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Article

New Real Estate Brokerage Act comes into force

Date

June 7, 2010

AUTHOR(s)

Stéphanie Gilcher
Mary Pagonis
Kim Nguyen


On April 14, 2010, the Government of Québec issued Order 294-2010 proclaiming the coming into force on May 1, 2010 of the new Real Estate Brokerage Act and the following seven related Regulations:

  1. Regulation to enact transitional measures for the application of the new Act.
  2. Regulation respecting the issue of broker’s and agency licences.
  3. Regulation respecting records, books and registers, trust accounting and inspection of brokers and agencies.
  4. Regulation respecting disciplinary proceedings of the Organisme d’autoréglementation du courtage immobilier du Québec.
  5. Regulation respecting the Real Estate Indemnity Fund and determination of the professional liability insurance premium.
  6. Regulation respecting the brokerage requirements, professional conduct of brokers and advertising.
  7. Regulation respecting contracts and forms.

The reform of the supervision of real estate brokerage proposed in the new Act includes a series of new practical and efficient approaches to the supervision of real estate brokerage, orientated towards public protection. The Minister of Finance will be responsible for the administration of the new Act.

Summary of the main changes under the new Act

1. Scope of the law

The new Act will continue to apply to the purchase, sale or exchange of immovable property and to loans secured by immovable hypothecs. However, the definition of a brokerage transaction has been modified with regard to the field of leasing. As such, the new Act’s application is now limited to leasing by an intermediary who carries on an enterprise in the field of leasing of immovable property. The purchase or sale of an enterprise remains covered by the new Act if the enterprise’s property consists mainly of immovable property.

Exceptions under the new Act:

The following persons are not subject to the new Act when engaging in a brokerage transaction in the course of their functions: (1) advocates and notaries; (2) liquidators, sequestrators, trustees in bankruptcy, sheriffs and bailiffs; (3) tutors, curators, liquidators of a succession and trustees; (4) provisional administrators appointed under the Act respecting the Autorité des marchés financiers (R.S.Q., chapter A-33.2); and (5) chartered appraisers engaging in activities mentioned in paragraph j of Section 37 of the Professional Code (R.S.Q., chapter C-26).

The following persons and partnerships are not subject to the new Act with regard to the brokerage transactions specified:

  1. banks, financial services cooperatives, insurance companies, mutual insurance associations, mutual benefit associations, savings companies and trust companies, and their employees and exclusive representatives when acting on behalf of their financial institution, in the context of a brokerage transaction relating to a loan secured by immovable hypothec;
  2. a member in good standing of a professional order or a person or partnership governed by an act administered by the Autorité des marchés financiers who only gives a client the name and contact information of a person or partnership offering loans secured by immovable hypothec or otherwise merely puts them in contact with each other, provided the member, person or partnership does so as an ancillary activity;
  3. an employee who, in the course of the employee’s principal occupation, engages in a brokerage transaction for the employer’s account, provided the latter is not a broker or an agency;
  4. forest engineers who engage in a brokerage transaction relating to forest property;
  5. members in good standing of a professional order of accountants mentioned in Schedule I to the Professional Code (R.S.Q., chapter C-26) who engage in a brokerage transaction relating to a loan secured by immovable hypothec, the purchase or sale of an enterprise, a promise to purchase or sell an enterprise, or the purchase or sale of such a promise;
  6. chartered administrators who lease out an immovable they manage, or engage in a brokerage transaction relating to a loan secured by immovable hypothec with regard to an immovable they manage;
  7. trust companies that engage in a brokerage transaction with regard to immovable property they hold or administer for others;
  8. a superintendent or manager of property held in divided co-ownership who acts as an intermediary to lease out a fraction of the property for and on behalf of the owner or syndicate, gives a co-owner the name and contact information of a potential buyer or lessee of the co-owner’s fraction, or otherwise merely puts them in contact with each other; 
  9. a superintendent of a rental residential immovable who leases out the property for and on behalf of the owner;
  10. a property manager who acts exclusively for a property owner and who, for the benefit of that owner, engages in a brokerage transaction relating to the leasing out of an immovable; 
  11. an employee or property manager who works for a subsidiary enterprise that is at least 90 per cent controlled by the property owner, and who engages in a brokerage transaction relating to the leasing out of an immovable, provided the employee or manager acts exclusively for the property owner;
  12. the spouse, child, father, mother, brother or sister of the owner of an immovable who engages in a brokerage transaction; and
  13. the sole shareholder of a legal person who engages in a brokerage transaction for that legal person.

2. Brokers and Agencies

  • One designation for all as "agent" will become "broker": "real estate broker" (natural person who engages in a brokerage transaction), or "mortgage broker" (natural person who engages exclusively in brokerage transactions relating to loans secured by immovable hypothec).
  • "Brokerage firms" will become "agencies": "real estate agencies" or "mortgage agencies."
  • Real estate agencies may hire real estate brokers and mortgage brokers. Mortgage agencies may only hire mortgage brokers.
  • The notion of "certificate" has been replaced by the notion of "license." Brokers and agencies will hold "licenses," to be issued by the Organisme d’autoréglementation du courtage immobilier (OACIQ). 
  • A real estate broker’s licence may be restricted to residential brokerage or commercial brokerage.
  • Brokers will be solidarily liable with the agency they represent.
  • Brokers will be insured personally.
  • Brokers who were qualified as "chartered" of "affiliated" under the old Act preserve the right to use such titles under the new Act. It is important to note that the change of titles under the new Act does not result in a change of the respective rights related thereto.
  • The notion of "beginner or new broker" is introduced: a broker new to the profession must act on behalf of an agency for at least three of the five years preceding the time he can work for his own account or become an executive officer of an agency. An agency acting through a broker who is new to the profession must set up a system enabling the broker to be mentored and his or her practice supervised. 
  • The broker has an obligation to open and maintain a trust account. Where a broker acts for an agency, these obligations are delegated to the agency. As such, the broker remains responsible with the agency for the aforementioned obligations. In addition, an agency may delegate to only one other agency the obligations related to the opening and maintaining of a trust account that were delegated to the agency by the brokers acting for the agency. Those brokers remain responsible for these obligations, with their agency and the agency to which they were delegated.
  • Registers and records can now be conserved on a technological medium only.
  • The agency can deposit the remuneration due to a broker in a management company controlled by said broker as long as said broker holds at least 90 per cent of the shares and the control of the said company. This option with regard to a management company is reserved only for brokers representing an agency. It is important to note that the foregoing remains subject to approval by the governmental authorities.
  • A real estate agency licence or a mortgage broker agency licence is issued by the OACIQ to a person or partnership meeting the requirements set out in the new Act and the regulations, which include, but are not limited to, the following:
    1. in the case of a natural person, the person holds a real estate broker’s licence or a mortgage broker’s licence, and acts as the executive officer of the agency;
    2. the directors or executive officers of the agency have passed all courses or completed all other training programs required by the inspection or discipline committee or taken as a consequence of a voluntary commitment on their part; and
    3. the executive officer has the qualifications required to act in that capacity, such as holding a real estate or mortgage broker’s licence that is neither suspended nor subject to restrictions or conditions, having the ability to act for his or her own account, meeting either of the following conditions: having passed the examination for executive officers of real estate or mortgage broker agencies or having qualified as an executive officer of a real estate or mortgage broker agency for three of the last five years, and having taken, and where applicable, having passed all additional training required for brokers to qualify as agency executive officers.
  • An agency is liable for any injury caused to a person or partnership by the fault of one of its brokers in the performance of the broker’s functions. The agency nevertheless has a right of action against the broker involved.
  • An agency and its directors and executive officers must oversee the conduct of the brokers who represent the agency and ensure their compliance with the new Act. An agency must also ensure that its directors, executive officers and employees comply with the new Act.

3. Training and Examination

  • Under the new Act, formal educational training is not mandatory.
  • The major change regarding the conditions for issuance of a licence is the new requirement of sufficient knowledge of French.
  • The examination to be passed to become a broker will have three components: residential, commercial and loans secured by immovable hypothec. However, as mentioned above, it will be possible to apply for a restricted licence.
  • The new certification system was developed on the basis of the competency-based approach. As such, licensing requirements incorporate more explicit criteria for measuring competence. For instance, the examination is significantly longer and the questions require more detailed answers as opposed to the true/false questions under the previous regime.
  • Students registered in the training programs prior to May 1, 2010 have acquired rights to complete their programs under the old certification system, subject to transitional measures put in place.
  • Interprovincial equivalence has been simplified in view of the fact that formal educational training is no longer mandatory. Accordingly, brokers from other provinces are only required to pass the new examination and demonstrate a sufficient knowledge of French.
  • In addition to their regular programs, colleges will now also offer customized programs given that formal educational training is optional under the new Act.
  • Mandatory continuing education will be developed and offered by the OACIQ.

4. OACIQ

  • The Association des courtiers et agents immobiliers du Québec will become the OACIQ, a self-regulatory organization whose sole mission is to protect the public.
  • The following chart shows the successive stages of the claims process.

Diagram

  • The OACIQ now has powers of conciliation, mediation and arbitration.
  • In addition, the OACIQ has been granted regulatory powers. However, all regulations adopted by the OACIQ must be submitted to the Government of Québec for approval.

Transitional period

A transitional period of 18 months will be in place to ensure compliance pertaining to advertising, contracts and forms. Business cards, signs and any other advertisement already used in accordance with the old Act before the coming into force of the new Act may be used for the 18 months following the coming into force of the new Act. Likewise, the rules regarding contracts and forms continue to apply for the 18 months following the coming into force of the new Act, with the necessary modifications.

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