4.1 Written Service Agreements & Mandatory Terms
Key Takeaways
Use a signed written agreement when establishing a residential client relationship. The brokerage and client are the parties even when a designated agent owes the agency duties.
Rule 43 requires the agreement to state its duration and other required terms. RECA’s exclusive residential forms specify a start and end time. Change an agreed term by signed written amendment and give the client a true copy immediately.
Holdover applies according to the executed fee clause, including the triggering transaction, period and exceptions. A qualifying later representation agreement can activate an exception under the applicable form.
Read the contractual fee trigger and due date separately from the statutory requirements for a commission action under Real Estate Act sections 21–23.
Put the client relationship in writing
Under Rule 43(1), a licensee establishing a residential real estate client relationship must enter into a written service agreement. The brokerage contracts with the client. With common-law agency the brokerage is the agent. In designated agency, the person or people designated in writing act as the client’s agent. Rule 58.1 adds mandatory provisions for designated brokerage agreements, including information barriers and the brokerage’s supervision duties.
| Rule 43 requirement | Apply it to a residential file |
|---|---|
| Identify parties and property | Name the brokerage and client parties. If applicable, state the address or legal description. Confirm identity and who has authority to sign. The RECA seller sample provides fields for both descriptions. |
| Effective date and duration | State the effective date if applicable and the agreement’s duration. Complete the beginning and ending date and time in the RECA exclusive form. |
| Services and responsibilities | Specify what the brokerage will do and what each party must do. Explain coverage, exclusivity if agreed, access and the reporting plan. |
| Use and distribution of information | Explain what information may be used, shared and for what purpose. Apply Rule 44 and Alberta privacy law. |
| Remuneration and termination | Specify the amount or calculation method, circumstances for payment and how the agreement ends. Review any expense reimbursement, retainer, post-term fee and exceptions in the particular form. |
| Signatures, changes and copies | Obtain signatures from the relevant parties. Amend or add terms in a writing signed by the relevant parties. Give the client a true copy of the agreement or change immediately on signature. |
Rule 60.1 and Schedule 1 add mandatory residential content for the applicable forms and require use of the Consumer Relationships Guide. Brokerages can use forms containing that content. Supplementary language must preserve the meaning and effect of mandatory content and statutory duties. Rule 60.1(4) provides a limited exception for a hand change to the form initiated and requested by the client, agreed by all parties, shown clearly and initialled by the client and licensee. Use the agreed expiry in the exclusive form. If the parties want a longer term, sign the amendment before expiry. If it already ended, make a new agreement before resuming the work.
Apply the contract’s fee and holdover terms
An agreed fee may become owing on a specified event and payable on a different date. Review the fee, any cooperating payment, applicable taxes, trigger, due date and source of funds. Alberta’s Act section 24 prohibits a real estate broker from arranging or retaining remuneration based on the difference between the list and actual sale prices. A fee calculated as a stated percentage of the sale price is a different formula.
In the RECA exclusive seller sample, a legally binding sale agreement made during the term triggers the fee clause, subject to its terms and exceptions. The fee can also be triggered by a binding contract made within the agreed days after the listing ends when the buyer was introduced during the listing. Exclusions include a buyer named in writing and a seller representation agreement signed with another brokerage after the first ends. The buyer sample separately applies to a property introduced to the buyer and specifies a period for the subsequent buyer agreement exception. Read the executed agreement for the exact terms, especially if the parties ended the agreement early.
Suppose the seller sample specifies a 60-day holdover and a fee of 7% of the first $100,000 plus 3% of the remainder. A qualifying $400,000 private sale yields $7,000 + $9,000 = $16,000 before GST. If the later representation agreement exception applies, the fee is not payable under that clause. The other brokerage’s fee amount does not enter that calculation.
Use the agreement to prevent and resolve a dispute
If a buyer expects every property found independently to be outside an exclusive agreement, compare that expectation with the agreed search area, property exclusions, exclusivity, and fee and holdover provisions before signing. Record any agreed exclusion in the agreement. If the client later wants a change, identify the term, agree on the signed amendment and give a true copy immediately. When disagreement persists, preserve the signed documents and material instructions. Review the actual notice or early-end clause with the broker, including whether a written notice is required and which obligations survive. A negotiated brokerage resolution can address a service issue where appropriate. Refer disputed contractual rights to legal counsel.
Separate remuneration, expenses and indemnity
The client and brokerage should understand what they must disclose and which amounts each may owe. Rules 41 and 43 require early disclosure to the client of how the licensee will be paid and written terms identifying when the brokerage’s remuneration is payable. In RECA’s exclusive designated-agency samples, buyer clause 8.8 and seller clause 9.6 address reimbursement of agreed reasonable expenses when the client changes their mind. Check which expenses the parties included and when the brokerage incurred them.
An indemnity concerns a loss or liability. In Canada Deposit Insurance Corp. v. Canadian Commercial Bank, the Alberta court explained that a principal may owe indemnity for losses arising from properly carrying out authorized work. The court distinguished losses due to the agent’s own negligence, breach of duty, unlawful conduct or acts outside authority. The applicable agreement may address indemnification expressly. For example, if a seller withdraws after authorizing an expense listed in the service agreement, review that reimbursement term. If a third party instead claims damages because the associate misdescribed the property, give the claim and records to the broker and insurer for review. A fee or expense clause gives no automatic right to pass that liability to the client.
Check recovery requirements separately
Sections 21 and 21.1 address licensing requirements for actions and collecting remuneration. Under section 22(a), an action on the service agreement requires that agreement or a written note or memorandum signed by the party to be charged or their agent lawfully authorized in writing. Section 22(b) also addresses a sale or lease effected through the services of an employed broker and delivery of the duly signed transfer or lease, or of a duly signed sale agreement entitling the buyer to possession. An unsigned offer at the asking price does not by itself meet that test. Section 23 limits who can sue the payer for shared remuneration. Refer a disputed claim to the broker and legal counsel with the signed agreements and transaction record.
RECA Rules 43, 44, 58.1 and 60.1 · Real Estate Act sections 21–24 · RECA seller and buyer sample forms
A brokerage is completing RECA’s exclusive residential buyer sample. The draft names the beginning date but leaves the end date and time blank. What should the associate do?
Leave the end blank because the brokerage can choose it later.
Agree on the duration, complete the start and end fields, obtain the relevant signatures and provide a true copy.
Sign now and enter a different end date on the brokerage copy.
Use the Consumer Relationships Guide as the signed service agreement.
A seller agreement follows the RECA exclusive designated-agency sample and has a 60-day holdover. After it ends the seller signs with Brokerage B. Within the 60 days the seller signs a sale contract with a buyer introduced under Brokerage A. Brokerage B earns $10,000 and the old formula would yield $16,000. What does the original form’s later-agreement exception do?
Requires the seller to pay Brokerage A $6,000 as a fee difference.
Requires the two brokerages to divide the fees equally.
Removes the fee under the original holdover clause because the later-agreement exception applies.
Extends the original listing until Brokerage B’s fee is paid.
A licensed brokerage sues to enforce a specific orally agreed commission. No signed written agreement, note or memorandum supports that agreement. Which result follows for that claim under the Real Estate Act?
The court enforces the oral amount whenever the sale has closed.
The court applies a statutory industry rate.
The individual associate may enforce it directly if the brokerage declines.
Section 22(a) prevents enforcement of that oral fee agreement.
Sections you finish are checked off in the contents.