Can my business broker buy my business in Ontario?

Ontario’s Trust in Real Estate Services Act, 2002 (TRESA) says “real estate” includes businesses, so it can apply to business brokerage. If your broker, or someone connected to it, wants to buy, TRESA and RECO’s bulletins set steps.

The written notice when the registrant is the buyer

Section 32 of TRESA says no registrant (a brokerage, broker or salesperson) shall, directly or indirectly, acquire any interest in real estate for themselves, or offer to, unless they first deliver a written notice to all other parties to the agreement and those parties have acknowledged receipt in writing. The notice must state the registrant’s status, disclose all facts within the registrant’s knowledge that affect or will affect the value, and give particulars of any negotiation, offer or agreement for a later sale of an interest in it to anyone else. RECO’s Bulletin 3.4 says this comes before any offer is made or received.

When someone connected to the broker has an interest

RECO’s Bulletin 3.4 separately says that if an agent represents a client on a purchase or sale and knows (or ought to know) of an interest that the brokerage, the agent, a person related to either, the agent’s personal real estate corporation or a person related to it has or may have in the property, the agent must disclose it to the client and every person making or receiving an offer, as soon as possible and before any offer. It must describe the interest and, if someone else holds it, the relationship.

The conflict-of-interest steps

Under the Code of Ethics, a registrant must not provide or continue to provide services to a client whose interests conflict or may conflict with its own unless it has disclosed to the client or prospective client the transaction or relationship, advised them to seek independent professional advice about it, taken all reasonable steps to ensure they have demonstrated a reasonable understanding of the conflict, and obtained their written consent despite it. Bulletin 3.4 says an agent who wants to buy a seller client’s property could not represent the seller, as the conflict is too severe to manage.

Questions to put to the broker

• Who exactly would buy, and how are they connected to the brokerage?
• Will the written notice come before any offer?
• Who will act for you in the sale, and who will advise you on price?