A common question among sales representatives is how soon a brokerage must release commission after closing a deal. Many believe there are strict RECO guidelines setting out a timeline, but in fact, there are none.
RECO does not regulate when commissions must be paid, whether the transaction is within the same brokerage or between two brokerages.
In-House funds
In a double-ended deal, or when it receives payment as the co-operating brokerage, the brokerage holds the commission funds in its commission trust account. Those funds are considered paid to the brokerage. How the brokerage then distributes the money to you, the salesperson, is an internal matter governed by your independent contractor’s agreement.
Payment to the Co-operating Brokerage
When a listing brokerage pays a cooperating brokerage, there are rules that must be followed. Once the cooperating brokerage receives the funds, however, the transaction is considered complete from the perspective of PropTx and RECO.
If PropTx rules apply in your area, the commission must be released within seven days of closing, regardless of whether any lawyer’s funds have been received. The co-operating brokerage must always be paid in full before the listing brokerage takes its share.
Understanding these distinctions helps avoid confusion and conflict when commission payments are delayed. It comes down to the specific terms of your brokerage contract and, where applicable, the PropTx timelines that govern payment between brokerages.
Independent Contractor Agreements
There are many brokerages, usually the larger ones, with regular full-time staff in accounting. They will write you a cheque within 30 minutes of receipt.
Some other brokerages with only part-time staff will seek to delay payment, often for two weeks and sometimes more.
There are some contracts which will permit the brokerage to withhold funds and remit them the to CRA on your behalf on account of HST and income taxes. These funds are not placed in a trust account and any arrangement along those lines should be avoided.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com