Jan 01, 2011

Enforcement of Holdover Clauses #443

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By Brian Taylor,
Norton Rose Fulbright LLP

Commission under listing contracts has always been payable where a legally enforceable Contract of Purchase and Sale is entered into by the seller during the term of the contract.

In 1997, the Multiple Listing Contract was amended to expand the circumstances under which a commission is payable.

Section 5A(ii) of the Multiple Listing Contract now provides that commission is payable if:

  "a legally enforceable contract of sale between the Seller and a Buyer who is introduced to the Property or to the Seller by the Listing Brokerage, a Cooperating Brokerage or any other person including the Seller during the term of this Contract is entered into:
 a. within sixty (60) days after the expiration of the term of this Contract, or
 b. any time after the period described in (a) where the efforts of the Listing Brokerage or the Cooperating Brokerage where an effective cause;"

These "holdover" provisions continue to be considered and enforced by the courts.

In a recent case1, a seller entered into a Contract of Purchase and Sale more than sixty days after the expiration of the term of the Multiple Listing Contract.

The buyer had been introduced to the property and the seller during the term of the listing contract by a brokerage representing a prospective buyer.

For reasons unrelated to the ultimate decision, the buyer's agent was not aware that the property was already listed on the Multiple Listing Service® (MLS®). The listing brokerage was not involved in the offer from that particular buyer. The sale completed and the buyer's agent was paid directly by the buyer.

Upon learning of the transaction, the listing brokerage sued the seller for commission owing under Section 5A(ii)(b) of the Multiple Listing Contract.

In considering whether commission was payable, the court confirmed that, "it is the interpretation of the [Multiple Listing Contract] that determines whether a commission is owing and not some concept of general expectation."

The court concluded that it was the buyer's agent and not the listing brokerage that was the effective cause of the sale. However, it concluded that the buyer's agent was a cooperating agent under the Multiple Listing Contract and, on the strict wording of the contract, the obligation of the seller to pay commission to the listing brokerage was triggered "as a result of the introduction of a purchaser during the listing agreement by a Cooperating Brokerage that is the effective cause of the sale."

REALTORS® and sellers should be mindful of the fact that courts will strive to enforce the specific terms of a clearly written contract.

 1. Scott v. Davies, 2010 BCSC 1479.

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Author profile photo
By Brian Taylor,
Norton Rose Fulbright LLP

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