October 3rd - 2011

LEGAL BEAT: Time well spent explaining Buyer Representation Agreements

A real estate brokerage sued for its commission under a signed Buyer Representation Agreement (BRA).

A real estate brokerage sued for its commission under a signed Buyer Representation Agreement (BRA). The buyers disputed the claim on the basis that the REALTOR® failed to explain to them the nature and content of the agreement and the commission liability.

The judge heard conflicting testimony from the REALTOR®, the buyers and others. The buyers each said that they had signed an Agreement of Purchase and Sale (APS) for a property and that was the only document they intended to sign. They had also signed a BRA when the REALTOR® told them to "sign here, sign here," but they did not know that it was a BRA. The sale did not proceed and they later bought another home through a different REALTOR®.

The buyers were relying on the REALTOR® as the professional, the judge ruled. They were mistaken as to the type of document they were signing. Their defence of non est factum [not understanding what they were signing] was successful.

The judge also found that the parties did not achieve "a consensus ad idem wherein the parties had reached an agreement on the terms and that the parties had an intention to be bound by those terms." There was no meeting of the minds, he ruled, and therefore no intention to create legal relations had occurred. With the absence of those features, there was no enforceable contract.

Re/Max West Realty v Prokopos and Dalmakis

MERV'S COMMENTS
The judge decided that the brokerage had not proved its case based on the facts. There is also an indication that the brokerage had lost an arbitration claim at the local board.

The message is simple and clear. Take the time to explain the documents fully and thoroughly and don’t be in a rush when you’re doing this. Have both clients in the same room at the same time. If that’s not possible, ensure that you deliver the same message to both and that they both understand it.

In my Merv’s Comments seminar, we discuss how long it should take to ensure that consumers understand what they’re signing. How much time do you usually spend explaining documents before asking clients to sign? That’s the exact same amount of time you will have to explain your actions or defend yourself before a judge.

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For more information contact

Ontario Real Estate Association

Jean-Adrien Delicano

Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246