When is an agent my agent?
Buyers are often confused about what, if anything, they may owe a real estate when they haven’t signed with them. The concern pops up most often when buyers view a home, but are unsure of the obligations they may have to the real estate agent who shows up. This issue gets even more muddied with misinformation given by salespeople who may have overheard a lawyer speaking about the issue, and then understood none of the intricacies. We want to address head-on the issue of when an agency relationship is formed with a real estate agent, and what obligations a buyer might have to one.
An agency relationship means when one party has the authority to act on behalf of another, including binding them in contracts. This is usually combined with a fiduciary obligation on the part of the agent, such as with lawyers.
When contemplating buying a home, and making offers, one will frequently be confronted with real estate agents attempting to insert themselves into the process. In response to the recent case 2021 ONSC 4743 (CanLII) | Homelife Maple Realty et al v. Singh et al | CanLII it is reasonable for people to wonder when they have retained an agent, and upon what terms. I will review the case, and consider the law of contract, and equitable remedy, in considering this issue.
The first thing to consider is the very basic question, Law 101, of what makes a contract. A contract, at its core, is an offer, and an acceptance. One party makes an offer, to buy or sell, and the other accepts. The critical element of a contract forming is what is called the 'meeting of minds', which means that the parties involved either did, or should reasonably be expected in the circumstances, to have understood they have made the same agreement. This is why contracts are best done in writing: so both sides can consider the document and agree that everything written constitutes the agreement being made.
This is also why it is essential to read carefully any written agreement presented to you for your signature. The law assumes that if you signed an agreement you intended to be bound by its terms, and were aware of them at the time you signed it. If you were misled or deceived into signing a contract, you will need to prove that deception, but even that does not relieve you of the obligation to actually read what you sign. In the case of the OREA 300, it contains an important clause to make sure buyers who sign it are bound to it: an ‘Entire Agreement’ clause, which excludes any representation made outside the contract from forming part of the contract. Agreements don't need to be in writing, but it is much easier to determine when an agreement has been made and upon what terms if it is in writing.
Turning to the case above, it is reasonable to ask what it says about retaining a real estate agent, and when there is an agreement. Have I retained an agent when I ask them any questions? If I view a property and an agent is there, have I retained them? You need to consider the circumstances, but basically, the answer is no. The agent cannot force a contract upon you by deception. What the case above reveals is that the buyers had an agent, and that agent was doing work for them, and then they decided, when they needed more money to buy the property they wanted, to rely upon the fact that they never actually signed the Buyer Representation Agreement (BRA) to claim that they had never retained their agent. The agent sent them a BRA, and then proceeded to do a lot of work for the buyers, engaging in negotiation on their behalf, and making offers. This is what in law is called 'reasonable reliance'. The agent had sent the BRA to the buyers, and the buyers, though they had not signed it, were acting, in legal terms 'with the intent to be bound' by the terms of the contract. Meaning, their actions indicated that they wanted the agent to do things for them in their search for a home, and were aware of the terms of him doing that, because the BRA had been provided to them. They knew, or reasonably should have known, that the agent was acting on the basis of being bound by his BRA, and, as the judge found in the above ruling, there would be unjust enrichment were the buyers permitted to avoid paying the agent because the BRA was not signed.
At ZVR, we consider the standard OREA 300 BRA to be predatory in nature, and refuse to use it. The contract obligates the buyer to pay the commission to the agent on the purchase of a property during the period of the Agreement, even if the agent was not involved in finding, negotiating or signing the Purchase Agreement. In addition, signing it often follows false representations as inducements. Agents quite often say not to worry about signing it because it is standard (as if that helps), and critically, that the seller will pay the commission required by the BRA. This is contrary to the terms on the face of the BRA. The OREA 300 states that a buyer will pay no matter what a seller agrees to. Worse than that, the practice of using co-operating commissions, where the Seller’s agent agrees to pay a portion of his commission to the Buyer’s agent, is hidden from buyers, and they are unable to make a proper decision or even discover the true cost of their agent. In short, the entire structure is unjust, and fundamentally based upon deception.
What does this mean then for understanding when you have, or have not, retained a real estate agent, and what to do? Firstly, be clear. If you want to avoid uncertainty or argument about whether you have retained an agent to work for you, be explicit at all times, if you can, in writing by email or text message, because those have date and time stamps. If representations are made to induce you to a contract, it is best to include them in writing in the contract itself. Second, enquire. If you're asking an agent for something, and they appear willing to do an awful lot of work and you don't think you've hired them, remind them that you have not retained them, again in writing if possible. Finally, stand your ground. Agents will sometimes do things for you, and then try to guilt you or otherwise convince you to sign up to being their client when you have no obligation to do so. For example, if you search on Redfin, House Sigma, Fairsquare Properly or Zolo for a property, and book a showing, buyers are often surprised that the person who shows up is not the Seller's agent, but a buyer's agent who is attempting to insert himself into the transaction to get paid. They'll sometimes go through the whole showing without explaining who they are or their relationship to the transaction. Them showing up and doing something, without explaining the terms of any agreement, does not obligate you to do anything. The same would apply to the listing agent. Remember: the meeting of minds. They cannot deceive you into an agreement; that violates the most basic precept of contract law.
In summary, contracts are formed by an offer and an acceptance, which creates a meeting of minds, when the parties understand they have made an agreement in the same way. Contracts do not have to be written, but generally written is preferred because it allows for greater certainty of terms. Contracts can arise by conduct, if the parties act in a way which indicates their intention to create legal relations. Essentially, law is more complex and nuanced than a set of simple statements (beware anyone who tells you something which begins with "All you have to do is...") which allows obviously unjust situations to be enforced. You need to be aware, and clarify with people with whom you interact in their professional capacity, when they are being asked to do something for compensation, and how much. It is for exactly this reason that lawyers insist upon written retainer letters before they do anything for clients, and expressly state on websites and in emails that they are not retained because they answer an email question.
