Commercial real estate brokerage

The aim of this stipulation introduced to Brokerage contract is to draw seller’s attention, as soon as the contract is taken, to the fact that the immovable can be subject to taxes, in whole or in part. For this purpose, although the licence holder is obliged to inform his selling client that the immovable could be subject in whole or in part to GST and QST, it is the seller’s responsibility to provide the broker with the proportion in which the immovable is subject to taxes, and it’s not for the broker to determine that. The seller must make this verification with an expert in the field, such as his accountant or tax expert and, if necessary, with tax authorities like Revenu Québec. The broker must keep this information in the brokerage contract record.

Read the following articles for more details:

Application of GST and QST to the Sale of a Building Used for Residential and Commercial Purposes

Residential immovable – subject or not to GST and QST - Declaration to be made in the mandatory brokerage contract and promise to purchase forms

No. A real estate broker’s licence restricted to residential brokerage allows its holder to only act within the parameters of section 3 of the Regulation respecting the issue of broker’s and agency licences. To carry out commercial real estate transactions, you must be licensed in this area of practice. In addition, remember that under section 73 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising, any transaction must fall within the limits of your area of expertise.              

This means whether or not it is a co-listing, the brokerage contract cannot provide that the holder acts as an intermediary in a brokerage transaction that does not fall within his or her area of expertise.

You may however add this expertise to your licence by completing a basic training program in commercial real estate brokerage in an educational institution recognized by the OACIQ and passing the certification exam.    

No. All brokers and agencies are governed by the same ethical obligations, regardless of their area of practice. In the day-to-day activities however, there are significant differences in the practices depending on the area of practice.

Read the article “Residential” or “Commercial” Brokerage: Ethical obligations are the same for all for more details.

Unlike a residential transaction for which OACIQ mandatory forms must be used, it is not necessary to use them in commercial transactions. Commercial transactions between seasoned investors include particularities specific to each one. Many agencies will decide to use their own customized forms and include some standard clauses drafted by the OACIQ.

Note that the OACIQ has developed recommended forms that can be used for a commercial transaction. Like the other forms, they are available on InstanetForms.

More information can be found in the article What forms should be used for the sale of an enterprise? and in the Regulation respecting contracts and forms.

No, this form is not mandatory, but to better inform the buyer and to avoid any dispute, its use is highly recommended, as set out in section 82 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising.

Yes. Only a licence holder authorized to engage in commercial transactions may act as intermediary, in exchange for compensation, for the purchase or sale of an enterprise whose assets, based on their market value, mainly consist of immovable property.

Thus, you must know that the sale of an enterprise that does not include an immovable (formerly called “business assets sale”) is not a brokerage transaction subject to the Real Estate Brokerage Act, as the sale of an enterprise whose assets, based on their market value, do not mainly consist of immovable property. Whether you hold a commercial or residential real estate brokerage licence, you have to be cautious if you decide to engage in a transaction in this context. Above all, note that the transaction will not be covered by the Professional Liability Insurance Fund. In addition, you must inform the parties to a transaction that they will not benefit from the protection mechanisms offered by the Real Estate Brokerage Act.

Further information can be found in section 1.1 of the Real Estate Brokerage Act and in the article entitled What forms should be used for the sale of an enterprise?

You need to be vigilant. In fact, you cannot act in violation the Securities Act. However, you may however be called upon to act as intermediary for the sale or purchase of an enterprise that results in the sale of shares.

The article entitled The sale of shares: Do you have the right? provides more information in this regard.

Yes, it is possible. However, the best practice is to also sign a brokerage contract with the lessee or buyer you are representing and provide for a method for entering into a remuneration payment agreement with the seller or lessor. Your remuneration agreement with the seller or lessor must be concluded before drafting the promise to purchase or lease. In this context, this remuneration agreement does not constitute a brokerage contract since you do not represent the seller or lessor, but the buyer or lessee.  This remuneration agreement must also be disclosed in writing to your buying client or the lessee, if this is not already specified in your brokerage contract. Moreover, because you are not a party to the transaction promise, your remuneration must not be included therein.

Note that a broker representing a lessee or buyer cannot enter into a remuneration agreement with the seller or lessor if the latter is already represented and has signed a brokerage contract with another broker (section 99 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising). 

Under section 95 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising, a broker must collaborate with the other licence holder by establishing an agreement in advance.

A broker or agency executive officer who offers to sell or lease an immovable or enterprise, in whole or in part, must collaborate with any other licence holder who so requests. He must also offer the collaborating broker reasonable remuneration sharing terms, agreed on beforehand.

Unreasonable remuneration sharing terms could reduce the interest of another broker or agency in proposing the immovable or enterprise under the brokerage contract to their clients. It is therefore easier to understand the broker’s obligation to inform his client in writing of the remuneration sharing terms that he intends to offer to a broker or an agency collaborating in the transaction, as well as the consequences of this sharing, as required by the regulation.

For further details, read the article Informing clients of the remuneration sharing conditions.

The commercial real estate broker often faces a dilemma when it comes to respecting his duty to collaborate with other brokers, while ensuring that sensitive information regarding the sale of a business is not disclosed to a competitor, for instance. Since all brokers are subject to the duty to collaborate, the broker who engages in commercial transactions will not evade his duty to share information and to agree in advance to share remuneration with a buyer’s broker.

The compromise often lies in the signing of a confidentiality agreement by the buyer for the non-dissemination of information. Obviously, such an agreement should be used under special circumstances required by the seller, but should not be used systematically. When such circumstances exist, the handling of this document is the seller’s broker’s responsibility. In addition, various problems may arise from a misuse of this document as you will see in the article entitled Commercial brokerage: Confidentiality of information and duty to collaborate

Under section 23 of the Real Estate Brokerage Act,  it is only when the brokerage contract concerns the sale of part or all of a chiefly residential immovable comprising less than five dwellings that the sale is required to take place within 180 days following the expiration of the brokerage contract to entitle the broker to remuneration.

For a commercial transaction, your compensation will be protected for 365 days if you used your own form or the recommended form Exclusive brokerage contract – Sale of an immovable, whose abbreviation is “BCG” (“G” for “General”), in which the 365-day period is shown.

Attention! If you used the form Exclusive brokerage contract – Sale of a chiefly residential immovable containing  less  than  5  dwellings  excluding  co-ownership  (BCS)  even if it was not mandatory to use it, the period stated in the contract is then 180 days.

The information centre Info OACIQ is the first place to contact for any questions.

The Canadian Commercial Arbitration Centre is also a resource to consult in the event of a dispute.

Yes. Licence holders performing leasing brokerage transactions are subject to the obligations of the REBA even when carrying out a leasing transaction. Other unlicensed corporations or persons may now carry out leasing brokerage transactions, but cannot use a title that leads others to believe that they are real estate brokers. Only OACIQ licence holders may use the title of real estate broker or agency. Therefore, real estate brokers outside the province of Quebec will not be able to practise in Quebec without being registered as real estate brokers with the OACIQ.

Pursuant to section 37 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising, a licence holder may not share remuneration with a person or partnership that engages in or attempts to engage in brokerage activities without being authorized to do so in or outside Québec.

Nevertheless, in commercial leasing brokerage, it is possible to share remuneration with an unlicensed person who represents a promisor-lessee. You should sign a remuneration agreement in advance with the person concerned and disclose this information to your client.