What must an Ontario business broker give the buyer of a business?

A buyer working with or through an Ontario business broker may want to know what the broker must hand over before the contract is binding. Ontario’s regulation under the Trust in Real Estate Services Act, 2002 (TRESA) has a rule written for the purchase of a business. TRESA defines “real estate” to include businesses, and RECO says it enforces TRESA for conduct on December 1, 2023 onwards. This page covers that rule and the broker’s related disclosure duties. It does not say whether the numbers are reliable. This covers Ontario; check the rules where you are with a lawyer.

The statements a purchaser must receive

Under O. Reg. 567/05 s. 21(2), if the purchase of a business is negotiated by a registrant on behalf of the person disposing of it, the registrant must provide the purchaser, before a binding agreement of purchase and sale is entered into, statements signed by or on behalf of that person. They are a profit and loss statement for the preceding 12 months or since the person acquired the business, a statement of assets and liabilities, and a list of all fixtures, goods, chattels, other assets and rights relating to the business that are not included in the trade. The first two are subject to the exception in s. 21(4), below. Under s. 21(3), if the list is not provided and the agreement does not expressly deal with an item, it is deemed included in the trade.

When the first two are not required

Under s. 21(4), the profit and loss statement and the statement of assets and liabilities are not required if the purchaser signs, or has signed on their behalf, and delivers to the registrant a statement that the purchaser received and read a sworn or affirmed statement from the seller. The seller’s statement must set out the terms and conditions under which the seller holds possession of the business premises, the terms and conditions of any sublet of part of them, all liabilities of the business, and whether the seller has made the books of account in the seller’s possession available for the purchaser’s inspection, has refused to, or has none.

Other duties and the limit of a statement

Under s. 22.1(1), a broker or salesperson who represents a client in acquiring or disposing of a particular interest in real estate must take reasonable steps to determine the material facts relating to it, disclose them to the client as soon as possible after determining them, and advise the client to consider whether they affect the decision. Under s. 22.2(1), if a seller has a legal obligation to disclose a fact to the buyer and the broker or salesperson who represents the seller knows it, that broker or salesperson must disclose it to every buyer who expresses an interest in the real estate. Treat a signed statement as a starting point. Test it yourself through due diligence and ask your lawyer and accountant what to verify.