Listing Licensees Duties to Provide True Market Value; The Cancellation of a Listing Cancels the Holdover Clause #279

By Gerry Neely
B.A. LL.B

The extent of a licensee's duty to provide market value for property a licensee knows he will list for sale, was discussed in a case where a lakefront lot, which was listed for sale at $35,000, was purchased and resold immediately for $65,000.

The offer to purchase was received within two weeks of the listing of the property. During that period the licensee had been told by another licensee that the property was listed below market value, information with which the listing licensee disagreed. This information was not communicated to the lot owners. The lot owners sued for the maximum amount of damages of $10,000 that could be claimed in Small Claims Court.

In describing the licensee's duty, the Small Claims Court judge referred to the potential for a conflict of interest of a licensee, who knows that the property for which he is providing a market value will be listed with the licensee. The perceived conflict is that the licensee will list the property at a low price in order to sell it quickly to earn a commission.

The trial judge held that the licensee was in breach of his fiduciary duty, when he failed to advise his principals of the advice he had been given, that the property was listed at below market value, particularly when a quick offer at the asking price was received.

When the lot owners succeeded in Small Claims Court, the licensee appealed. Upon the same facts, the Supreme Court judge agreed that the comments about the low market value should have been given by the listing licensee to the lot owners. Since the ultimate buyer owned almost all of the remaining land surrounding the lake, the Supreme Court judge held that the licensee was negligent in failing to discover, as had the buyer who flipped the property, that the owner of the large parcel surrounding the lake was a likely buyer. ¹

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I understand that, with the cooperation of their sellers, licensees will cancel listings of property, which they intend to relist and continue selling, to avoid having the number of days the property has been unsold appear on the MLS(D information distributed to other members of the board. That may be a dangerous practice, if the property is not relisted with the same licensee, and is subsequently sold to a buyer who was introduced to the property before the listing was cancelled.

For reasons other than the one described in the above paragraph, a Victoria licensee cancelled a listing a few days before it was to expire. The seller continued to market the property and sold it himself within approximately one month of the cancellation, to a buyer who had been shown through the property by the licensee during the period of the listing.

When the seller refused to pay the commission, the licensee sued, arguing that paragraph 5(a)(ii) of the listing contract, the holdover clause, applied. The seller's denial of liability was based upon the ordinary meaning of cancel as meaning revoking, annulling, or making a contract void or invalid. While the Small Claims Court judge accepted these definitions, she said that the holdover clause continued in effect. In her opinion, it did not matter whether a contract expired or was cancelled, in either case it came to an end and the 90 day period commenced when that occurred and, therefore, the seller was liable for a commission.

The seller appealed the decision to the Supreme Court of British Columbia. There the judge, on the same evidence, held that when the listing contract was cancelled, none of it, including the holdover clause, had any further liability.²

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Since a listing contract is made between two parties, a licensee cannot unilaterally terminate a contract, other than for breach by a seller of its terms. A licensee who terminates a contract, without the consent of the other party, could be liable in damages if, for example, the property remains off MLSO, market values fall and the owner claims damages for a lost opportunity. The result of this decision is that an unhappy licensee should try and negotiate the end to the contract to retain the benefit of the overholding period. (To be discussed further in the next column.)

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