Commission Earned During a One-Year Overholding Period #165

Dec 01, 1990

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

An Ontario listing agreement which expired on October 15th, 1984, had a one-year overholding clause. This entitled the agent to a commission if within that year, the property was sold, exchanged, leased or optioned to anyone who, during the listing period, was made aware through the marketing activities of the agent that the property was for sale. Commission was to be paid upon completion.

A conditional offer was made through the agent in August 1984 by a purchaser who was unable to remove the conditions. The property was relisted in August 1985, with another agent under a listing contract which excluded a number of potential purchasers, including the purchaser who made the August 1984 offer. On September 23rd, 1985, that purchaser made an offer acceptable to the vendor which was conditional upon the purchaser arranging financing within 90 days of acceptance. The condition was removed by the purchaser on December 11th, 1985, after the expiration of the one-year overholding period, and the transaction subsequently completed.

The vendor refused to pay the commission because it argued that since the offer was conditional, no sale took place during the overholding period. The judge agreed and the agent appealed. The Appeal Court overruled the trial judge to hold that the September offer created a binding contract of purchase and sale in the overholding period, when the condition was removed.

The reasons for judgment emphasize that all decisions concerning an entitlement to commission depend upon the terms of the contract covering the payment of commission. In this case, there were two significant terms upon which the court relied in reaching its decision. The first was the entitlement to commission if the property was optioned during the overholding period.

The court concluded that the positions of an optionee and a conditional purchaser are somewhat similar. Completion by an optionee is dependent upon the optionee's decision to proceed, and completion by the conditional purchaser was dependent upon fulfilling or waiving the financing clause. It would be inconsistent therefore, that a vendor should be required to pay a commission in the case of an option given within the overholding period, but not be liable for commission for an accepted conditional offer made during this same period which became unconditional when the period ended.

The second term of significance to the judge was that no commission was payable in either instance unless the sale closed. No vendor would pay a commission for the granting of an option which might not be exercised. Similarly, no commission would be payable by holding that the sale took place during the overholding period unless the sale was completed.1

  1. H.M.P. Realty Corporation v. Federal Business Development Bank, Ontario Court of Justice, Sault St. Marie, 3841/87. September 6, 1990.

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