Why this matters: An agent switches brokers mid-transaction and is confused on what happens to their buyer representation agreement and fee.

Does the buyer representation agreement (BRA) I procured for my broker terminate when I change brokers?

Question: What happens to a representation agreement entered into between a broker and a buyer-client procured by an agent of the broker when the agent switches to another broker?

Answer: No change takes place in a broker’s representation of a client under a BRA when the agent producing the client changes employment from one broker to another.

Consider a broker who enters into a buyer representation agreement (BRA) with a buyer-client solicited by an agent of the broker. Under a BRA, the broker is the licensee hired to act on behalf of the buyer, not the agent. However, the buyer-client primarily engages with the agent to achieve the buyer’s objective to locate and acquire an interest in suitable property at a justifiable price and on appropriate terms.

The agent may switch brokers, but the switch does not affect the BRA entered into between the agent’s prior broker and the buyer-client procured by the agent.

However, the client may want to continue working with the same agent. To achieve this representation, the prior broker and client need to cancel the representation agreement by mutual agreement.

A BRA runs with the broker, not the agent

Question: What duties does an agent owe a buyer-client the agent solicited who entered into a representation agreement with the agent’s broker when the agent becomes employed by another broker?

Answer: The agent owes no duties regarding the representation besides avoiding interference with the prior broker’s representation of the buyer.

Again, the buyer representation agreement is between the buyer broker and the buyer-client, not the agent. Thus, the broker employed to represent a buyer is duty bound to diligently provide services to locate and advise on suitable property, negotiate a purchase agreement and close an acquisition.

Here, the agent procuring the BRA typically is tasked as the broker’s “account executive,” acting on behalf of the broker to render services necessary for the buyer to acquire the desired interest in property. The agent, as the account executive, acts as the broker’s agent for so long as the agent remains employed by the broker.

Continuing, the agent procuring the buyer under the BRA changes employing brokers. The buyer-client wants to follow the agent to the agent’s new broker’s office. Here, the buyer’s actions are restricted by whether the representation period has expired and whether the BRA safety clause provision has expired. Let’s look first at an example of an expired buyer representation agreement.

When the representation period expires, the buyer is never required to extend or renew their representation agreement with the broker, though they may choose to do so. On expiration of the representation, the buyer may enter into a BRA retaining the agent’s new broker as the buyer’s representative.

However, the BRA with the prior broker typically has a safety clause which, when perfected, may be enforced to collect any fee earned in the safety period. [See RPI Form 103.1 §4.1(b)]

The safety clause entitles the prior broker to a fee as earned when a property reviewed with the buyer prior to expiration of their representation is the subject of an offer by the buyer to purchase the property during the safety period and the buyer later acquires it.

Payment of any fee earned under the safety clause is the buyer’s obligation to either pay the broker directly or arrange for the seller of the property to pay it.

What about the agent’s share of a fee earned under a BRA after leaving a broker’s employment?

Question: What happens to the agent’s share of a fee earned and received by their prior broker under a BRA procured by the agent when the agent is no longer employed by the broker? 

Answer: The fee earned by a broker on a transaction under a BRA procured by an agent who is no longer employed by the broker is now further split by the broker with another agent assigned as the replacement account executive to diligently provide the buyer with services owed the buyer by the broker.

An agent on procuring a buyer for a broker under a BRA nearly always becomes the broker’s “account executive” providing services needed by the buyer-client. The procuring agent shares in fees received by the broker under the BRA, such as on the buyer’s acquisition of a property.

However, on leaving a broker’s employ before the representation period expires, the broker assigns another agent to assist the buyer-client to locate or close the acquisition of a property.

Depending on the valuation given by the broker to the time and effort the new “account executive” contributes to locate property or to close an existing transaction, the valuation amount offsets the portion of the fee the procuring agent was to receive.

What happens when the representation period has not expired?

Question: When a BRA with one broker has not expired and the buyer agent procuring the BRA changes employing brokers, may the buyer-client follow the buyer agent by entering into a BRA with the agent’s new broker without the prior broker earning a fee?

Answer: No, unless the prior broker cancels the representation by mutual agreement with the buyer-client.  

The buyer-client subject to an unexpired BRA who wants to follow their buyer agent to a different broker who now employs the agent needs to negotiate the cancellation of the BRA with the agent’s prior broker. When the prior broker agrees to terms for cancellation of a BRA, the broker and buyer-client enter into a release and cancellation of employment agreement. [See RPI Form 121]

The cancellation agreement either ends all fee obligations to the prior broker or provides for payment of a fee contingent on a future event. [See RPI Form 121 §2.2]

Without a cancellation agreement, the buyer-client remains obligated under the BRA during the retainer period and the following safety clause period.

Further, before agreeing to represent a buyer, the broker needs to inquire about any prior representation the buyer had with another broker. The objective is to determine whether the retainer period and the safety clause period have expired, then decide how best to manage any conflict.

The broker needs to make some arrangement with the prior broker to cancel the prior broker’s representation agreement. The conditions for cancellation might be to split any fee earned and received by the new broker on a property transaction which is covered by the safety clause in the prior broker’s cancelled BRA.

On cancellation of the outstanding BRA and its obligations, the buyer then enters into a BRA with the agent’s new broker. Otherwise, the buyer exposes themselves to liability for two earned fees under separate representation agreements when both representation agreements cover the same transaction.

Purchasing a property of the same type during the safety clause period

Question: What obligation does the buyer-client have to pay their prior broker a fee under an expired BRA when they purchase a property of the type described in the BRA which is not a property covered by the safety clause?

Answer: No fee is earned as the representation period under the BRA has expired and the property acquired was first presented to the buyer after the BRA expired.

In order for the prior broker to receive a fee under an expired BRA, the prior broker or their agent needs to have reviewed the property with the buyer-client during the representation period.

Further, a properly worded safety clause requires the broker to notify the buyer of the identity of property the broker brought to the buyer-client’s attention using an Identification of Qualifying Properties form, called perfecting the safety clause. [See RPI Form 123]

Justifiable reasons for a buyer-client to terminate a BRA 

Question: What reasons justify a buyer’s termination of a representation agreement and avoid liability to the broker for payment of a fee earned on canceling a BRA? 

Answer: Reasons justifying canceling an exclusive representation agreement include the broker’s lack of due diligence in the performance of obligations owed the buyer-client, or the occurrence of a conflict of interest requiring disclosure by the broker which is unacceptable to the buyer-client.

A buyer-client may justifiably cancel a BRA when the broker or their agents fail to diligently provide services necessary to:

  • locate property of the type sought;
  • investigate and give advice on qualifying properties; and
  • prepare documents to acquire a suitable property.

When the cancellation of a BRA is justifiable, the buyer-client incurs no liability for a fee under fee provisions in the canceled BRA as no fee has been earned.

Another situation arises when a broker or their agents have a conflict of interest which is unacceptable to the buyer-client, as exists when a dual agency arises. Such an agency conflict occurs when:

  • the buyer becomes interested in buying a property the broker is offering for sale by a seller-client;
  • the seller is an entity managed by or in which the broker or their agents hold an ownership interest; or
  • family members of the broker or their agents are involved in the transaction.

The buyer-client may refuse to agree to the existence of a conflict and decide not to continue working with the broker regarding the property transaction involving the conflict without incurring liability for a fee.

Related article:

Death of an agent: What happens to fees delivered after death?

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