Six things you need to know about “sub-brokerages”
Some brokerages in Ontario have been creating so-called “sub-brokerages” that share resources with a parent brokerage.
Here are six things you need to know about a sub-brokerage arrangement.
- Under REBBA 2002, there is really no such thing as a sub-brokerage (though we will use the phrase here for the sake of simplicity). Any sub-brokerage – sometimes called a “sub-franchise” – has to be registered with RECO as a separate brokerage and has the same rights, requirements and obligations as any other brokerage.
- 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.
- This means that a sub-brokerage cannot use the parent brokerage’s real estate trust account to hold funds for a deal brokered by the sub-brokerage. The only exception to this occurs when the parent brokerage represents a party to the trade.
- The sub-brokerage also cannot use registrants employed by the parent brokerage for its trades, and the sub-brokerage’s registrants cannot trade on behalf of the parent brokerage.
- A sub-brokerage can use the same address as the parent brokerage, and they can share office space and storage facilities. The sub-brokerage can also use support staff – i.e., non-registrant
staff – of the parent brokerage for administrative support.
- The Broker of Record for the sub-brokerage is still accountable for the subbrokerage’s compliance with REBBA 2002 in terms of any services that are shared.