Aug 01, 1999

Cooperating Agent’s Claim for Commission from Listing Agent #307


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

The agent for a prospective buyer, whose offer for a seller’s property was rejected, sued the listing agent for the share of commission offered by the listing agent to cooperating agents. The offer, which was for the exact price and the same terms as those contained in the MLS® contract, was rejected because the seller had already accepted an offer, subject to a condition concerning finance, which was to be removed several weeks later. That event occurred, the sale to the buyer who made the first offer completed and the listing agent received the commission.

The argument for the agent was that it came within the definition of an agent acting for a prospective buyer (paragraph 4A of the MLS® contract); the listing agent had offered a commission of 2 ½ per cent of the sale price to the cooperating agent who assists in obtaining a buyer for the property, and the agent had found a buyer ready, willing and able to purchase on the terms of the listing. Further, since paragraph 8 of the MLS® contract requires the seller to accept an offer by a buyer who is ready, willing and able to purchase on the terms set out in the MLS® contract, the agent for the prospective buyer had fulfilled the terms of the MLS® contract.

The agent acknowledged that it could make no claim to the commission paid to the listing agent by the seller in respect of the sale, because the agent did not find the buyer. The agent could not sue the seller for a second commission for the seller’s breach of paragraph 8 of the MLS® contract, because the agent was not a party to that contract.

In the end the success of the agent’s claim depended upon whether he assisted in obtaining a buyer. That in turn was decided by the ordinary meanings of the phrase "prospective buyer" and the word "buy." The dictionary meaning of the word buyer is someone who has bought something. A prospective buyer on the other hand is someone who expects to buy something in the future. The offer by the listing agent made in 5(c) is to pay part of the listing agent’s commission to a cooperating agent who brings a buyer. The offer is not made to a cooperating agent who presents an offer from a person who may be ready, willing and able to purchase, but whose offer is not accepted.

In addition, the commission to be paid is based upon a percentage of the sale price, a price agreed upon between the seller and buyer, which usually differs from an offered price. The agent’s claim was dismissed.

This decision may answer a question that has been addressed by some boards in their regulations, as to whether a listing agent is liable to a cooperating agent when, despite a binding contract, the buyer fails to complete. By finding the buyer who contracted with the seller, the cooperating agent had accepted the listing agent’s offer and earned the right to share in a "portion of the listing agent’s commission". While the seller would be liable by paragraph 5(a) of the MLS® contract for payment of the commission, it might never be collected by the listing agent. The reasoning in this case suggests that the cooperating agent is only entitled to a commission if the agent brings a buyer who completes.1

 1. Rosling Real Estate (Nelson) Ltd. v. Robertson Hilliard Cattell Realty Company Ltd. Reasons for Judgment, June 7-8, 1999, S.C.B.C. Nelson Registry.

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