April 7th - 2008

LEGALBEAT: Fee or commission – not both!

An employee/salesperson alleged that his employers had breached a provision of the Real Estate and Business Brokers Act by charging clients a flat processing fee and a percent sales commission.

An employee/salesperson alleged that his employers had breached a provision of the Real Estate and Business Brokers Act by charging clients a flat processing fee and a percent sales commission.
 
The judge said: “The legislation prohibits a listing agent from charging both a flat fee and a percent commission on a sale. R-O had an established practice of asking clients to pay $395 plus GST on listing to cover marketing expenses, in addition to a sales commission of either 5 percent or 6 percent, depending on the level of service chosen. This practice had been ongoing for 10 years and had been approved by their broker and by the ... Real Estate Board. Mr. R had also sent notification of the flat fee to the Registrar under the Real Estate and Business Brokers Act, and received no reply. Based on these steps, R-O were of the view that the charge for marketing expenses was permissible. Rule 5 of the Code of Ethics requires the member to fully inform a client regarding the type of expenses they might be liable for and without referring to this rule, the plaintiffs indicated that that they felt they were in compliance because the fee was for expenses and was fully disclosed to the client. After receiving his license, Mr. G questioned the practice with the business manager because he felt it was contrary to the prohibition against charging both a flat fee and a percentage commission. He was told that the practice was "okay" and to continue to collect this fee. Not long after, a client filed a complaint against the flat fee. The regulatory tribunal held a hearing and R-O was instructed to discontinue the practice. They did so immediately.”

Renaud v Graham 2007 CanLII 5680

MERV'S COMMENTS
Apart from how these "junk fees" are explained, they are not permitted in Ontario. The Act says that, "All commission or other remuneration payable to a brokerage in respect of a trade in real estate shall be either an agreed amount or percentage of the sale price or rental price, as the case may be, but not both ...” If you want to be paid more, why not just increase your commission rate percentage?

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