Six things you need to know about “sub-brokerages”
Updated May 6, 2022
Some brokers in Ontario have been creating new brokerages, referring to them as “sub-brokerages” that subcontract resources or back-office services from a “parent” brokerage.
Here are six things you need to know about a sub-brokerage arrangement.
- A sub-brokerage must meet all of the requirements of a brokerage. The legislation does not distinguish a sub-brokerage from a brokerage. A sub-brokerage must be registered with RECO as a separate brokerage and has the same rights, requirements and obligations as any other brokerage, and must comply with the law.
- A sub-brokerage must operate at arm’s length from the parent brokerage. In other words, it is not considered a “branch” of the parent brokerage.
- A sub-brokerage cannot deposit funds into the parent brokerage’s real estate trust account to be held by the parent brokerage for the sub-brokerage, UNLESS directed, in writing, by the parties to the trade. Of course, if the parent brokerage represents a party to the trade, they may hold the funds if directed by the parties.
- A registered employee (salesperson or broker) of a sub-brokerage cannot trade on behalf of the parent brokerage. Conversely, a registered employee of the parent brokerage cannot trade on behalf of the sub-brokerage.
- A sub-brokerage may use the same street address as the parent brokerage, and share office space and storage facilities. The sub-brokerage may also use non-registered support staff of the parent brokerage for administrative support.
- The Broker of Record for the sub-brokerage is still accountable for the sub-brokerage’s compliance with the legislation in terms of any services that are shared.