Realtors' commissions belong to the agencies says the Court

Jeudi, 29 mai 2014


GMREB and QFREB are invited to defend the realtors
Commissions from Quebec “self-employed” real estate brokers are not immune from the various creditors in a bankruptcy of their agency. That at least, is the Quebec Superior Court’s conclusion in the Groupe Sutton- Royal Inc. (Syndic de) case, where seven former brokers from the fallen agency Groupe Sutton-Royal inc. are opposing the trustee Demers Beaulne.
In a case of bankruptcy of a real estate agency, the bank account used for receiving and temporarily keeping the commissions earned by its brokers is not considered a "trust" within the meaning of the Bankruptcy Act. Furthermore, Justice Lalonde comes to the conclusion that commissions belong to the agencies and not the brokers. (1) This surprising decision, to say the least, is creating a major issue for all Quebec real estate brokers.
Currently, the real estate brokers have submitted the case to the Quebec Court of Appeal. Should it be dismissed and that the Supreme Court of Canada refused to hear the case or also rejects it (an unlikely situation according to the brokers’ attorneys), all Quebec's real estate brokers will be penalized on three levels.
  1. The case law will establish that commissions do not belong to brokers but to their agencies, an illogical situation considering the nature of self-employed brokers and the well-known conventions and customs in the profession between the brokers and their agencies.
  2. Therefore, real estate brokers’ incomes will not be protected in the event of bankruptcies such as the one from the Groupe Sutton-Royal inc. case, which will allow secured creditors (usually banks and the Crown) to be repaid before the brokers (who would be considered "ordinary" creditors), an incredible nonsense in my opinion and many brokers including the lawyers involved in this case, since the agencies’ revenues are mainly the results of the brokers labor, who are self-employed workers obliged by law to undertake a variety of responsibilities.
  3. There will be no more means to overrule this decision unless undertaking a long and difficult campaign to our elected members of the Quebec National Assembly, which will weaken the situation for all brokers. 

Representations to OACIQ
Recently informed of this shocking situation for all realtors who are once again left to fend for themselves, I broached the subject at the annual general meeting of the self-regulatory organization of the Quebec real estate brokerage (Organisme d’auto-réglementation du courtage immobilier du Québec) commonly known as OACIQ. I took the opportunity to ask if it was possible to consider amending the regulations as to have the brokers’ commissions deposit in an "in trust" account (or in trust), for example, to protect brokers incomes against any intervention by third parties (agency's creditors, trustee, etc.).
Already aware of the issues raised by the brokers involved in the case of Groupe Sutton-Royal inc., officers of the OACIQ indicated that they would come back with further information later. It is still quite ironic that the agencies’ customers are entitled to a full protection while at the same time the brokers are left defenseless.
I look forward in hearing OACIQ’s reflection on the subject. Although we know very well that this organization was created to protect the public and not the brokers, it should, nevertheless, be able to make representations to the legislator to request adjustments to the Act or amend its own regulations to require agencies to deposit the commissions received on behalf of their brokers (2) in a trust account which, incidentally, is already mandatory to have.
Should Real Estate Boards and FCIQ support the cause of all brokers?
Until now, the brokers affected by the bankruptcy in Groupe Sutton-Royal inc. had to appoint their own attorneys to recover their commissions. Following the Superior Court’s judgment and considering the main issue, which now concerns all Quebec real estate brokers, the Greater Montreal Real Estate Board (GMREB) and the Quebec's Federation of Real Estate Boards (QFREB) should get involved in this case. This would be a great opportunity to demonstrate beyond any doubt their support in favor of all realtors, regardless of their allegiance.
Their inaction and silence until now are not only disturbing for the brokers affected by this case, but as previously mentioned, for all Quebec real estate brokers as well. It is already extremely difficult for realtors to obtain brokerage contracts and conclude transactions. Should they, on top of it, also fear not being able to obtain their commissions after months of work?
This case is not just about the 27 brokers of Sutton Royal Group Inc. or the seven who chose to take their grievance to court. This case concerns all brokers as a whole and makes us realize that OUR COMMISSIONS DO NOT BELONG TO US and therefore, are not protected. This renders the future of the profession vulnerable. At a time when, month after month, many cases of fraud, malfeasance or spectacular bankruptcies are reported, it is understandable to have the reflex to protect oneself.
Bodies such as CIGM and other Real Estate Boards along with the Federation, whose primary missions are to help and defend the interests of their members, are in great position to support the realtors to not only help amending the Act and/or its regulations but also financially to help overruling the Superior Court’s judgment.
Express our solidarity and protect our commissions
Would it not be appropriate that GMREB and QFREB work with realtors’ lawyers involved to build and finance the case? Should we not require from our officers to find all solutions to help them to clearly demonstrate to the Court of Appeal that the commissions belong to the brokers and not the agencies?
Why must brokers keep on paying for everything, including « CSST » contributions (another issue to be discussed later on) and generous broker contributions, when protection and concrete actions from their bodies are inexistent.
We truly hope that during the meeting scheduled on June 5th between the lawyers of the realtors and the Direction of the GMREB, the latter will show leadership by initiating actions including the holding of a special general meeting. The weight of the entire process for a case of such magnitude should not rest on the mere shoulders of the seven realtors involved in the case. These pioneers have demonstrated more courage and determination than what is required of them for this major collective issue at hand. It is time for the officers of the bodies to take initiatives and take part in this collective issue.
The purpose of such general meeting is simple: to discuss this issue with objectivity and have everyone involved to protect the livelihood of real estate brokers. The cause is noble and concerns all realtors.
Beyond the financial aspect, solidarity between all brokers and especially our bodies is primary to cope with adversity together, to unite as one and to find solutions so that we do not have to relive this situation again. We must offer solutions such as the account "in trust or trust", which will not solve everything, but will bring some protection.
Surely, there are other solutions to better protect the brokers. Feel free to share your ideas on this topic and what actions must be taken.
In parallel, we hope that our directors will take action and support the cause financially for a full defense of the brokers involved and by extension, all Quebec real estate brokers. This fundamental issue concerns us all.
You can read the decision of the Superior Court here.
Hope to hear from you.

NOTE : Participate in VOX POP on this page. The question is: "Following the judgment of the Superior Court, must the QFREB and real estate boards, including GMREB, act quickly to protect brokers' commissions?"

To read the French text on the same subject and reviews, click here.
 “[44] En l’instance, les courtiers ne détiennent aucun droit de revendication dans la chose. Les sommes déposées au compte bancaire de Sutton-Royal auprès de la BMO sont des biens (créances) du failli12 et font partie intégrante du patrimoine de la débitrice-faillie lequel constitue le gage commun de ses créanciers.”
Section 35, Regulation respecting brokerage requirements, professional conduct of brokers and advertising (C.Q.L.R. c. C-73.2, r 1)

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