Sub-Agency still needs to be explained

In large measure, sub-agency has come and gone. It exists only in rare situations.

You have to go back to the early 1990’s and earlier. The Listing agent offered a commission to the co-operating Brokerages. By reason of sub-agency, they became the agent of the agent.

So, the buyer really had no one working for them. If they indicated that they might consider increasing their offer by another $10,000.00 to the person whom they mistakenly believed was acting for them, they would find that this “secret” was suddenly passed along to the Seller.

What we had was two agents working for the Seller and no one working for the Buyer. The Ontario Court of Appeal in the Knock Estate basically said that that was crazy and just didn’t make any sense (actually they didn’t say that specifically, they polished up the words).

The same issue had presented itself in the United States. Buyer Representation was invented along with the concept of a “customer” so that brokerages could still double end the deals.

Commercially, sub-agency still exists, but residentially it’s essentially been gone since the early 1990’s.

Now, we come to both the Listing Agreement and the Buyer’s Representation Agreement. They both say that you:

  1. Explained sub-agency, and
  2. Delivered a document explaining sub-agency.

The only problem is that you may not have really known what sub-agency was, and when you did give “Working with a Realtor” to a person, there was no explanation.

This “failure” is great for cross-examination in Court because it will catch just about everyone off guard.

Brian Madigan LL.B., Broker

Comments 1

  1. If sub agency does not exist in today’s RESIDENTIAL transactions…what must you explain to your home vendor client and to your home purchaser client in order to ensure you are compliant?

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