No Judicial Leeway to Compensate Unlicensed Individuals Who Provide Real Estate Services #523
CATEGORY: Legally Speaking
TAGS: BC Court of Appeal Illegal Contracts Public Policy Real Estate Services Act REALTOR® Licensing Remuneration
Beginning in the late eighteenth century, courts refused to enforce illegal contracts as a matter of public policy. In more recent times, however, courts have tried to become more flexible in their approach, seeking to balance "the need to preserve public policy by not enforcing illegal contracts [against] the need to prevent unjust enrichment by denying recovery."1
But how does this approach apply to people who provide real estate services?
This question surfaced in a recent case concerning real estate services provided to a seller with respect to the sale of his property.2 The seller approached the plaintiff and requested his assistance in negotiating the sale of two parcels of land to the municipality. The parties entered into an oral agreement that the plaintiff would act as the seller's agent and would be paid compensation in the amount of ten per cent of the sale price, if the sale completed. Three rounds of negotiations over five years resulted in an eventual sale of the parcels for $6,300,000. The seller refused to compensate the plaintiff for his services and the plaintiff sued for his expected $630,000.
At trial, the seller did not contest the facts but pleaded that payment was not owing because the contract was illegal pursuant to section 4 of the Real Estate Services Act (Act), which states:
No action may be brought or continued for remuneration in relation to real estate services unless, at the time the real estate services were provided, the person claiming the remuneration was
- a. licensed under this part to provide those real estate services, or
- b. exempted by this Act or the regulations from the requirement to be licensed under this Part in relation to the provision of those real estate services.
The trial judge found that the plaintiff had in fact provided real estate services, that he was not licensed nor exempt under the Act and that an action in contract was barred under section 4 of the Act. The court did, however, find that the plaintiff was entitled to the $630,000 on the basis of quantum meruit. In striking a balance between the issues of public policy underlining the Act and unjust enrichment, the court stated as follows:
"(i) [The seller} had approached [the plaintiff], not the other way around; (ii) [the seller] had assured [the plaintiff] that his lawyer had confirmed that the agreement was not prohibited by [the Act], (iii) there was no risk to the public as [the plaintiff] was not soliciting work or holding himself out to be a real estate agent; and (iv) if no compensation was payable, [the seller] would have obtained a substantial benefit in utilizing [the plaintiff's] services and paying nothing for them."3
The seller appealed and the BC Court of Appeal overturned the decision, finding in favor of the seller.
The Appeal Court distinguished between two types of illegal contracts: those where the legislature has specified the consequences for the illegal contract and those where it has not. The Appeal Court concluded that in the former category, courts are obliged to carry out the statutory objective, while in the latter category it is open to courts to determine the consequences. In this case, the Appeal Court concluded that section 4 of the Act fell into the former category, leaving the trial judge no discretion. It found that the legislature had specified the consequences of an unlicensed person providing real estate services. Section 4 barred any action - not just an action in contract -- for remuneration. Consequently, the plaintiff's claim for remuneration from the seller was dismissed.
The public policy objectives of the Act are clear -- the legislature has determined that only persons licensed or exempted under the Act may provide real estate services. It has backed that up with a strict prohibition against unlicensed persons claiming remuneration for the provision of services that they are not permitted to provide.
|1.||Birch v GWR Resources Inc. 2016 BCSC 117, aff'd 2017 BCCA 184 at paras 53-77.|
|2.||Lindsay v Dan Ambrosi and Vallyview Enterprises Ltd. 2019 BCCA 442.|
|3.||Lindsay v Ambrosi 2019 BCSC 358 at paras 58-61.|
Update on Wang v Shao (Legally Speaking issues 502 & 514)The Supreme Court of Canada has denied leave to appeal the BC Court of Appeal's decision in Wang v Shao, which held that a seller was not obliged to disclose a death on the property when asked, "Why are you moving?" For a detailed discussion of the disclosure or non-disclosure of stigmas, including violent death, see Legally Speaking 502 and Legally Speaking 514, which discuss both the trial court and appeal court decisions in Wang v Shao.
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