Legally Speaking - April 2009 (429)
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Legally Speaking (429, April 2009)

 

Number 429, April 2009

Drafting a Listing Exclusion

A listing contract may say that no commission is payable in certain circumstances; for instance, if the buyer is a certain person. Since the particular circumstances are excluded from those that attract commission, this arrangement is often called a listing exclusion.

There is no standard wording for a listing exclusion. If the listing brokerage and seller agree to a listing exclusion, the listing licensee usually drafts the wording and adds it to the listing contract. Where the brokerage uses a preprinted form of listing contract, the licensee often adds the extra wording by hand.

In Berrettoni v. Hugh & McKinnon Realty Ltd., the Supreme Court of British Columbia strictly interpreted a listing exclusion against the brokerage that was claiming commission.1

The sellers had a long-standing dispute with the couple that owned the lot next door. The dispute arose from a restrictive covenant in the sellers’ title in favour of the lot next door. The covenant protected the neighbouring lot’s privacy and view by significantly limiting the size and location of any residence on the sellers’ property. This also lowered the market value of the sellers’ property. In an earlier attempt to remove the restrictive covenant, the sellers unsuccessfully sued their next door neighbours,2 one of whom then offered to buy the sellers’ property for a low price, which the sellers rejected.

When the sellers listed the property, they told the listing representative they didn’t want the property sold to one of the next door owners. Consequently, the licensee added a listing exclusion to the listing contract. The case doesn’t quote the actual wording used, but the exclusion apparently said that no commission was payable if the licensee sold the property to an owner next door.

The buyer was a business corporation, which turned out to be a company connected with one of the owners next door. This came to light when, in the course of completing the sale, it became evident that her name would ultimately appear as the new registered owner. Relying on the listing exclusion, the sellers refused to pay commission.

When the brokerage sued the sellers to recover commission, the Provincial Court of BC (Small Claims Division) ordered the sellers to pay it. The court read the exclusion clause in favour of the brokerage by implying two additional terms into the listing exclusion. The court implied that the brokerage would only lose commission if the listing representative knowingly sold the property to one of the neighbours next door, and that the listing licensee must show that he diligently tried to discover the identity of the purchaser.

When the sellers appealed, the Supreme Court of British Columbia overturned the lower court’s decision. A court will imply a term into a contract where it’s clear the parties themselves must have intended it, either because the implied term is necessary for the efficient business of the parties, or where the term to be implied represents the obvious, but unexpressed, intention of the parties. Here, the common intention was to prevent a sale to particular neighbours. The listing exclusion spoke for itself; it wasn’t necessary to imply any additional terms into it. The Supreme Court strictly interpreted the wording of the listing exclusion against the licensee.

When drafting a listing exclusion, choose your wording carefully. For instance, when excluding commission if a particular buyer purchases the property, use wording to the effect that no commission is payable if the licensee knowingly facilitates a sale to that buyer, or fails to reasonably inquire into the identity of the purchaser.

Mike Mangan
B.A., LL.B.

  1. Berrettoni v. Hugh & McKinnon Realty Ltd., 2008 BCSC 307.
  2. Berrettoni Estate v. Belzberg, 2006 BCSC 225.
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