Bob Aaron in Home Buying Tips, Legal
Earlier this month, the Ontario Superior Court of Justice released a decision which highlights the obligations of parties signing a buyer-agency agreement.
In the fall of 2005, Helen Clubine was looking at properties in the Orangeville area with her real estate agent Zoi Boussoulas.
By early January, 2006, Clubine had inspected a property known as Willow Hall several times, and was finally ready to put in an offer to purchase it.
At the time the offer was being prepared and signed, Boussoulas presented Clubine with a standard form buyer-agency agreement (now known as a buyer representation agreement), which gave the broker exclusive authority to act as the buyer's agent until June 30, 2006.
This form, which is commonly used in the real estate industry, provides that the broker is entitled to be paid commission if the buyer enters into an agreement to purchase any property, during the running of the agreement. If the seller does not pay the commission, or all of it, the buyer is required to pay it.
The form also has a holdover clause which entitles the broker to commission if the buyer, within 180 days after the agency agreement expires, enters into an agreement to buy a property shown or introduced to him or her by the agent while the agreement was in force.
In paragraph 4, Clubine agreed: "if I fail to advise you of any property of interest to me that came to my attention during the currency of this Agreement and I arrange a valid offer to purchase the property during the currency of this agreement or within the holdover period after expiration of this agreement, I agree to pay you the amount of commission set out above."
A later amendment to the agreement set the buyer's agent's commission at 2.5 per cent.
Willow Hall was listed at $825,000 but needed major renovations. Clubine instructed Boussoulas to prepare and submit an initial offer of $575,000. It was rejected.
Eventually, Boussoulas submitted a final offer of $750,000, but the vendors' bottom line was $765,000. The listing and selling agents offered to kick in $10,000 of their commission, but by that time the buyer lost interest in it.
Clubine and Boussoulas had an "unpleasant" telephone conversation in the aftermath of the transaction, and their friendship came to an end.
Clubine later purchased another property using a different agent, and that fact came to the attention of Homelife/Vision Realty Inc., the company where Boussoulas worked. Ken Kakoullis, the Homelife broker, wrote to Clubine advising that she had breached the terms of the buyer-agency agreement, and owed his company $21,774.50.
Clubine denied any responsibility for payment, alleging that Boussoulas had orally agreed to terminate the agreement, and that it was not explained to her that Clubine was responsible for paying commission if she bought another property.
Eventually, Homelife/Vision sued Clubine for its lost commission. The matter came up for trial before Justice Darla Wilson in March of this year, and her decision was released earlier this month. Justice Wilson found no fault with the actions of the real estate agent.
"The evidence establishes that she is an experienced real estate agent who conducted herself in a professional manner throughout," the judge wrote in her decision. "I do not accept the evidence offered by Ms. Clubine that she signed (a buyer-agency) agreement without satisfying herself of her obligations under that contract."
The judge concluded, "Ms. Clubine was angry that she did not get the Willow Hall property for the price that she wanted and she blamed Ms. Boussoulas for the outcome. She chose to enter into an agreement with another agent, which resulted in the purchase of a property during the period of time covered by the agreement with the Plaintiff and consequently, she owes the Plaintiff the 2.5 per cent commission which amounts to $21,774.50," plus interest and costs.
Buyer representation agreements have an important role in the real estate process. The lesson of this case is that buyers should always be aware of their risks and responsibilities when signing one.
Bob Aaron is a sole practitioner at the law firm of Aaron & Aaron in Toronto. Bob specializes in the areas of real estate, corporate and commercial law, estates and wills and landlord/tenant law. His Title Page column appears Saturdays in The Toronto Star and weekly on Move Smartly. E-mail bob@aaron.ca
