Understanding Buyer Representation Agreements

When buying a home, before the Agreement of Purchase and Sale is even a consideration, there is another form of contract buyers must sign that people may not be as familiar with. The Buyer Representation Agreement (BRA), a contract that a realtor or agent may ask the buyer to sign, gives the real estate company exclusive permission to act on the buyer’s behalf in the acquisition of a piece of real estate property. Below, we review the purpose behind the BRA and the typical legal obligations of each party to a BRA.

Buyer Representation Agreement Objectives

Basically, the BRA aims to govern the terms of the agency relationship of the Real Estate company or brokerage on behalf of the buyer. The BRA typically will indicate the buyer’s agreement to pay the agent a commission for their role, which will normally include the agent managing much of the purchasing process, including contract negotiations with the seller and all of the required paperwork.

BRA’s almost always provide for a period of exclusivity for the term of the contract, so that if you purchase property during the contract term, the real estate agent will receive a commission regardless of whether they were involved with the purchase of the property. The exclusivity will also mean that the buyer can’t use another real estate agent for a purchase during the term of the agreement. There is usually a fixed term to the agreement so that buyers can seek new representation if they haven’t found a property to purchase by the end of the term. BRA’s also often provide for an indemnification clause which removes any liability for the real estate agent for the physical condition of the purchased property.

The terms (especially the duration) of the BRA are negotiable and should be in writing, as this helps to ensure all parties are clear on their obligations. This is particularly important with respect to the commission, as this can often be a source for legal disputes. A recent case decided by the courts, Sutton Group-Admiral Realty Inc. v. Taborovska, illustrates the need for both parties to a BRA to have an understanding of the obligations and the terms within it.

Real Estate Agent Commissions

In the Taborovska case, an agent from a realty group worked with the parents of the respondent (Ms. Taborovska) to find a home for her. The parents, who live in Ukraine, made an offer on a home in Mississauga under their daughter’s name. The daughter also signed an Agreement of Purchase and Sale for the property and a BRA which provided the agent with a 2.5% commission for any home she purchased between mid-November 2018 and mid-March 2019.

The offer for the home in Mississauga was rejected and the purchase didn’t go through. Just ten days after she signed the BRA, the daughter put an offer on another piece of property through another real estate agent. The agent sued to obtain the 2.5% commission on this deal, as per the terms of the BRA. Ms. Taborovska however sought a declaration with the courts that the BRA which she signed was void and unenforceable. She argued this on the legal principle of “Non Est Factum”.

Understanding Contract Terms: “Non Est Factum

Non Est Factum is a legal defence that means that a written contract is invalid because the defendant was mistaken about its meaning (or the meaning of particular terms within it). To be able to plead this defence successfully, the defendant must prove on a balance of probabilities that:

  1. she was mistaken about the nature of the contract;
  2. the mistake of the nature of the contract was a result of a misrepresentation by the other party to the contract; and
  3. that she was not careless in signing the agreement.

The Judge concluded that Ms. Taborovska was able to satisfy all three elements of the defence and ruled in her favour. Much of this was due to the somewhat unique circumstances of this case, as the BRA (as well as the Agreement of Purchase and Sale) was in English but the conversations between the Agent and the Buyers’ parents were in Russian and the parents relied upon the agent to translate the terms of the contracts to them. In addition, while Ms. Taborovska signed the BRA, the discussions relating to the agreement largely took place between the agent and her parents.

There were different accounts between the parties as to who explained what or what had been explained or translated, including whether there was a clause-by-clause oral translation of the documents or just a general summation of the terms of the BRA. The court ultimately found the testimony of the buyers to be more credible that they did not fully understand the terms of the BRA nor did they have the terms fully explained to them.

Court Finds Agent Misrepresented Contents of the Buyer Representation Agreement

The second threshold was met as the court ruled that the agent mispresented the nature of the BRA to the buyers by telling them that it related only to the Mississauga property. The agent did not explicitly confirm that that the BRA would provide him with a commission should they purchase any other property (whether through another agent or not).

The third threshold with respect to carelessness was also met as the court ruled that the defendant had not been careless in her actions, since the agent had been dealing mostly with her parents and had not communicated directly or often with her during the contract discussions. Effectively, it was reasonable for the daughter to rely upon the information she received from her father who was handling the negotiations as her own de facto agent and who was exercising the necessary due diligence on her behalf.

In contrast, it was the agent who was arguably careless as he never spoke directly to the purchaser, his client, about the BRA directly. According to the court,

Mr. Antonenko had an obligation to ensure Gann understood the documents he was asking her to sign. Having failed to do so, Mr. Antonenko cannot now try to enforce the terms of the BRA he did not explain.

As such, the agent wasn’t able to claim the commission.

The case highlights the need for either party to a BRA to understand their obligations under it and contractual terms in general. Non Est Factum claims are not easy to make successfully, and the burden is upon the defendant to prove beyond a balance of probabilities the necessary threshold elements. Although the defendant was successful in this instance, seeking legal advice to review any contract is always recommended, particularly if one is unsure of the meaning or character of various contract clauses.

Contact the Real Estate Lawyers at Prudent Law for Advice on Residential Real Estate Contracts Before You Sign

The lawyers at Prudent Law in Mississauga are trusted advocates with respect to contract disputes,  real estate transactions and real estate litigation. We provide practical advice and passionate representation in both residential and commercial real estate deals. If you are contemplating the sale or acquisition of a piece of real property and you’d like to discuss it with one of our experienced real estate lawyers, please call us at 905-361-9789 or contact us online.

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