Scotia, and New Brunswick also impose strict oversight of these situations.

Why prohibit dual representation and what are the different steps to follow?

The prohibition of dual representation aims to ensure public protection considering that:

• A real estate broker must not place themselves in a conflict of interest situation: they cannot simultaneously commit to defending the divergent interests of a buyer with whom they are bound by a purchase brokerage contract and those of a seller with whom they are also bound by a sale brokerage contract during the same transaction.
• In practice, it is impossible for a real estate broker to prioritize the interests of the seller, who wants to sell under the best conditions and at the maximum price, and at the same time protect the interests of the buyer, who seeks to pay the lowest possible price.

Here are the step-by-step actions that the broker must undertake during the conclusion of a purchase brokerage contract:

1. At the signing of a purchase brokerage contract: the real estate broker must, from the outset, inform the buyer of the possibility of a brokerage contract termination if they find themselves in a situation of dual representation and no exception provided by law applies. The clause type 1.16 - Warning to the Buyer - Dual Representation was designed to help the broker manage this situation (to be inserted in 10.1 of the purchase brokerage contract or in an annex G).
   
   The broker must also ensure at this occasion that the buyer client has understood their obligations provided in the brokerage contract (for example, when visiting a property open to the public for a free visit. Upon arrival, the buyer must inform the seller's broker that they are already represented by another broker). This ensures transparency with the client and avoids misunderstandings and possible misinterpretations from the public.
2. During the duration of the purchase brokerage contract: the broker targeted by the purchase brokerage contract must inform the buyer, when they learn that the buyer intends to make a purchase offer, that the desired property is covered by another brokerage contract concluded by themself or their agency (situation of dual representation).
    
   • In the case of the two exceptions mentioned in clause type 1.16 (under-served area and brokerage contract concluded with another broker from the same agency on the same property): the clause type 1.15 – Notice Regarding the Applicable Exception in a Dual Representation Situation allows the broker to notify the buyer at the appropriate time and obtain their consent to continue representing them.
      
   • In the case where no exception mentioned in clause type 1.16 - Warning to the Buyer – Dual Representation is applicable or where the buyer has not consented to the broker continuing to represent them: the broker must terminate the purchase brokerage contract. They will continue to represent the seller only.
3. In case of termination of the purchase brokerage contract: the real estate broker representing the seller must recommend that the buyer be represented by another real estate broker by signing a new purchase brokerage contract.
   
   The broker must send a written notice to the buyer. Thus, the purchase brokerage contract is terminated by law upon the sending of this notice.
   
   The clause type 1.14 - Notice of Termination of Exclusive Brokerage Contract – Purchase was designed to help the broker manage this situation. This clause type must be integrated into the mandatory modification form (MO) and signed by the buyer.
   
   The termination of the brokerage contract should not come as a surprise to the buyer, as the broker had already informed them at the signing of the purchase brokerage contract.
4. Following the termination of the purchase brokerage contract: the broker cannot demand any compensation from the buyer or other brokers to whom they referred the buyer.
    
   • The buyer wishes to be represented by a new real estate broker.
     
     The broker can refer the buyer to other brokers, but they cannot limit themselves to proposing a single name. The broker cannot receive any compensation for such a referral, as it would be a conflict of interest since they remain involved in the transaction as the seller's broker, and additionally, article 29.1 of the REBA clearly states that a licensee cannot demand compensation following the termination of the brokerage contract when in a dual representation situation.
      
   • The buyer does not want to be represented by another broker.
     
     The broker must inform the buyer that they represent the seller and must protect and promote the interests of their client. The broker must inform the buyer that they will be treated fairly if unrepresented.

Consult this diagram (PDF) which illustrates what to do when a buyer client is interested in a property for which the broker also has a sale brokerage contract (or residential rental brokerage contract).

What are the obligations of the agency manager when a broker from the agency faces a dual representation situation?

The agency manager must ensure that the broker facing a dual representation situation complies with current regulations, as indicated in question 3.

The agency must ensure that the broker acting on its behalf does not represent both the seller client and the buyer client within the same transaction.

The agency must ensure that they or the broker informs the buyer that the purchase brokerage contract with them is terminated by law from the date of sending or delivering the notice of termination.

The agency or the broker cannot demand any compensation following the notice of termination.

The agency or the broker must recommend to the buyer, following the notice of termination, to conclude a new contract aimed at the purchase or rental of the property with another real estate broker or another real estate agency to be represented and have their interests defended.

It is strongly recommended to obtain written confirmation from the buyer of the receipt of the notice of termination to ensure that the buyer is informed that the broker no longer represents them.

In the case where the buyer chooses not to be represented (i.e., not to conclude a written purchase brokerage contract with another licensee), the agency must ensure that the broker informs them that they cannot claim to represent, protect, promote, or defend their interests. They must inform them that they can only provide fair treatment, meaning objectively providing information on all relevant facts of the transaction as well as the rights and obligations of all parties involved in the transaction.

If an agency manager witnesses a non-compliant situation within another agency, the first thing to do is to contact the manager of the broker in question to resolve the situation. If this is not possible or if OACIQ intervention is required, they can contact the OACIQ Public Assistance Service.

Remax Platine has drafted a document that must be signed by the buyer who does not want to be represented despite the recommendations of the Real Estate Brokerage Act in Quebec, and the buyer must sign this document as proof that they have been informed of the recommendation.