January 26th - 2014

Legal Beat: Words matter in agreements and can lead to litigation

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This listing agreement that led to this Alberta court case stipulated that: a commission would be paid if the property was sold; the commission would be paid after the sale was completed; and a sale would be completed when the change in ownership was registered at the Land Titles Office and the buyer paid the purchase price.

According to the same document, alternate compensation would be paid if a purchase contract was 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% of the forfeited deposits.

The seller entered into a standard form Commercial Real Estate Purchase Contract, prepared by the REALTOR® for sale of the 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 was to be paid as follows: $10,000 as a deposit; a first payment of $2.2 million, together with the deposit; a second payment of $2.79 million; and $9 million by mortgage back.

The buyer paid the deposit as well as submitting the first payment, but did not complete the transaction. The REALTOR® sued for commission and claimed that there was a “sale” when a beneficial interest passed to the buyer when the first payment was made.

The courts held 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%. The courts held that the first payment was not designated as a deposit as contemplated by the listing or Agreement of Purchase and Sale.  The REALTOR® lost.

1068823 Mountain View Real Estate 2010 ABCA 84

MERV’S  COMMENTS

Listing agreements are contracts that are given their normal interpretation of what was intended, based on the wording and language that the parties chose to use in those documents. If you want commission on an accepted Agreement of Purchase and Sale, make sure the wording says so. If you want to claim half of all deposits, call them that. Ontario REALTORS® should review clause 2 of OREA’s Commercial Listing Form 520.

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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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