Humber/Ontario Real Estate Course 4 Exam Practice

Why would a brokerage's registration revocation terminate representation agreements?

1. Expiration of the agreement period

2. Mutual agreement between parties

3. Legal non-compliance

4. Changes in representation policy

The correct answer is: Legal non-compliance

When a brokerage's registration is revoked, it signifies that the brokerage is no longer legally permitted to operate or represent clients in real estate transactions. This revocation is a matter of legal compliance, meaning that the brokerage has failed to adhere to the regulations and standards required by the governing bodies of the real estate profession. Representation agreements are binding contracts between a client and the brokerage, and these contracts assert that the brokerage will act on behalf of the client. However, if the brokerage loses its registration, it can no longer offer its services or fulfill its obligations as agreed upon in those contracts. Therefore, the legal standing of the brokerage is compromised, rendering it incapable of upholding the terms of representation agreements. In this context, the other factors such as the expiration of the agreement period, mutual agreement between parties, or changes in representation policy would not inherently terminate representation agreements as effectively as a brokerage's registration revocation would. These scenarios may lead to changes in representation but do not directly relate to the legal capacity of the brokerage to operate, thus highlighting the unique impact of a revocation on representation agreements.