Beware of Flat Fee Brokerages

Compensation for Real estate brokers must be tied to the sale of a property, according to a new ruling from the Supreme Court of Canada.
In a 7-2 decision titled Association des courtiers et agents immobiliers du Québec v. Proprio Direct Inc., the Court ruled that Proprio Direct’s practice of charging a non-refundable fee for their services – whether or not they successfully sold the property – violated the consumer protection principles of Québec’s Real Estate Brokerage Act (REBA).
Quoting the REBA, the decision noted that every exclusive brokerage contract must set out the nature and manner of the broker’s compensation, including particulars determined by government regulation. Those “particulars” include a requirement that compensation is payable only in the event of a sale.
“This interpretation is supported too by the fact that the purpose of REBA is to protect consumers,” wrote J. Abella, explaining the judgement. “Consumer protection trumps freedom of contract, not the other way around.”
This decision restores the Court of Québec’s original finding in the case, which had been overturned by the Court of Appeal for Québec. The two dissenting judges on the Supreme Court agreed with the Court of Appeal that the REBA’s compensation provisions were not mandatory.
The case stemmed from complaints filed by two vendors who signed exclusive brokerage contracts with Proprio Direct requiring them to pay a non-refundable “membership fee”, in addition to a commission if the property sold. The two vendors paid fees of $1,262.97 and $1,724.22, although their homes were not sold during the contract period.