The length of the holdover period in the exclusive right-to-buy contract is best described as

Nasma Ali is the founder of One Group Real Estate and a sales representative for Sage Real Estate Ltd.

A trilingual mom of three in the top one per cent of all real estate agents in Toronto, and ranked 22nd in Canada for Keller Williams Advantage Realty, Ali’s best known on the Toronto real estate scene for her presence on Instagram where she shares her real estate journey with over 7,000 followers.

Prior to real estate Ali studied to be a computer engineer and is a certified negotiation expert. Her attention to detail, problem-solving skills and analytical thinking make her the perfect person to have in your corner when it comes to explaining contracts and paperwork.

As someone who measures her success according to her client’s satisfaction and believes in building long-lasting relationships, no one has second thoughts about working with her, but the same can’t be said for all realtors. So, what happens when you’re working with someone who does make you think twice? Ali shares her perspective.

If you’ve signed a buyer’s agreement, but are having second thoughts,  can you back out of the agreement and how do you go about it?

First of all,  a buyers’ agreement or buyer representation agreement (BRA) is a signed agreement that says a realtor will work in your best interest to find you a home for a specified length of time. You can set its expiry for any date, but if the date exceeds six months, the client must initial the document to acknowledge the extension. Usually, you never see those initials because a buyer’s agreement is rarely set for longer than six months. Until the agreement expires, the agent is entitled to the commission on all home purchases made during that period.

READ: The Ultimate Real Estate To English Translator For Homebuyers

Once the time period on the buyer’s agreement expires, there’s what’s called a holdover period. It usually lasts anywhere between 30 and 90 days. During the holdover period, the client cannot purchase a home shown to him by the agent on the expired buyer’s agreement without that agent also being entitled to that commission.

Buyers agreements can also be contained to a specific geographic region. The region can be as large as a province or as small as a neighbourhood. Bottom line, a buyer’s agreement is a contract, so it’s not supposed to be easy to get out of.

Photo by Cytonn Photography on Unsplash

Speaking from personal experience, I know some agents might hold you hostage with a buyer’s agreement I’ve had clients come to me and say, “I can’t get out of this agreement, the agent refuses to cancel it.”

If that’s the case,  the next step is to talk to the broker of record.  Agents are, technically, representatives of their brokerages and buyers are clients of the brokerage. If you explain the situation to the broker of record and they are reasonable, they will most likely cancel the agreement. Nobody wants to force anyone to work with them against their will.

READ: Ask An Agent: What Happens If My Pre-Construction Condo Is Cancelled?

There are cases where agents and their brokerages refuse to cancel a buyer’s agreement out of spite. They know the buyer won’t do business with them, but they also know that the moment the buyer purchases a house with another realtor, they will be entitled to commission from that sale. In that scenario, they will approach the other agent to get their commission.

Sometimes it can be very petty. I’m not trying to put agents in a bad light, I’m just saying it can happen. I know of a case where it actually did happen. In that case, it was a seller’s agreement. Neither the agent nor the brokerage would cancel it so the seller rented the home out for a year. They were up against a wall but waited until the seller’s agreement ran out before selling.

Personally, if my client came to me and wanted out of their buyer’s agreement, I’d cancel it. Why would I want to work with someone who doesn’t want to work with me? It doesn’t make sense.

READ: Even Financially Secure Single Home Buyers Hesitate On Buying In Canada

If both your agent and your brokerage refuse to let you out of a buyer’s agreement, that’s when you should approach the Real Estate Council of Ontario [RECO]. You can file a complaint, ask them to investigate or ask them to arrange for a mediator. This can save you from having to go to court or get a lawyer.

It’s also very important that the client understands what they are signing when they sign a buyer’s agreement.

I know of another situation where someone signed a buyer’s agreement for a lease. Instead of 2.5 per cent commission, the agent was entitled to half a month’s rent. A few months after the agent got them a rental unit, they worked with another agent and bought a home.

What they didn’t know — since they didn’t read the leasing agreement or it wasn’t properly explained to them — was that they had signed a leasing agreement and a buyer’s agreement, which meant the leasing agent was also entitled to the 2.5 per cent commission earned from that home purchase.

Make sure that doesn’t happen to you. Pay attention to what your agent has filled in on a buyer’s agreement, ask a lot of questions and get your agent to explain the agreement to you in the simplest terms.

Do you have a real estate question? Let us know on Twitter, Facebook or via email at [email protected]

by: Robert Pacan

It’s not uncommon that a listing agreement between a real estate agent and a seller include a “holdover period”. This clause states that the seller is liable to pay the commission to the real estate agent should the property sell within ‘x’ number of days after the listing agreement concludes, provided that the buyer was introduced to or saw the property during the listing period. An agent who puts in a lot of time and effort wants to be protected should a buyer decide to make an offer shortly after the listing agreement expires. A recent Ontario Court of Justice decision upheld the holdover period clause after the seller attempted not to pay the real estate agent’s commission.

In Sutton Group v. Kim (2014 ONSC 891), the Court heard arguments on whether the seller was required to pay real estate commission for the sale of his property 2 days after the expiration of the listing agreement between the seller and the seller’s agent. This listing agreement contained a 90 day holdover period. As stated, the property sold 2 days after the listing agreement expired, well within the holdover period. The seller contacted the agent after the property was sold and offered $2,000 for her time, but stated the commission was no longer payable because he sold the property himself. The brokerage pursued the agent’s commission in court. The seller argued, among other things, that he wasn’t liable under the listing agreement because he wasn’t informed of the holdover period, nor was the purchaser introduced to the property during the listing period or shown the property during the listing period. With respect to the first argument, the Court agreed that the seller was not informed by the holdover clause by his agent, but did not see that as justification not to pay. The Court reasoned that it was a well-established principle that a party could not escape liability through carelessness in not reading through a document that he or she had signed.

The seller also argued that the purchaser was introduced to the property prior to the listing period and not shown the property during the listing period. The Court found that while the seller was partly successful with this argument, it failed on the showing of the property during the listing period element. First, the seller argued that the purchasers had seen the property the year prior when they saw a ‘for sale’ sign near the property and were shown around by the tenant living at the property at the time. This having not been during the listing period, the Court agreed that the purchaser was not introduced to the property during the listing period. However, the second part of the holdover clause was met. It was determined that the purchaser was shown the property during the listing period once more, leaving the Court to conclude that the 5% commission was to remain payable to the agent as the holdover clause was engaged.

The takeaway from this case as a future seller is that if you sign a listing agreement, be attentive to the holdover period. This provision can be amended to however many days you feel is reasonable for an agent to receive commission. Whether you decide on 7, 30, or 90 days, be conscious of the fact that you still may be liable for commissions to your previous real estate agent. Before you sign an offer, vendors would be well advised to obtain advice on their particular circumstances prior to accepting an offer during the holdover period from anyone who was shown the property during the listing period.

This blog contains strictly general information and is not intended to replace advice from a qualified legal professional. The contents of this blog are therefore not to be relied upon as such. Any facts or examples used are for illustrative purposes only and not intended to address specific incidents or problems. Use of this information does not constitute a lawyer-client relationship. Retain a lawyer for legal advice prior to making any decisions referenced in this blog.