Do I need a Written Service Agreement for Agribusiness?

The Real Estate Act Rules define “rural real estate” as real estate located outside a city, town, village, hamlet, or summer village that has its primary purpose as farming.  

Rural real estate does not include:  

• minerals in, on, or under that real estate
• real estate used primarily for extracting, processing, storing, or transporting minerals

Put simply, rural real estate comprises real estate that has its primary use as farming operations. Within the industry, this is commonly referred to as agribusiness. If you are trading in agribusiness real estate, you need to hold a commercial real estate licence.  

In Alberta, written service agreements are required for residential real estate, mortgage brokerage, property management, and condominium management, and are recommended for all commercial real estate relationships, including those in agribusiness. These agreements help clarify the relationship between the parties involved, the services provided by the licensee, and the obligations and responsibilities of all parties. They also outline how personal information will be handled, compensation details, and the length and termination process of the agreement. You need to have a good reason to choose not to use a written service agreement in your agribusiness. 

Imagine a problem arose with the contract and RECA is asked to investigate. The first question we would ask is “why wasn’t there a written service agreement in place?” We have seen instances where a licensee chooses not to use a written service agreement and conflicts of interest or contractual problems later occur that could have been prevented had one been in place. 

The Real Estate Act Rules specifically address written service agreements in s.43. This section outlines that a written service agreement creates an obligation for licensees to disclose how they will be paid for their services. This is important, especially in large-scale agribusiness transactions. Licensees always need to ensure their role is understood and to disclose to their clients how they will be paid for their services.  
Written Service Agreements are there to protect both your own and your client’s interests. There is always the chance for a misunderstanding or a dispute and the ability to refer to the stipulations listed in the written service agreement is invaluable.

Licensees are encouraged to use written service agreements in all agribusiness transactions.  
It is always a good idea to question, “why wouldn’t I use a written service agreement?”. When in sincere doubt about whether a service agreement should be used, please contact us to discuss the advantages of using one. In almost every situation, it just doesn’t make sense not to. 

For any questions regarding written service agreements or agribusiness transactions, please contact info@reca.ca.