Commission Collection - No Breach of Duty or Fiduciary Relationship #359

By Gerry Neely
B.A., LL.B.

When the price of a property listed on the Multiple Listing Service® (MLS®) is reduced, what is the extent of a licensee's obligation, if any, to give follow-up notice to buyers' agents who have shown interest in the property?

This novel question arose when a West Vancouver property was listed on May 15, 2001 for $748,000, $50,000 more than recommended by the sellers' licensee. This price was reduced in stages to $629,000 on August 18, and finally to $519,000, effective September 6. The large reduction was due to the sellers entering into an agreement in May to purchase a home under construction, closing August 31, 2001.

A conditional offer for $480,000 and open for less than 48 hours, was received from a developer on September 7, before the reduction was disseminated through MLS®. In an effort to attract a better offer, the licensee informed several buyers' agents of the reduction. He believed these buyers' agents had shown serious interest in the property, had the price had been lower.

However, he did not call a salesperson whose client, a doctor, had seen the house twice in July when it was listed at $719,000. At that time, that agent stated his client would be interested in a price range between $560,000 and $580,000.

The sellers accepted the developer's offer after the licensee explained the options available to them and reminded them that the MLS® information had only been processed the previous day. He also continued to show the house and, within four days of the date of acceptance, had two back-up offers of $519,000 and $589,900, the latter from the doctor.

The conditions were removed and the sale closed with no payment of commission. When the listing agent sued for commission, the sellers claimed he had breached the required standard of care. They also claimed he breached the fiduciary duty owed to them by failing to advise them of the doctor's interest in July at the lower price range, and by failing to inform the doctor's agent of the greatly reduced price when the licensee received the developer's limited duration offer.

They argued that the lack of dissemination of the price reduction through MLS® made it important to contact all buyers' agents who had indicated a significant interest in the property by viewing it more than once. This would have required less than ten phone calls.

The licensee responded that many people had shown an interest, but considered the price too high. He had not heard from the doctor or his agent, even though the price was reduced over a period of time. He considered the range of price mentioned by the doctor's agent to be merely an opinion of market value and not an expression of a serious interest in the property.

The judge concluded that the sellers kept control of the pricing, leading to an overpriced property and no offers. Their difficult financial circumstances made it risky to reject the only offer they received. The licensee kept them fully informed and did not withhold information that a reasonable licensee would have disclosed.

He added that, in the absence of written offers, deciding when there is a sufficient level of interest to impose a duty upon a licensee to make a follow-up call would be a "near impossible task." As there was no duty of care to call other agents, the licensee did not breach a duty of care or his fiduciary relationship to his principals. Commission was ordered to be paid to the listing agency.1

Legally Speaking 360 will continue to consider commission cases with an in-depth look at the duty of care issue.

1.

Central Realty v. Holmes and others, S.C.B.C., Vancouver Registry, Reasons for Judgment, March 24, 2003.

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