December 12th - 2010

LEGAL BEAT: Take care when drafting exclusions

The sellers had serious legal disputes with their neighbours Ms. Belzberg and Mr. Knechtel about restrictive covenants. That went to court and the sellers lost.

The sellers had serious legal disputes with their neighbours Ms. Belzberg and Mr. Knechtel about restrictive covenants. That went to court and the sellers lost.

The neighbour offered to buy the sellers’ property at a low price, but that offer was rejected. The sellers listed the home with a REALTOR® but wanted to make sure that the neighbour did not buy it. The REALTOR® included an exception in the Listing that provided that no commission would be paid if the property was bought by the neighbour.

The property was sold to LWB Projects Ltd., which turned out to be a company connected with Ms. Belzberg. The sellers did not discover that until after the deal was made and had to complete the transaction. The REALTOR® "asked specific questions of the buyer’s agent, received information that denied that Ms. Belzberg was the purchaser. He did a corporate search and found no connection to Ms. Belzberg."

The provincial court judge found that the REALTOR® was entitled to commission because he had done his due diligence. The Listing was interpreted to include that he would not "knowingly" sell it to the neighbour. The appeal Court allowed the seller’s appeal and denied the commission to the REALTOR®. The appeal judge said that, "The parties agreed that no commission would be payable if the property was sold to Ms. Belzberg. The learned provincial court judge found as a fact that Ms. Belzberg was the purchaser. Despite the due diligence exercised by (the REALTOR®), by the strict terms of the Listing Agreement the Respondent is not entitled to a commission. The learned provincial court judge erred in law when she implied terms that were neither necessary to give business efficacy to the contract nor required to give effect to the obvious intentions of the parties."

Berrettoni v Hugh & McKinnon Realty 2008 BCSC 307

MERV’S COMMENTS
There may be a difference in your exclusion language if you say that no commission will be paid if it is sold to X - or saying that no commission will be paid if it is sold to X if you know that and if you did not take reasonable steps to discover the identity of the buyer. Draft your exclusions carefully and protect your commission.

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