Protecting Your Commission

The issue of a seller’s contractual obligation to pay commission has once again arisen in Ontario’s courts. In the recent case of Gidda v. Malik, the seller had signed a listing agreement with a real estate brokerage, but subsequently sold the home through a private sale. The private sale was singed and dated during the period listing agreement was in effect but did not close until after the expiry of the listing agreement.

The real estate agent who listen the property learned of the private sale, but what is unique is how she obtained details of the private sale. The agent contacted the law office that represented the seller and misrepresented that she was an agent acting for the seller in relation to the private sale. She then asking for a copy of the private agreement, and a secretary working at the law office forwarded a copy of the agreement to the real estate agent. Using this information the real estate agent successfully obtained a judgment against the seller for the commission owing of $10,000.

The seller did not learn from this court decision. He decided to sue his lawyer for the $10,000 on the basis the lawyer had improperly disclosed the private sale agreement. The court ultimately found that, while negligent for disclosing the agreement, the lawyer is not liable for the seller’s “loss”. It was found that even if the agreement had not been disclosed, the sale would have become a matter of public record and the real estate brokerage would have likely pursued the matter.

Most importantly for real estate brokerages, the court went on to note that the seller was the author of his own misfortune. It was found that the seller had entered into a binding agreement to pay commission, and he could not set out to deprive the brokerage of that commission, nor could the seller then blame his lawyer and pass the cost of paying the commission onto his lawyer.
An agent should never involve him or herself in any unscrupulous actions, such as misrepresenting his or her identity or the capacity in which the agent is involved in a transaction. Where a brokerage has a contractual right to a commission, a remedy against the seller can be obtained without engaging in such behavior. The seller and/or lawyer may have referred this matter to RECO. We do not know. The penalties, costs, losses and expenses as a result of a RECO complaint and decision could have been much more than the commission recovered from the seller.

Reprinted from K-W Real Estate Board Legal Update