(Ontario Real Estate Source)
By Brian Madigan LL.B.
This is an interesting clause. It's the one that says that Buyer A will pay $1,000 more than the Seller's highest offer. So, you can appreciate that it would be a good clause to have in a multiple offer situation.
The difficulty in Ontario is the restriction placed upon registrants falling under the Real Estate and Business Brokers Act, 2002. They really can't use it.
It doesn't matter much whether some people consider it to be immoral, unethical or illegal; it just cannot be utilized effectively.
Here is the relevant provision under the Code of Ethics:
Competing offers
26. (1) If a brokerage that has a seller as a client receives a competing written offer, the brokerage shall disclose the number of competing written offers to every person who is making one of the competing offers, but shall not disclose the substance of the competing offers.
(2) Subsection (1) applies, with necessary modifications, to a brokerage that has a seller as a customer, if the brokerage and the seller have an agreement that provides for the brokerage to receive written offers to buy.
Any disclosure would be an offence under the Code of Ethics. If such a clause were either permitted or encouraged, such a clause would be circulated as a precedent clause suitable for inclusion in an Offer. And, it is not.
The Real Estate Council of Ontario (RECO) considers it inappropriate, as do the participating boards and associations.
Since the clause is effective in some instances, it is noteworthy that it can be used by buyers who are unrepresented, or buyers who are represented by solicitors. The preclusion in terms of its usage seems to be confined to registrants under the Real Estate and Business Brokers Act, 2002.
Anyone else seems to be free to use the clause. The restrictions appear to be confined to handling multiple offers by the listing brokerage.
FSBO's and lawyers can have all the fun they want with this sort of clause, since they are not regulated. In many states in the United States, this sort of clause is quite popular.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, if you are interested in residential or commercial properties in Mississauga, Toronto or the GTA, you may contact him through Royal LePage Innovators Realty, Brokerage 905-796-8888
www.OntarioRealEstateSource.com
