Real Estate Brokers: Identify Yourselves!

By: Gabriel Di Genova

Lawsuits for forced transfer of title launched by real estate brokers are not rare. By the very nature of their profession, brokers often become real estate investors. However, in a Superior Court judgment recently* rendered by Hon. Yves Poirier, j.c.s., the Court reiterates the absolute nature of the ethical obligations of members of the OACIQ.

In Immeubles Wilfrin Poulin ltée c. Groupe immobilier Trempe inc., 2018 QCCS 6055 (CanLII), both plaintiff and defendant operated non-residential real estate as their primary commercial activity. However, plaintiff’s representative, an indirect 25% shareholder in the plaintiff entity, was also a real estate broker duly registered with the OACIQ.

A series of offers and counter-offers seemingly led to a binding accepted offer; plaintiff would purchase defendants’ building and began its due diligence accordingly. The due diligence process elicited a series of environmental concerns for the intended purchaser. Despite this, the intended purchaser continued its due diligence but postponed the acquisition date. With the parties unable to agree on the closing documentation and modalities, defendant refused to proceed with the transfer and advised the intended purchaser that it was cancelling the offer.

The plaintiff summoned the defendant to appear before a notary for closing and communicated an updated draft deed of sale, with an amendment to the purchaser’s declaration: the vendor was denouncing, for the first time, that plaintiff’s representative was a real estate broker and member of the OACIQ.

Following defendant’s refusal to proceed with the sale, plaintiff launched an application for forced transfer of title.

Defendant submitted various motives for refusing to pass title, namely,

• the offer to purchase was nul due to deadlines that had not been respected; and
• plaintiff’s representative did not respect his professional obligations in failing to denounce he was a member of the OACIQ (in contravention of art. 18 of the Regulation respecting brokerage requirements, professional conduct of brokers and advertising).

Plaintiff attempted to argue that notwithstanding the broker’s non-conformity with art. 18, sensu stricto, such a deviation is merely one of relative—not absolute—nullity (art. 1419 C.C.Q.). Plaintiff suggested that by defendant’s behaviour (continuing negotiations, continuing due diligence, submitting its corporate documentation to the executing notary), defendant effectively renounced its prerogative to invoke the art. 18 breach as justification to refuse to transfer title.

The Court refused this argument, on the basis that a breach of art. 18 is sufficient to nullify the accepted offer, as the legislation exists primarily for public protection:

[41] L’analyse du concept de la nullité relative n’est d’aucune utilité. La disposition prévue à l’article 18 du Règlement sur le courtage déroge des dispositions générales prévues à l’article 1419 du Code civil. L’obligation de révéler sa qualité d’agent immobilier, dans le cas où ce dernier détient un intérêt direct ou indirect, est la pierre angulaire de la protection particulière que l’État prévoit pour le contractant et le public en général. Le contractant doit savoir qu’il transige avec un professionnel de l’immobilier. La faculté de dédit ne repose pas sur le concept de nullité relative. En effet, en l’absence de cet avis, suivant le règlement, le contractant peut obtenir le dédit de la promesse d’achat sans autre motif que l’absence dudit avis, le tout sans qu’il y ait de dommage et réclamation possible pour les agents immobiliers impliqués ni pour le co-contractant. Le contractant n’a aucun motif, justification ou préjudice à établir. En tout temps, il jouit de ce droit de dédit jusqu’à ce que le contrat soit signé entre les parties. Le dédit a été communiqué à IWP le 6 juillet 2016. GIT bénéficie de la faculté de dédit et la promesse d’achat ainsi que la contre-proposition sont, dès l’instant où l’on invoque ce fait, nulles et non avenues. (emphasis added)

The Court’s conclusions seem draconian, particularly under the circumstances of the present case whereby both parties were experienced real estate investors.

Notwithstanding plaintiff’s failure to officially denounce its representative’s membership with the OACIQ, did defendant nonetheless have de facto knowledge of this? The Court is tacit in its judgment as to whether such evidence was presented at trial. Given the realities of the real estate industry, one could comfortably assume that the intended vendor had an idea as to who it was dealing with, or at the very least, that such information was easily available to it. It therefore seems harsh to nullify the entire agreement on a technicality that was seemingly not even a concern to the defendant—at least not until defendant was seeking reasons to avoid closing. This is even harsher in the context of an intended purchaser in possession of what it thought was a binding accepted offer to purchase.

However, this is the state of the law on the matter; art. 18 of the Regulation is deemed to be a public order provision that the legislature adopted purely for the protection of the public. Admittedly, all professions come with ethical obligations that may restrict the members’ commercial opportunities.

In the broad sense, Justice Poirier’s decision emphasises that being a member of a professional order (or a regulatory body) comes with rights AND obligations. The commercial interests of any individual member (rightfully) take a back seat to the protection of the public.

*The decision was originally rendered from the bench by Justice Poirier in September 2018; the written transcription was made available in June 2019.