Real estate brokerage act: Guide for buyers and sellers
The Real Estate Brokerage Act in Québec underwent significant changes in June 2022. These changes, proposed by the Minister of Finance, aim to strengthen consumer protection in residential real estate brokerage. Two major modifications were introduced: the prohibition of dual agency and the elimination of verbal brokerage contracts. The main objective of these modifications is to increase transparency and avoid conflicts of interest in real estate transactions. This guide aims to explain these changes and their implications for buyers and sellers in the Quebec real estate market.
Key changes to the Real Estate Brokerage Act
The amendments made to the Real Estate Brokerage Act in June 2022 introduced significant changes in the practice of real estate brokerage. These changes aim to strengthen consumer protection and align Québec’s practices with those of other Canadian provinces.Prohibition of dual agency
Dual agency is now prohibited. In concrete terms, this means that a real estate broker can no longer simultaneously represent the seller and the buyer in the same transaction. This measure aims to avoid conflicts of interest, as it is considered impossible for a broker to prioritize both the interests of the seller (who wants to sell at the best price) and those of the buyer (who seeks to pay the lowest possible price).Elimination of verbal brokerage contracts
Verbal brokerage contracts are no longer valid. From now on, to represent a buyer or a seller, the broker must have a written brokerage contract. This measure aims to clarify the terms of the engagement between the broker and their client, thus offering better legal protection to both parties.Alignment with other Canadian provinces
These changes align Québec’s practices with those of other Canadian provinces. For example, British Columbia already prohibits real estate brokers from simultaneously representing both parties in a real estate transaction. Similarly, Alberta, Saskatchewan, Manitoba, Nova Scotia, and New Brunswick impose a strict framework for these situations.Advantages of the new law for buyers and sellers
The new Real Estate Brokerage Act brings several significant advantages for buyers and sellers :
- Increased consumer protection.
- Improved transparency.
- Reduction of conflicts of interest.
- Clarity of commitments.
- Equity in transactions.
The role of the Real Estate Broker for the seller
According to the new provisions of the Real Estate Brokerage Act, the role of the real estate broker for the seller has been clarified and strengthened. Here are the main responsibilities and obligations of the seller’s broker:- Written brokerage contract: The broker must have signed a written sales brokerage contract with the seller.
- Exclusive representation: They represent only the seller and defend their interests.
- Termination in case of dual agency: They must terminate their purchase brokerage contract in case of dual agency.
- Information and recommendation: They must inform the unrepresented buyer that they represent the seller and recommend that they seek representation.
- Equity in transactions: They must provide fair treatment to the buyer, whether represented or not.
- Advice and confidentiality: They must advise the seller according to their needs and not disclose confidential information about them.
- Verification and accuracy: They must verify the information they provide and be able to demonstrate its accuracy.
- Collaboration: They have the obligation to collaborate with brokers who request it.
- Identity verification: They must verify the identity and legal capacity of unrepresented parties.
- Remuneration: Their compensation is provided for in the sales brokerage contract.
The role of the Real Estate Broker for the buyer
With the changes made to the Real Estate Brokerage Act, the role of the broker for the buyer has been clarified and strengthened. Here are the main responsibilities and obligations of the buyer’s broker:
- Mandatory written contract: Signing of a written purchase brokerage contract.
- Exclusive representation: Defends only the interests of the buyer.
- Information on dual agency: Warns the buyer of the possibility of contract termination.
- Equity in transactions: Provides objective information to all parties.
- Advice and confidentiality: Guides the buyer and protects their confidential information.
- Information verification: Ensures the accuracy of the information provided.
- Collaboration: Works cooperatively with other professionals.
- Identity verification: Verifies the identity and legal capacity of unrepresented parties.
- Remuneration: Defined in the purchase brokerage contract, adjusted if necessary.
- Information to the unrepresented seller: Recommends that the seller without a broker seek representation.
Understanding the role of the collaborating broker without a brokerage contract
According to the information provided, the collaborating broker is a new role defined in the law. Here are the main characteristics of this role:- Works de facto for the seller.
- Collaborates with the seller’s broker.
- Does not represent or defend the interests of the buyer.
- Must inform the unrepresented buyer that they do not represent them.
- Must provide fair treatment to the buyer.
- Must provide a written notice to the buyer explaining their role, obligations, and mode of remuneration. This notice includes an acknowledgment from the buyer confirming that they have read it and received sufficient information to understand its scope.
- Is subject to the general ethical obligations of the broker.
- Their remuneration is based on the share of compensation provided for in the sales brokerage contract.
Common scenarios in Real Estate Transactions
The new Real Estate Brokerage Act in Québec frames different transaction situations. Here are the main scenarios:- Seller with broker, buyer without broker.
- Seller and buyer each having their own broker.
- Seller without broker, buyer with broker.
- Seller with broker and presence of a collaborating broker.
