The Real Estate Act and the End of the 100% House #23

By Gerry Neely
B.A. LL.B.

Unless a recent decision is reversed on appeal or the Real Estate Act is changed, the 100% house may disappear. This describes the arrangement between an agent and salesperson where the agent receives no part of the commission earned by the salesperson, but, instead, receives a rental or other payment which defrays the agent's costs of keeping open an office. In the case in question, a claim for commission was brought in the name of the agent but on behalf of the salesperson who had obtained the listing agreement, and the offer which resulted in the sale of the listed property. The salesperson rented an office for $100.00 per month from the agent, who was not entitled to share in the salesperson's earnings. The agent gave evidence that it had agreed to have the action brought in its name only on the basis that the salesperson paid all of the legal expenses and agreed to indemnify the agent for any costs that might be incurred. On the basis of this and other evidence, the Court stated that "it is plain that there was no supervision by the agent of the salesperson. There was no control or direction by the agent of the salesperson in his real estate activities. The sales person obtained the listing, he wrote it up, he handled the whole transaction; he was under no contractual obligation to the agent with respect to the way he went about obtaining listings or selling properties. The acceptance of the listing in the name of the agent was, it seems to me, purely a matter of form. This listing was, in fact, obtained by the salesperson in his own right. It could not be said that the salesperson was an agent of the agency. He could only be an agent of the agency if the agency was the principal in this transaction, but, in fact, the salesperson was the principal de facto here. The agency was merely a convenient shell."

Evidence from the office of the Superintendent of Brokers that it did not disapprove of an arrangement described as a 100% house, was insufficient to persuade the Court that the agent in whose name the case was brought had a claim for commission founded upon the activities of the salesperson. The argument for the defence was that under Section 33 of the Real Estate Act, a salesman is prohibited from engaging in a real estate transaction and is prohibited from accepting commission in respect of a real estate transaction, except from the agent who, according to the records of the Superintendent, is his employer. The facts found by the Court did not indicate either an employer-employee or principal-agent relationship between the agency and the salesperson, but only one of landlord and tenant. On the strength of these facts, the Court said that if it were to hold that the agent had a cause of action, the Court's decision would make the provisions of Section 33 worthless. The Judge, therefore, dismissed the plaintiff's claim for commission with costs.

The case is under appeal both as to the facts found by the Court and the law relating to those facts. Had there been more evidence of supervision by the agent of the salesperson's activities, the results might have been different. Had there not only been more supervision, but a sharing of commission, the results would have been different. While the results in this case depend entirely upon the facts found by the Court, it would be prudent for sales persons in the 100% houses to re-examine their contractual and other arrangements. Since the foundation of the relationship between agent and salesperson is based upon the assumption by the agent of responsibility for the actions of the salesperson, the Courts may conclude that the nominal role of the agent in the 100% house does not satisfy the intent of the Real Estate Act.

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