April 7th - 2004

Merv's Column What's better-- 0% or 50%?

The sellers list a subdivision property using a typical Ontario Listing Agreement.

The sellers list a subdivision property using a typical Ontario Listing Agreement. The Realtor finds a buyer who puts down a deposit of $20,000 with a conditional Agreement of Purchase and Sale for $500,000.

There is a long closing as everyone knows that the buyers must sell their own property in order to complete this transaction. The conditions, however, are waived.

Several months later the buyers have not sold their property and tell their lawyer to advise the sellers that they will not be able to complete their deal. The sellers and buyers sign a Mutual Release terminating the agreement with the sellers retaining the deposit. No commission is paid to the Realtor who then sues the sellers.

The judge examines the Listing Agreement which provides that the sellers must pay commission if the transaction is not completed by reason of their default. Under these circumstances it was not the sellers who defaulted; it was the buyers. It was not necessary for the sellers to tender to prove that they were ready to close the transaction. No commission is payable under the express language of the listing. Since there is such language it is inappropriate to consider a claim in quantum meruit or unjust enrichment for the services provided by the Realtor.

MERV'S  COMMENTS
The usual rule is that there must be a closing before there is entitlement to commission - unless the parties stipulate otherwise in their Agreement. Sellers do not have to go to the expense of suing recalcitrant buyers.

The 2004 OREA Commercial Listing Agreement has a specific provision to ensure Realtors get something for their services. Just make sure that you point it out clearly to your clients. The provision reads:

"In the event the Buyer fails to complete the purchase or lease and the deposit becomes forfeited, awarded, directed or released to the Seller, I then authorize you to retain as agreed compensation for services rendered, fifty (50%) per cent of the said deposit (but not to exceed the commission payable had a sale or lease been consummated) and to pay the balance of the deposit to me."

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Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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