Legally Speaking - March 2007 (405)
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Legally Speaking (405, March 2007)

 

Number 405, March 2007

Commission Due Despite Extension of Completion Date

In general, a brokerage must have a contract with a person to claim commission from that person. In each particular set of circumstances, the wording of the contract determines the brokerage’s entitlement to the commission.

In Clause 5 of the Multiple Listing Contract, a commission is payable where a legally enforceable Contract of Purchase and Sale is entered into during the listing period, or in certain cases afterwards, where the buyer was introduced to the property during the listing period. Finally, commission is payable if, during the listing period, a buyer makes an offer where the buyer is ready, willing and able to pay the listing price and agrees to all other relevant terms requested in the listing contract, but the seller refuses to sign the buyer’s offer.

A seller signed a listing agreement described by the court as the “standard type of listing agreement.” The listing period ran for 180 days. In the listing contract, the sellers agreed to pay the brokerage a commission of $9,750 plus GST upon a binding Contract of Purchase and Sale being entered into, and the sale being completed by the purchaser.

On the same date, the listing REALTOR® presented the buyers’ offer for $325,000, which the sellers accepted.

The buyers were selling their current home and purchasing the sellers’ property on the same day. On the completion date, the buyers received the proceeds from the sale of their current home too late in the day to complete the purchase of the sellers’ property. When the buyers’ REALTOR® asked the sellers for a one-day extension to permit the buyers to complete the next day, the sellers refused unless the purchase price was increased by $15,000. They ultimately settled for $12,000. To facilitate the sale, the buyers’ REALTOR® agreed with the buyers that the monies being held to pay the real estate commission could be used to facilitate the sale, without prejudice to the brokerage’s right to later collect the real estate commission directly from the sellers.

The next day, the deal completed and the buyers moved in. The sellers, however, refused to pay the brokerage’s commission. The sellers argued that, when the buyers failed to complete the day before, the deal was dead and they no longer owed commission. The sellers also claimed someone told them that the real estate agent was “out of the picture,” which to them meant commission was no longer payable. For that reason, they agreed to the one-day extension on the basis the REALTOR® was no longer entitled to commission. The brokerage sued the sellers for the commission.

The court ordered the sellers to pay commission in the gross amount of $10,432.50, including pre-judgment interest and reasonable expenses.

These sellers wrongly refused to pay commission. While the Contract of Purchase and Sale between the sellers and buyers might have come to an end when the buyers couldn’t complete on the planned completion date, the listing contract was a separate agreement between the sellers and the brokerage. The licensee introduced the buyers to the property and the buyers completed their purchase within the listing period. There was no evidence that the listing brokerage ever waived its commission or authorized anyone else to so inform the sellers.(1)

This case reminds us of the importance of the listing contract, whose wording governs entitlement to commission. In a commission dispute, the listing contract is the first thing to check.

Mike Mangan
B.A., LL.B.

 
1.
Cikes v. Silcox, 2006 BCPC 369.
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