By Bob Aaron
Other
A ruling of the Ontario Superior Court of Justice in December makes it clear that a seller is responsible for paying commission to the real estate agent if a full price offer is presented, whether or not the offer is accepted.
Back in September 2008, Richard Fody signed a listing agreement with T. L. Willaert Realty for a vacant parcel of vacant land near Tillsonburg, Ont. The $229,000 listing price was later reduced to $199,900.
In the standard OREA 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, $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.
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. In a detailed and well-reasoned decision, 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 that 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 and the court released its reasons on December 12.
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.
After reviewing previous judicial decisions, Justice Garson wrote, “Simply put, courts have recognized that listing agreements are binding contracts … The law further provides that the vendor may be liable for the commission even though the transaction does not close.”
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 in presenting the final offer.
“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 Toronto real estate lawyer and chair of the Tarion consumer advisory council. His bi-weekly columns appear in The Toronto Star. He frequently lectures to real estate agents. Email bob@aaron.ca. Website www.aaron.ca.