This is the Representation paragraph:
“3. REPRESENTATION: The Seller acknowledges that the Listing Brokerage has provided the Seller with written information explaining relationships, including information on Seller Representation, Sub-agency, Buyer Representation, Multiple Representation and Self-Represented Party assistance. The Seller understands that unless the Seller is otherwise informed, the co-operating brokerage is representing the interests of the buyer in the transaction. The Seller further acknowledges that the Listing Brokerage may be listing other properties that may be similar to the Seller’s Property and the Seller hereby consents to the Listing Brokerage listing other properties that may be similar to the Seller’s Property without any claim by the Seller of conflict of interest. The Seller hereby appoints the Listing Brokerage as the Seller’s agent for the purpose of giving and receiving notices pursuant to any offer or agreement to purchase the Property. Unless otherwise agreed in writing between Seller and Listing Brokerage, any commission payable to any other brokerage shall be paid out of the commission the Seller pays the Listing Brokerage, said commission to be disbursed in accordance with the Commission Trust Agreement.”
Review
Set out below and marked in bold and italics are those words that are inserted by me to assist in the review. They are not set out in the clause itself. Let’s look at that paragraph in a little more detail:
3. REPRESENTATION:
Acknowledgement
The Seller acknowledges that the Listing Brokerage has provided the Seller
Relationship Explanations in Writing
with written information explaining relationships, including information on
- Seller Representation,
- Sub-agency,
- Buyer Representation,
- Multiple Representation and
- Self-Represented Party assistance.
Cooperating Brokerage is acting for Buyer
The Seller understands that unless the Seller is otherwise informed,
the co-operating brokerage is representing the interests of the buyer in the transaction.
Similar Properties: No Conflict
The Seller further acknowledges that the Listing Brokerage may be listing other properties that may be similar to the Seller’s Property and
the Seller hereby consents to the Listing Brokerage listing other properties that may be similar to the Seller’s Property
without any claim by the Seller of conflict of interest.
Appointment: Give and Receive Notices
The Seller hereby appoints the Listing Brokerage as the Seller’s agent for the purpose of giving and receiving notices
pursuant to any offer or agreement to purchase the Property.
Cooperating Commission Comes out of Total Commission
Unless otherwise agreed in writing between Seller and Listing Brokerage,
any commission payable to any other brokerage shall be paid out of the commission the Seller pays the Listing Brokerage,
said commission to be disbursed in accordance with the Commission Trust Agreement.
COMMENT
So, where’s the “written information about representation agreements? The RECO Information Guide covers the following: Seller Representation, Buyer Representation, Multiple Representation and Self-Represented Party assistance. However, it didn’t cover Sub-agency. That’s not there!
So, you are going to have to find that somewhere else. At one time, it was covered in the “Working with a Realtor” (WWR) document, but it was dropped out of the more recent versions. Besides, OREA has now eliminated the WWR document in its entirety.
Let me explain sub-agency. Let’s assume that the Seller lists his property with ABC Brokerage and that brokerage requires the assistance of another brokerage to handle some part of the transaction. The first Brokerage could retain XYZ Brokerage to provide that assistance. Since there is no direct relationship between XYZ and the Seller, XYZ is the sub-agent of ABC, however, it still owes its fiduciary duties to the Seller.
A further example may be a situation wherein the Listing Brokerage offers a commission. XYZ has a potential buyer who has not signed a Buyer Representation Agreement (BRA). And, going forward, they won’t because they are a very sophisticated purchaser. XYZ approaches ABC and receives the sub-agency appointment. Going forward both ABC and XYZ represent the Seller. The Buyer is on his own in this deal.
If the Buyer says something to XYZ, then this information is passed along to ABC and ultimately the Seller. Both Brokerages are acting for the Seller, and none one is acting for the Buyer.
In the ‘60’s, ‘70’s, and ‘80’s, that was how it worked. It was at that time, that the industry switched over to Buyer Representation. That presented a problem for some larger Brokerages which now had a potential conflict acting on both sides of a transaction. So, “Customer Service” a lower service level without fiduciary duties was introduced. That service model was eliminated with the TRESA changes.
That still leaves us with the Sub-agency arrangements. This takes place most frequently in commercial transactions.
Sub-agency should not be confused with co-listing arrangements. In this model, The Sellers directly retains ABC and XYZ. In sub-agency, it is ABC which retains XYZ on behalf of the Seller.
The difficulty going forward is that the Listing Agreement makes reference to sub-agency and says that the Listing agent already handed out the written explanation. Many, in fact, most Listing agents will simply assume that it was covered in the RECO Information Guide and it wasn’t. And, it’s been gone for years from the WWR and that document is now gone. This could present a very embarrassing situation for the Listing agent in cross-examination in any legal proceedings.
There is an acknowledgement that the Listing Brokerage may have similar properties and that’s not a conflict.
An appointment is made with respect to giving and receiving notices. So, that should be carried forward into an Offer or Agreement of Purchase and Sale. It should be noted that this appointment does not apply in the case of multiple representation.
The total commission is specified and the cooperating commission will come out of that.
Brian Madigan LL.B., Broker