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Representation Agreements Realty Brokers and Realty Buyers and Arguments of Enforceability
Question: Are commissions still owed if a buyer acquires property through a different realty broker under the OREA Form 300?
Answer: Yes, generally under the Ontario Real Estate Association Form 300, or Broker Representation Agreement, a buyer may be required to pay commission to both brokers if acquiring property through a different broker while the agreement is active. This underscores the importance of understanding your obligations under such contracts. For personalized legal guidance, consult a professional familiar with real estate law in Ontario.
Does a Broker Representation Agreement (OREA Form 300) Make Commissions Payable Even If a Buyer Purchases Property From Another Realty Broker?
Generally, Depending Upon the Specific Facts of Each Case, a Buyer Under a Broker Representation Agreement Must Pay Commission to the Broker. If the Buyer Makes a Purchase Through Another Broker, then the Buyer Owes Respective Commissions to Each Broker.
Understanding the Enforceability of Broker Representation Agreements Involving the Ontario Real Estate Association Form 300
In the Province of Ontario, individuals encounter the OREA Form 300, colloquially termed as a Broker Representation Agreement. This legal document facilitates an agreement between an aspiring purchaser and a real estate brokerage firm, typically restricting its scope to a specific geographical locale and a predetermined duration. The realm of legal conflicts stemming from purported violations of such agreements frequently transpires within the confines of the Small Claims Court; the reason being that the commission amounts in question usually fall within the Small Claims Court maximum monetary jurisdiction limit set at thirty-five thousand dollars ($35,000.00) dollars per Plaintiff. It is noteworthy that the outcomes of these legal battles varied whereas the resolution heavily relies upon the distinctive facts of each individual case.
The Law
The case of Sun v. Mani, 2024 CanLII 35486, provides a typical example of a dispute involving commissions payable under a Broker Representation Agreement. Within the Sun case it was said:
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.
Within the Sun case, the Defendant tried to argue that the Broker Representation Agreement was altered by a verbal term uttered by the realty agent promising to refrain from any subsequent attempt to enforce the Broker Representation Agreement. This argument, purporting that the written terms were altered by a verbal term, was unaccepted by the court whereas the court adhered to the parol evidence rule which a contract law doctrine intended to ensure certainty of contracts. The primacy of the parol evidence rule, which mitigates against the supplanting of written agreements with allegedly spoken terms, was underscored in the Sun case with reference to and reliance upon Fung v. Decca Homes Limited, 2019 ONCA 848, wherein it was said:
[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. ...
The parol evidence rule appears to often arise in cases disputing enforcement of a Broker Representation Agreement whereas within Sun, while citing Apex Results Realty Inc. v. Zaman, 2018 ONSC 7387, and First Contact Realty Ltd. v. Prime Real Estate Holdings Corporation, 2015 ONSC 5511, all stand for the proposition that the written terms within a Broker Representation Agreement require amendment in writing rather than merely a purported verbal amendment. Specifically, these cases stated:
[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.
A buyer, to successfully circumvent the enforcement of a Broker Representation Agreement, will generally need to provide a court with evidentiary support that the agreement was entered into under legally objectionable circumstances such as misleading conduct by a realty agent. Doing so will, generally, require proving a case that extends beyond mere regret for having entered into the Broker Representation Agreement and will need to lean upon legal principles specific to contract law if the court is to deem invalid the binding effect of a signed Broker Representation Agreement.
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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