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Representation Agreements Realty Brokers and Realty Buyers and Arguments of Enforceability
Question: Does a Broker Representation Agreement (OREA Form 300) Ensure Commission Payment Even if a Buyer Uses Another Realty Broker?
Answer: In Ontario, if a buyer under an active OREA Form 300, a Broker Representation Agreement, purchases a property through a different realty broker, both brokers might expect commission. The agreement typically obligates buyers to pay the original brokerage, and disputes are often resolved in Small Claims Court based on the specific contract terms and circumstances. For comprehensive legal guidance and support, consider Thamar Bilingual Legal Services Ontario at (647) 818-7974.
Does a Broker Representation Agreement (OREA Form 300) Make Commissions Payable Even If a Buyer Purchases Property From 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 OREA Form 300 serves as the document known as a Broker Representation Agreement. The Broker Representation Agreement establishes the written contractual terms between prospective purchasers and real estate brokerages and involves specific locations and will be applicable for a set timeframe. Legal disputes alleging breach of a Broker Representation Agreement are common and will frequently arise as proceedings of the Small Claims Court because the disputed commission sums are often within the thirty-five thousand ($35,000.00) dollar per Plaintiff limit of the Small Claims Court. Interestingly, the outcomes for these types of cases will sometimes favour the realty brokerage and sometimes favour the realty buyer as these cases will turn based upon each unique case scenario.
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.
As occurred in the case of Sun, the buyer attempted to argue that the written Broker Representation Agreement contained an oral term, or was amended by an oral term; however, such an argument was denied acceptance by the court based upon the parol evidence rule that exists so to support the principle of certainty of contracts. Accordingly, a buyer seeking to avoid enforcement of a Broker Representation Agreement will likely require proof of amendment of the Broker Representation Agreement by way of express writing. The application of the parol evidence rule, the rule in law that prevents an purported oral agreement from overwriting a written agreement, arose in the Sun case wherein the case of Fung v. Decca Homes Limited, 2019 ONCA 848, was cited and wherein Fung, it was stated:
[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. ...
Within cases disputing the enforceability of a Broker Representation Agreement, such as Sun, which among other cases cited Apex Results Realty Inc. v. Zaman, 2018 ONSC 7387, and First Contact Realty Ltd. v. Prime Real Estate Holdings Corporation, 2015 ONSC 5511, it is shown that the written terms within a Broker Representation Agreement will stand strong unless there exists an amendment in writing. In this respect, these cases all similarly state:
[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.
If avoiding the binding terms of a Broker Representation Agreement is the goal, demonstration of how the agreement was entered under false pretenses, such as misstatements by the realty agent, such as through dishonest representations, becomes imperative. The challenging task at hand would be to supply evidence, properly rooted in the principles of contract law, that indicate concerns graver than mere remorse for entering into a Broker Representation Agreement by the buyer.
Conclusion
A Broker Representation Agreement (OREA Form 300) is a standard and common contract used within the business of real estate dealings. As a contract, the general rules and principles of contract law apply; and as such, making a case that a Broker Representation Agreement is without binding effect and is unenforceable requires proof of factual circumstances that fall within the realm of general contract law. The fact that the Broker Representation Agreement is specific to the realty business fails to make such a contract unusually special and, generally, enforceability of the Broker Representation Agreement is subject to usual contract law principles.
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