March 22nd - 2017

Legal Beat: Dispute over nature of payment

The buyer could not come up with the deposit in this case, so the registrant put up her own money to keep the transaction alive. A dispute ensued when the deal fell apart.

Legal beat

The buyer could not come up with the deposit in this case, so the registrant put up her own money to keep the transaction alive. A dispute ensued when the deal fell apart.

by Merv Burgard

Legal beat

A real estate deal started to fall apart when the purchaser failed to come up with the $300,000 deposit. The buyer’s representative -- the plaintiff in this action -- put up $100,000 of her own money to keep the deal alive. When the transaction ultimately failed, the plaintiff sought to get her money back from the listing brokerage. However, the broker had already given the money to the seller.

The registrant who was the buyer’s representative then sued the listing brokerage, which added the seller and its principal as third parties in the lawsuit. Eventually the plaintiff agreed to dismiss the action and the judge had to rule on how to address the court costs. He ordered the buyer’s representative to pay $20,000 for the brokerage’s costs and $20,000 to the third parties.

The background is that the buyer’s representative was acting for Dieter Wehr, who was buying from Fairfield Classic Collection in King Township with the defendant acting as the listing brokerage. When the registrant paid the $100,000, she submitted an envelope to the listing brokerage with no indication on its face or inside the envelope of the particular sale to which the payment pertained. The listing brokerage deposited the money to its general account and eventually paid it to the seller under a written direction.

The Realtor described the payment as a “goodwill gesture” rather than a deposit. The seller characterized it as a partial deposit that was forfeited when the transaction failed to close.

Emmott v. Your Community Realty 2016 ONSC 7446 (CanLII)

MERV’S COMMENTS.

There was also a two-year Ontario Limitations Act issue since the deposit was forfeited in 2005 and the registrant did not commence her action until almost five years later.

There is no indication in this decision whether the listing brokerage had a mutual release form signed or a court order to release the deposit. The listing brokerage probably decided that there was little risk of a lawsuit by the buyer.

Mervin Burgard Q.C.When in doubt, get a mutual release form or a court order. Otherwise, you may face lengthy and expensive litigation. The $20,000 probably did not cover the listing brokerage’s entire legal costs. Why take that risk?

I know that some buyer’s representatives often say that they go the extra mile for their clients, but this extra mile cost a bundle. This was a $140,000 mile she had to pay for, plus her own lawyer’s bill.

Merv Burgard, Q.C.
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