Originally published in Blakes Bulletin on Environmental
and Real Estate, August 2011
A recent judgment of the Court of Quebec should give pause to
real estate brokers working in the province. On June 14, 2011, in
Les Immeubles Bruce Miller v. Thermitech Inspection, the
Honourable Armando Aznar decided that, even though the client had
accepted an offer to purchase for its property (later cancelled by
agreement with the buyer), the broker was not entitled to claim its
commission because the broker had failed to inform its client
adequately about potential costs associated with decontaminating
Thermitech Inspection Inc. (the Client) hired Les Immeubles
Bruce Miller Inc. (the Broker) to find a buyer for its property.
The Client received an offer of C$325,000 from a potential buyer
(the Buyer), whom the Broker was also representing. The offer was
drafted by the Broker and contained the following clause:
8.1 Purchaser buys
building "as is" with no legal warranty, and will buy
without mortgage condition as cash offer. Purchaser only condition
is he will do environments test, and must have no contamination and
if it does be contaminated vendor must clean. (sic)
On the advice of the Broker, the Client counter-offered. The
counter offer was drafted by the Broker and reads as follows:
P2.3 1) Purchasher
is aware building needs complete renovation, and buys the building
at 4508-45122 coolbrook, montreal as is with no legal warranty. As
well vendor can keep any money coming from his claim from the
insurance due to fold. Only condition is purchasher will do a
environmental test and if property is contaminated vendor must
clean. As well in back of property there is no parking rights, for
theres no right of passé.
2) Final price will be $330000, paid in cash with no mortgage
condition, signing the deed of sale will occur 7 days after a clean
environmental report. (sic)
The Buyer accepted the counter offer. A few days later, the
Buyer's environmental consultant advised the Client that soil
testing would be needed to check for impacts from a former heating
oil tank. The Client then notified the Buyer and the Broker that it
was not prepared to spend more than C$5,000 on decontamination.
Soil testing revealed one area where hydrocarbons were present in
concentrations exceeding residential land use criteria. The Buyer
then wrote to the Client saying that she was withdrawing her offer,
given the Client's refusal to honour the terms of the counter
offer. The Broker advised the Client to sign a letter accepting the
cancellation and agreeing to return the deposit to the Buyer. In
the letter, which was drafted by the Broker and signed in his
presence, no mention was made of the Broker's commission.
The Broker continued to have a mandate to sell the property.
However, when it became clear that the Client was not prepared to
assume decontamination costs, the Broker claimed C$26,074 as a
commission from the Client, on the grounds that the brokerage
agreement clearly stated that if a sale fell through because of the
actions of the Client (in this case, its refusal to carry out
decontamination work), then the Client would nevertheless have to
pay the Broker's commission.
The court held that the cause of the cancellation of the sale
was the Broker's failure to explain to the Client that the
Client's financial liability under the counter offer was
unlimited. In other words, the Broker drafted the counter offer and
the Client did not understand that by undertaking to decontaminate
the property, it was making an open-ended financial commitment. The
court then cited provisions of the Quebec Civil Code on
service contracts along with relevant provisions of the Rules of
professional ethics of the Association des courtiers et agents
immobiliers du Québec. It then reviewed existing case
law and journal articles. The court concluded with a citation from
the author Henri Richard who wrote that when a Broker fails to
fulfill an obligation under the brokerage contract and that failure
results in a cancellation of an offer to purchase, the consequence
for the broker is loss of the commission.
Real estate brokers need to exercise a great deal of caution
when dealing with soil and groundwater contamination issues. To
avoid litigation, it is best to refer environmental questions to
legal and engineering experts before making binding contractual
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