Commission Sharing Agreements

Real estate agents often work in small teams, or align themselves with others for specific projects.

Here’s an example of an arrangement between John and Robert.

John’s brother William is the President of a small consulting company. They are looking to buy a commercial building as a long term investment. Naturally, William speaks to his brother John about finding some space.

The problem is simple. John works in the residential market and requires the expertise of Robert who specializes in commercial transactions.

So, they work out a deal. Robert will assist John with the transaction. Robert’s portion of the commission is “first pay”. He gets priority. If there’s any commission reduction of any kind, then it’s coming out of John’s share.

Any new business arising out of the relationship shall be John’s. That means that John will do any residential deals himself, and if there is another complicated commercial transaction, he can sit down again with Robert and work something out for that deal.

Have a look at the draft agreement:

Commission Sharing Agreement

Whereas John Smith has entered into a Buyer’s Representation Agreement (BRA) with XYZ Inc. (hereinafter referred to as the client) for the acquisition of a property or properties to be used as the client’s head offices.

And whereas both John Smith, Sales Representative and Robert Jones, Broker independent contractors registered by RECO with ABC Realty Inc., Brokerage.

And whereas, John Smith has requested that Robert Jones assist him with respect to the transaction.

In consideration of the premises, and the sum of two dollars the receipt of which is acknowledged and other good and valuable consideration the parties hereto agree as follows:

1. Robert Jones will assist John Smith in respect to the transaction(s).
2. Robert Jones will be paid one percent (1%) of the value of the purchase price in the transaction(s), which shall be a first priority allocation out of the commission entitlement due on account of this transaction(s), paid by either the Seller or the client.
3. John Smith will charge the Seller a percentage equal to or higher than 1% of the purchase price, which shall have no effect upon the commission to be paid to Robert Jones.
4. All leads, prospects, and any business arising out this relationship shall remain with John Smith.
5. Any future business relationship shall be solely at John Smith’s discretion.
6. This agreement shall be filed with ABC Realty Inc., Brokerage.
7. This agreement shall continue throughout the duration of the BRA, and any extensions, continuations or replacement BRA’s, until terminated by the parties.

In witness whereof, the parties hereto have executed this agreement

this          day of  May 2021 at Toronto, Ontario.

_______________                                                        ____________________

witness                                                                          John Smith

_______________                                                        ____________________

witness                                                                          Robert Jones

Of course, with some variations we can have two separate Brokerages for John and Robert.

Brian Madigan LL.B., Broker
www.iSourceRealEstate.com