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A seller must pay commission to their real estate agent if a full-price offer is presented, whether or not the offer is accepted, according to last month’s ruling of the Ontario Superior Court of Justice.
Back in September, 2008, Richard Fody signed a listing agreement with T. L. Willaert Realty Ltd. for a vacant parcel of vacant land near Tillsonburg. The $229,000 listing price was later reduced to $199,900.
In the standard form listing agreement, Fody agreed to pay Willaert a commission of five per cent of the sale price.
The agreement stated that commission was due and payable upon delivery of any “valid offer” on the terms set out in the listing agreement, or any other terms acceptable to the seller. Even if the transaction failed to close, commission was payable if the non-completion of the transaction was owing to the seller’s “default or neglect.”
A vacant land data input form signed at the same time as the listing agreement showed that the property was a “desirable treed building site just minutes from Tillsonburg,” and that the buyer would be responsible for installing a well and septic system.
Willaert found a buyer who submitted an offer for $150,000 in March, 2009. When Fody refused to meet with the agent, the offering price was increased to $170,000, then $184,000, and finally $186,272.50. Fody signed the offer back at $195,000, but ultimately refused to accept it.
At the end of April, the purchaser submitted an offer at the full asking price of $199,900. The offer was faxed to Fody’s lawyer, and a copy was dropped off the same evening in Fody’s mailbox. Fody and the agent also exchanged text messages over the next four days. Fody did not respond to the offer.
Terry Willaert then sent a text message to Fody advising him that the offer would expire at midnight on that day, and should he decide not to sign the offer, “the commission will still be payable” under the terms of the listing agreement. Ultimately, Fody did not accept the offer.
Willaert sued Fody in Small Claims Court for the commission of $8,995.50 plus HST and costs. Deputy judge James Searle ruled in favour of the real estate agent, and found that the listing agreement was sufficient to make the seller liable to pay the stated commission on the basis of an offer which met all the terms of the listing agreement.
In his decision, the deputy judge wrote, “The court has no doubt Fody was avoiding and otherwise frustrating Willaert because he decided not to sell unless he was able to purchase a farm. When the prospect of purchasing a farm evaporated late in April of 2009 he became inaccessible and nasty and refused to act in good faith when Willaert was obtaining and communicating offers that were near, then at, the listing price, something Willaert was obligated and entitled to do.”
Fody appealed the Small Claims Court decision to the Superior Court of Justice. Justice Marc Garson ruled that the price offered by the buyer was both the full listing price and the best available price at the time.
In dismissing the appeal and holding that the full commission was payable, the court ruled that a valid offer was submitted to the seller during the listing period, and that the seller acted “in bad faith and attempted to frustrate the efforts” of the agent.
“Acceptance of the offer is not required. The listing agreement clearly contemplated payment of the commission upon presentation of an offer at the full asking price.”
Sellers should think twice before refusing to pay their real estate agents for doing what they were hired to do.
Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto and a past board member of the Tarion Warranty Corp. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears alternate Fridays in The Toronto Star and alternate weeks on Move Smartly. E-mail firstname.lastname@example.org