November 23rd - 2015

Legal Beat: Get your BRA signed

Getting a Buyer Representation Agreement (BRA) signed at the beginning would have prevented problems and a lawsuit in this commercial case.

Legal Beat

Getting a Buyer Representation Agreement (BRA) signed at the beginning would have prevented problems and a lawsuit in this commercial case.

Legal Beat

by Merv Burgard, Q.C

In this case, the REALTOR® discovered a hotel property that was in receivership. He provided extensive research to a prospective commercial buyer and conducted tours of the property. The buyer ultimately purchased the property and took title to it. 

The Realtor offered to assist the buyer in putting together a bid package and in attending the auction, but the buyer did so personally with his solicitors. They had previously discussed a reasonable fee for these services. The Realtor suggested 3 per cent and the buyer’s spokesperson suggested 2 per cent; no verbal agreement was reached. A buyer’s brokerage agreement at 2 per cent was sent to the buyer, but it was never signed. The board of directors of the buyer decided that $15,000 was an appropriate finder’s fee for this $8 million purchase and offered that in an agreement.  That amount was not acceptable to the Realtor® who sued.

The brokerage’s expert gave evidence that 2 per cent was appropriate and that the finder’s fee proposed by the buyer was neither a fair or reasonable compensation in this case. On the other hand, the buyer’s expert said that without a written agreement, the $15,000 fee was justified.

The judge decided that there was an oral contract to pay a fee but that the amount had not been settled.  He then referred to Section 23 of Alberta’s Real Estate Act that requires a signed service agreement, but the buyer’s conduct created an estoppel. 

However, that principle cannot be successful in relation to a statutory bar.

There is also a section providing for commission payable by a seller for the agent’s activities. It does not refer to commission by a buyer. That is essentially a quantum meruit claim when there is no written agreement. (Quantum meruit refers to “What one has earned” -- a reasonable sum of money paid for work when the amount is not stipulated in a legally enforceable contract.) On these facts the judge decided that the Realtor was the “effective cause” of the purchase and that the buyer was enriched by his services, to the deprivation of the Realtor. The judge concluded that a fair value for the services provided was $50,000.

Real Estate Professionals Inc v Calgary Drop-In & Rehab Centre Society 2015 ABQB 530 (CanLII)

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MERV’S COMMENTS

Mervin Burgard Q.C.

As this case shows, you may be entitled to some commission ($50,000 rather than $160,000) but only after a long and expensive legal battle. Ontario registrants and their lawyers should be guided by various provisions in REBBA, including its Code of Ethics and Section 23 of Ont Reg 567/05 GEN. Ontario REALTORS® and their lawyers and experts may also want to refer to Section 36(1.1) of REBBA dealing with generally prevailing commission amounts. See also the OREApedia topic, Commission without an Express or Fully Signed Agreement.

The reluctance among Realtors to get a Buyer Representation Agreement (BRA) signed upfront continues to surprise me. Isn’t it easier to insist on a signed BRA at the beginning, before providing your valuable services to a buyer or tenant?  Isn’t signing a listing what you usually demand of sellers or landlords before spending your time and money marketing their property?

Something along these lines: “Well buyer, here is the Working With A REALTOR® (WWR) brochure, our usual transaction forms, and the BRA. Sign the WWR and the BRA first. Then you can get in my car and come to the showing and have the benefits of my further documentation such as negotiating an APS acceptable to you, and the continuation of my professional services!” 

Mervin Burgard, Q.C.

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