Getting a Commission Rebate in Ontario: Put It in Writing, How It’s Paid, and What Your Lender Needs to Know

A rebate touches four parties and at least three documents. Here is which party carries which piece, and where the gaps usually open up.

I’m Arthur Zhao, a real estate broker with AZ Real Estate Partners. The rebate conversation usually happens early. You are meeting an agent, the buyer representation agreement is on the table, and the agent says they will give you part of their commission back. You say thank you, and the talk moves on to neighbourhoods and budgets.

That moment, before you sign, is when a rebate is easiest to pin down, and most buyers spend it on something else. Three questions are worth asking right then: where will this be written, how exactly is it calculated, and how does the money reach me? An agent who has offered a rebate should be able to answer all three, and the answers belong in the agreement you are about to sign.

The rest of this piece goes party by party: what your brokerage, the seller, your lawyer and your lender are each responsible for, and what each one needs from you. Whether a rebate is a good idea in the first place is a separate question, and I don’t take it up here. This explains how the rules work in general; it is not legal, tax or mortgage advice for your file.

Your brokerage: the representation agreement is where the rebate lives

Since December 1, 2023, the rules for buyer agreements sit in O. Reg. 567/05, the General regulation under the Trust in Real Estate Services Act (TRESA). Three provisions matter here.

• s.13.3.1: a brokerage cannot enter into an agreement with a buyer for trading in real estate unless the agreement includes representation.
• s.13.6: if a buyer representation agreement is not in writing, the brokerage must put it in writing, sign it, and give it to you to sign as soon as possible and before you make an offer.
• s.13.4(1): a written agreement must clearly and prominently set out, among other things, the method for determining the brokerage’s remuneration, the circumstances in which that remuneration may change and how, and the method of paying it.

To be precise about what the regulation does not say: there is no provision that mentions rebates. Nothing in it says a rebate must be in the agreement. But a rebate is, in substance, a change to what the brokerage keeps from the deal, and the agreement is already required to spell out how the brokerage’s pay is determined and when it can change. Putting the rebate terms in that same document, or in a schedule signed with it, is the practical way to make them enforceable and visible.

Terms worth writing out in full:

• The basis. A fixed dollar amount, or a percentage. If a percentage, of what: the purchase price, or the commission your brokerage actually receives?
• Before or after tax. Whether the figure is calculated before or after HST on the commission.
• The condition. Typically, that the purchase actually completes. What happens if it doesn’t?
• Who pays and how. Your brokerage directly, or through your lawyer on closing (see the comparison below).
• When. On the closing date, or within a set number of days after.

A text message or a verbal promise may be evidence of what was agreed. It is not the document your lawyer and lender will work from.

The seller: the commission clause in your offer is not your rebate

Under TRESA, a seller can agree in the agreement of purchase and sale to pay an amount toward the buyer’s brokerage fees. According to RECO Bulletin 6.2, that remuneration clause should identify the parties (seller and buyer), its purpose, the amount and whether tax is included, when it is due, the payor, and the recipient. It may also say the money will be paid out by the seller’s brokerage or the seller’s lawyer.

The bulletin is direct on one point: “The remuneration clause is not a ‘cash back’ clause.” It is the seller helping cover what you owe your brokerage. It is not a payment to you, and it is not the place to write your rebate.

Where it does connect to your rebate is the arithmetic. The bulletin says your representation agreement should be clear about what happens if the seller offers more than you owe your brokerage (you reduce the amount, you keep the excess, or the brokerage receives it all) and if the seller offers less (you pay the shortfall, the brokerage accepts the lower amount, or some other arrangement). If your rebate is a percentage of what the brokerage receives, each of those answers changes your rebate. Make sure the agreement answers both, and that you can calculate your rebate under each.

Your lawyer: the two common ways the money is paid

Your lender: why the rebate cannot be part of your down payment

OSFI Guideline B-20 sets underwriting expectations for federally regulated lenders such as the major banks. On the down payment, it says lenders should make rigorous efforts to determine whether it comes from the borrower’s own resources or savings, and that their loan file should include documentation verifying the source of the down payment.

It then addresses rebates directly: “Incentive and rebate payments (i.e., ‘cash back’) should not be considered part of the down payment.” A footnote makes one exception, for affordable housing programs funded by a municipal, territorial, provincial or federal government. A brokerage commission rebate is not that.

Two practical consequences follow:

• Your down payment has to stand on its own. If you need the rebate to reach the minimum, you are short.
• Disclose it. Your lender is verifying where your money comes from and what the transaction looks like. Tell your lender, or your mortgage broker, about the rebate in writing early in the approval process, and ask how they want it shown. I did not find a published mortgage-insurer rule specific to brokerage rebates, so I am not going to describe one. Your lender’s written answer is the one that counts for your file.

B-20 is written for federally regulated institutions. If your lender is a credit union or a private lender, ask the same questions anyway. Their answers may differ, and you want them before you firm up the deal.

Taxes: one question for your accountant

I did not find a primary source from the Canada Revenue Agency that addresses how a buyer’s commission rebate on a home purchase is treated, so I won’t state a tax position here. If the amount is meaningful to you, or the property is not your principal residence, ask your accountant how it should be handled. Either way, keep the signed agreement, the closing documents showing the payment, and any bank record of it together. Those are what an accountant will ask for.

A short list to check before you sign an offer

• The rebate terms are in your signed buyer representation agreement or a schedule to it, not only in messages.
• The basis is clear: fixed amount or percentage, of what, and before or after HST.
• The agreement says what happens if the seller’s contribution is more or less than what you owe your brokerage.
• You and your brokerage have chosen how the rebate is paid, and your lawyer knows.
• Your lender or mortgage broker knows about the rebate, and your down payment does not depend on it.
• You have one question in to your accountant if the tax treatment matters to you.