Commissions - Listing Agreements for Court Ordered Sales #82

By Gerry Neely
B.A. LL.B.

A recent decision in an action which is likely to go on for some time involves an owner of a foreclosed property that was sold by Court Order, who has sued the lawyer who was advising him throughout the foreclosure proceedings. The basis of the action is that the lawyer consented to an Order for the sale of the property that, according to the owner, wrongfully resulted in a licensee receiving payment of a commission of $91,000.00.

The owner's argument is that the licensee was not entitled to the commission in the circumstances that resulted in the sale. The licensee has been drawn into the action by the lawyer to recover from the licensee the amount of the commission if the lawyer is held to be liable in damages to the owner. In order to reduce the number of issues to be heard at the trial, the Court was asked in this preliminary proceeding to determine whether commission was payable to the licensee.

The order giving conduct of sale to a creditor of the owner allowed the creditor to list the property with "one or more real estate firms. . . for a period to expire upon the redemption date or such other date" as the court might order. Commission would be payable only to the REALTOR "who may arrange the sale."

The commission agreement entered into as a result of this court order provided that a commission would be payable to the licensee on either of the following events:

"If title to the property is transferred pursuant to, or as a consequence of, an application for a Court approved sale brought by (the creditor) of an offer obtained by the licensee which was entered into during the term of this agreement."

The listing that was signed provided that it would expire on the date the redemption period ended. This redemption period was extended twice by court order; however, the listing agreement was never formally extended. After the first redemption period ended, the owner agreed to an extension of the listing contract. In addition, the solicitor acting for the creditor assured the licensee that its listing agreement would be extended. No new or extended written listing agreement was signed.

The offer ultimately approved by the court was made and approved after the extended redemption period had expired.

The purchaser whose offer was approved apparently learned of the foreclosure through the owner's solicitor and made his offer directly to the court. The licensee did not bring to the court the offer that was ultimately approved.

The importance of knowing the limitations of the listing contract is highlighted by the following reasons why the judge in this case decided that the licensee would not have been entitled to the commission paid to it:

1. The listing agreement was not in force at the time the offer was submitted to the court, because

(a) When the applications were made to the court to extend the redemption period, the court was not asked to extend the period when the creditor having conduct of the sale could list the property for sale with the licensee.

(b) Even though the owner agreed to an extension of the listing contract and the solicitor acting for the creditor assured the licensee that its listing agreement would be extended, no valid listing agreement could have existed after the expiration of the first listing agreement unless it was in writing, signed and for a specific term as required by Section 47 of the Real Estate Act.

2. By the terms of the agreement to pay a commission, the licensee was not entitled to a commission because the licensee had not obtained the offer approved by the Court.

1.

Mayo Holdings Ltd. et al v. Donald Moore Cunliffe, et al, Supreme Court of British Columbia Nos. SC4793 and SC5428, Nanaimo Registry.

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