Brian Madigan LL.B., Broker
BRMadigan@iSourceRealEstate.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


Phone: 416-745-2300
Toll Free: 1-888-507-0817

 

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Is Commission Owed on an Agreement which doesn’t Close?

October 11, 2017 - Updated: October 11, 2017

Is Commission Owed on an Agreement which doesn’t Close?
 

To answer this question we’ll have to look at the Listing Agreement.
 

Here’s what it says:
 

Part 1
 

“In consideration of the Listing Brokerage listing the Property, the Seller agrees to pay the Listing Brokerage a commission of ...............% of the sale price of the Property or ........................................................................................................................................ for any valid offer to purchase the Property from any source whatsoever obtained during the Listing Period and on the terms and conditions set out in this Agreement OR such other terms and conditions as the Seller may accept.”
 

You will see that the “trigger” for the payment of the commission is the valid offer. It could say the “completed transaction”, or the “closed transaction” or it could have added a condition like “provided the transaction is completed” or “upon successful closing”. But, it doesn’t.
 

A Seller could amend the Listing to provide this condition. Most lawyers will suggest this amendment. However, most of the time, legal advice is not obtained and this is the provision in the Agreement: the valid offer.
 

So, the Listing Brokerage will send an Invoice for the Commission to the Seller, and if the Buyer has defaulted will sue the Buyer for losses that have been incurred including the commission.
 

Part 2
 

“The Seller further agrees to pay such commission as calculated above even if the transaction contemplated by an agreement to purchase agreed to or accepted by the Seller or anyone on the Seller’s behalf is not completed, if such non-completion is owing or attributable to the Seller’s default or neglect, said commission to be payable on the date set for completion of the purchase of the Property.”
 

For greater certainty, if the failed transaction is the Seller’s fault, the commission is still payable. This clause might not be necessary, but it eliminates any doubt.
 

Here’s the problem. Some people will think that because Part 2 deals with the Seller’s default and doesn’t mention the Buyer, then, in the case of the Buyer’s default, there is no commission owing.
 

That’s not correct. Have a look at Part 1. It didn’t even matter if the Buyer closed the deal, the commission was owing for the valid offer.
 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: listing commission trigger valid offer not closing not completion ontario law
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

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