Conventional wisdom suggests that when you hire a real estate
agent to list and sell your property, the agent gets its commission
when you have an accepted offer and the deal is completed. The
standard Form 200 Ontario Real Estate Association Listing Agreement
provides, in Section 2 the terms upon which a commission is payable
"...the Seller agrees to pay to
the Listing Brokerage a commission...if sold...for any valid offer
to purchase the Property from any source whatsoever obtained during
the Listing Period and on the terms and conditions set out in this
Agreement or such other terms and conditions as the Seller may
accept...The Seller further agrees to pay any such commission as
calculated above even if the transaction contemplated by an
agreement to purchase agreed to or accepted by the Seller...is not
completed, if such non-completion is owning or attributable to the
Seller's default or neglect..."
In examining the language of the contract, there is a
presumption that there has to be an agreement of purchase and sale
which has been accepted by the seller.
In a recent decision of the Ontario Superior Court of Justice
(T.L. Willaert Realty Ltd. v. Fody (December 12,
2013)), the court upheld the decision of a small claims court award
of damages to a real estate agent where the seller never executed
an agreement of purchase and sale.
The facts of the Willaert case bear some discussion.
The listing agent presented a number of offers to the Seller over
the span of two months, which contained gradually increasing prices
to the full asking price and with a gradual reduction in conditions
so that on the final day of the listing, an offer is made at full
listing price. Although the seller had responded and made counter
offers to earlier offers from this same purchaser, the seller did
not respond to the agent's presentation of the final offer.
The small claims court determined that the Seller was clearly
avoiding and frustrating his agent, not because the offer was
non-compliant, but because the Seller had decided not to sell
unless he was able to purchase a separate property. The court found
that the Seller was not acting in good faith.
When engaging a real estate agent to list and sell your
property, understand that you may be liable for the commission even
if you never accept an offer to purchase. You should make it very
clear what conditions must be satisfied in order to have an offer
considered to meet the terms of the listing agreement. You may want
to negotiate an amendment to section 2 of Form 200 to provide that
the commission is not payable unless you formally accept an offer,
even if the offer satisfies all the terms of the Listing Agreement.
You may want to add in a provision that the Seller is under no
obligation to accept any offer, no matter what the terms of the
offer might be and reserve the right to accept or reject any offer
in your sole and unfettered discretion.
When you consider that the intention of a listing agreement is
to sell a property, you must not lose sight of the fact that you
are engaging a real estate professional to assist you in completing
a significant and complex transaction for a valuable asset. There
is a price to be paid for engaging that professional. But when you
start down the road to list your property for sale and then change
your mind, while you might have to accept an offer which is
otherwise compliant with the terms that you identified, you may
still be liable to pay the commission on a sale that might have
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Russell v. Township of Georgian Bay provides a useful reminder of the fact that while municipal officials sometimes appear to hold all of the cards in disputes with home owners, that is not always the case.
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