What rules does Ontario set on a business broker’s commission?

A seller or buyer may wonder whether Ontario limits what a business broker can charge. This page covers only what Ontario’s statute and regulation say about how remuneration is set, stated and claimed. It gives no fee levels and says nothing about what any broker charges. The rules reach a business sale because the Act’s definition of “real estate” includes businesses. For the registration bar, see can an unregistered business broker collect a commission in Ontario. This covers Ontario; check the rules where you are with a lawyer.

How the remuneration is set

Under s. 36(1) of the Trust in Real Estate Services Act, 2002 (TRESA), all remuneration payable to a brokerage in respect of a trade in real estate must be an agreed amount or percentage of the sale price or rental price, or a combination of both. Under s. 36(2), a percentage does not have to be fixed; it may be a series of percentages that decrease at specified amounts as the price increases. Under s. 36(3), no registrant may request or enter into an arrangement for remuneration based on the difference between the listed price and the actual sale price, and a registrant is not entitled to retain remuneration computed that way. Under O. Reg. 567/05 s. 23(3), a registrant may not indicate that remuneration is fixed or approved by the administrative authority, any government authority, or any real estate board or association.

When a registrant may claim it

Under O. Reg. 567/05 s. 23(1), and subject to s. 33(3) of the Act and s. 23(2) of the regulation, a registrant may not charge or collect remuneration unless the entitlement arises under a written agreement signed by or on behalf of the person required to pay it. The other route is another kind of agreement where the registrant has conveyed a written offer that is accepted, has shown the property to the buyer, or has introduced the buyer and seller to one another to discuss the proposed acquisition or disposition. Unless the seller agrees in writing, s. 33(3) bars a brokerage from claiming remuneration from the seller if, to its knowledge, the real estate is covered by an unexpired listing agreement with another brokerage. Section 23(2) is the buyer-side counterpart: unless the buyer agrees in writing, a registrant may not charge or collect remuneration from a buyer if the registrant knows there is an unexpired buyer representation agreement between that buyer and another registrant.

What must be disclosed

RECO says representation agreements must clearly identify the method used to determine the remuneration that the buyer is to pay the brokerage. If a brokerage has a representation agreement with a seller and an agreement between them has remuneration terms that may affect whether an offer to buy is accepted, O. Reg. 567/05 s. 23(4) requires it to disclose the existence and details of those terms to anyone who makes a written offer, as soon as possible after the offer is made and before any offer is accepted. A brokerage may represent more than one client in the same trade only if it discloses the prescribed information, including differences in remuneration arrangements, to each client and prospective client, and each consents in writing after receiving it (O. Reg. 567/05 s. 22(1)). RECO says a general mention of multiple representation in its Information Guide is not that disclosure and does not mean the client has consented. Ask the brokerage to show you each of these in writing.