July 27th - 2014

Legal Beat: Choose words carefully in commercial documents

The listing agreement in this case stipulated that: a commission will be paid if the property is sold; the commission will be paid after the sale is completed;

Mervin Burgard Q.C.

by Mervin Burgard 

The listing agreement in this case stipulated that: a commission will be paid if the property is sold; the commission will be paid after the sale is completed; and a sale is completed when the change in ownership is registered at the Land Titles Office and the buyer pays the purchase price.

Alternate compensation would be paid if a purchase contract is signed but the buyer defaulted. The alternate compensation is the lesser of the commission that would have been payable had the sale been completed or 50 per cent of the forfeited deposits.

In this instance, the seller entered into a standard form Commercial Real Estate Purchase Contract, prepared by the REALTOR® for sale of the Alberta land on which a hotel was situated, for $14 million. The contract provided for the payment of an initial deposit of $10,000. The purchase price would be paid as follows: $10,000 as a deposit; a first payment of $2.2 million, together with the deposit; a second payment of $2.7 million; and $9,000,000 by mortgage back.

The buyer paid the deposit and the first payment but did not complete the transaction. Consequently, the REALTOR® sued for commission and claimed that there was a “sale” when a beneficial interest passed to the buyer after the first payment was made. The court ruled that that was not what the listing agreement stated.

The REALTOR® then claimed that the deposit of $10,000 and the first payment were made to the REALTOR® and both were forfeited as deposits and they were entitled to 50 per cent. The courts held that the first payment was not designated as a deposit as contemplated by the listing or APS. The REALTOR® lost the case.

1068823 Alberta Ltd. v. Mountain View Real Estate 2010 ABCA 84

MERV’S  COMMENTS

Mervin Burgard Q.C.

Listing agreements are contracts that are given their normal interpretation of what the parties intended based on the wording and language they chose to use in those documents. If you want commission on an accepted APS, say so. If you want to claim half of all of the deposits, call them that. Registrants in Ontario should review clause 3 of OREA’s Commercial Listing Form 520.


Mervin Burgard, Q.C.

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