March 6th - 2003

Written notice

The property owner signed a commercial listing agreement which expired November 16th.

The property owner signed a commercial listing agreement which expired November 16th. An offer had been presented by another broker on November 12th, but the seller rejected it immediately after looking at the price.

The seller then signed an Agreement of Purchase and Sale on November 25th with that same buyer. The transaction was completed, but the listing agent was not paid.

Part of the holdover clause said, “I agree to pay you a commission of 5% (five percent) of the sale price of my property on completion of any sale…or any sale, exchange or option agreement effected within six months after the expiry of this agreement with any party to whom you or your representatives or cooperating brokers have introduced to my said property during the term of this agreement, provided you have notified me in writing prior to the expiry of this agreement of the name of such party you or your representatives or cooperating brokers have introduced to this property.”

The listing agent sued the seller – and lost. The listing agent had failed to comply with the condition precedent in the listing agreement of giving written notice to the seller of the names of parties that would make the seller liable for commission.

CB Richard Ellis v Swedcan Lumican Plastics

Merv’s comments 

The reason for an over holding clause is to protect the listing agent’s commission in such a factual situation. The usual clause in many listing agreements achieve that result. However, in this case CB Richard Ellis used a Form that requires them to produce a written notice to be given to the seller prior to the listing expiring.

Even though the seller may have known of the buyer’s identity from the first offer, they were not liable. Presenting the first offer was not the “written notice” that the parties had contemplated in the listing agreement. This case had a harsh result, but was caused by the Form CBRE used and failure to follow the exact language of their listing contract.

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Ontario Real Estate Association

Jean-Adrien Delicano

Senior Manager, Media Relations

JeanAdrienD@orea.com

416-445-9910 ext. 246

Ontario Real Estate Association
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