Commissions From Buyer on Defaulted Deal

Do I have to pay commission with a For Sale By Owner listing?

Question:

I was the Listing Agent and arranged for the sale of my client’s property in May with closing in late August. Buyer provided a $100k deposit. On the day of closing Buyer’s lawyer did not accept the title and we received a letter from Buyer’s legal representative that she is not intending to close. The matter is now in court.

What are my options? Can I sue the Buyer for commission or at least my expenses associated with listing and marketing the property?

Answer:

If you can sue at all, you can only sue for the commission not related expenses.

Your claim is against the person with whom you have a contract, and that’s the Seller.

If you stated or gave the Seller the impression that the commission would be payable only upon successful completion, then, you would not be able to recover. Unlike the Agreement of Purchase and Sale, this statement need not be in writing to be binding.

Assuming that you have the standard form OREA Listing with no changes, then the trigger for payment of the commission is the “the accepted Offer” and not the closing of the deal. Hopefully, you explained that to your Seller and hopefully the Seller will recall that explanation in Court.

Then, you have to prove that you had a valid Listing Agreement. That’s more than just getting the piece of paper signed.

The next step is proving that you were not in breach of any of your fiduciary duties to your Seller throughout the period of the Listing, otherwise, such a breach would disentitle you to payment of the commission. As an aside, let’s hope that you didn’t know about the title defect and no one is complaining that you improperly made certain representations or improperly drafted the agreement.

Now, we have one more hurdle and that is the Consumer Protection Act. If there is a problem there, then the Seller is entitled to rescind or cancel the contract. Once again, you would be precluded from payment.

Assuming that your Seller does not elect to sue, then “yes”, you could sue, but you have to take an Assignment of the Seller’s rights under the Agreement of Purchase and Sale. Now, the stakes get bigger, because there could be much more at stake than the commission. If it turns out that the Seller improperly failed to return the deposit, that’s now your fault.

You mention that the case is now in Court. There can only be one lawsuit between these two parties, so your commission may simply be part of the Seller’s claim, That’s one possibility and doesn’t cost you any money. In this scenario, your Seller may either be Plaintiff or Defendant, but in any event if they are a reluctant litigant, then you are at risk. Time flies when people are paying lawyers, so you better sue your own client before the two years is up, that’s whatever date in August 2019. If you don’t do this, the case will end up being settled in a few years and you’ll get nothing.

If you Commission were simply left on its own, that’s a problem. You need to Invoice your client the Seller and enter into payment arrangements. This way, your commission can be added to their losses.

Brian Madigan LL.B., Broker

www.OntarioRealEstateSource.com

Leave a Reply

Your email address will not be published.