7. Remuneration
One of the first things to address when discussing remuneration with the seller is that there is no set fee or fixed rate. The broker’s remuneration is based on the services he provides and on his objectives and business plan.
The brokerage contract to sell provides that the broker’s remuneration can be a percentage or a lump sum. The parties (the broker and the seller) must choose between the two.
If a percentage is chosen, the remuneration will be proportional to the sale price agreed to following acceptance of a promise to purchase (or, in certain circumstances described below, according to the original asking price set out in the brokerage contract).
Following is an example of remuneration based on percentage in the case of a property that ends up selling for $500,000:
Following is an example of remuneration based on percentage in the case of A PROPERTY THAT ENDS UP SELLING FOR $500,000:
| % Remuneration | Amount |
| 4% | $20,000 |
| 5% | $25,000 |
| 6% | $30,000 |
If the seller voluntarily prevents the performance of the contract, for example, by not allowing visits or by refusing to receive a promise to purchase, the percentage remuneration that could be due will then be calculated on the sale price indicated in the brokerage contract, and not on an accepted sale price.
The same is true if a promise to purchase is concluded but it consists in a transaction on the seller’s share capital, in the case where the seller is a corporation, and the sale is effected by a sale of the shares of this corporation rather than by the sale of the immovable. In this case, the amount of remuneration is established on the basis of the asking price indicated in clause 4.1 of the brokerage contract rather than on the sale price of the shares, which may include assets other than the immovable. It should be noted that despite such a provision in the brokerage contract, this does not authorize the broker to carry on the activity of securities broker.
Finally, if the remuneration takes the form of a lump sum, i.e. a specific amount, the remuneration due will correspond to the amount indicated in the contract, regardless of circumstances.
The broker must explain to the seller that his remuneration is taxable, whatever its form and whenever it is paid, in the same way as any other product or service, and that the Goods and Services Tax (GST) and the Québec Sales Tax (QST) will be added to the amount he will have to pay. A good practice is to give an example to your client by making the appropriate calculation. For example, if the remuneration is $25,000, amounts of $1,250 for GST (hypothetical rate of 5%) and $2,493 for QST (hypothetical rate of 9.975%) will be added to it. The total cost will therefore be $28,743.
For more information: Remuneration payable by the seller: Exclusive brokerage contract – Sale and The sale of shares: Do you have the right?
