Why Your Commission isn’t Protected

Imagine this scenario: you and your client diligently review your listing agreement. You add in an expiration date of 6 months and no over-hold. A few days later your realize that the 6 month expiration date was a mistake; you both agreed via email that the expiration date would be 7 months after the date of execution. You ignore this discrepancy, as you believe your client will act in good faith and honour the 7 month expiration date. Now here’s where it gets problematic: the property doesn’t sell after 6 months. Upset with the result, your client decides to sell the property on his own. The property sells in the 7th month. Are you entitled to your commission?

The Answer…..

It’ll be very difficult for you to argue that the listing agreement is valid and enforceable and, therefore, that you’re owed the commission. This is because the principle of certainty underpins the laws requiring agents to accurately draft and record all agreements related to a transaction – from buyer representation agreements to agreements of purchase of sale. If something is unclear, left blank or conflicts with what you agreed to and what you recorded, the contract may not be valid and your commission is at risk. This is particularly true of expiry dates. As Mr. Justice Morden put it in Rhodes and Rhodes Realty Ltd. et al. v. R. Pagani Investments Ltd. et al. (1981), 35 O.R. (2d) 77 (Ont. C.A.):

“if an agreement does not contain a provision which, in one way or another, at the time of the agreement, identifies the expiry date with certainty, then the requirements of the provision have not been met.”

Courts have interpreted the statutory provision requiring a listing agreement to contain an expiry date as seeking “to introduce a high degree of certainty into listing agreements, and to place the onus of ensuring such certainty exists on the broker”. As such, it is imperative to be accurate in your dates, names and pricing. But, that’s not all…

In ReMax Realton Realty Inc. v Seider [1993], the agent provided a listing agreement that included an expiry date. The agent then also provided a Professional Marketing Plan and Warranty that contained a provision allowing the seller to terminate the contract by providing 7 days notice. The seller ended up selling the property privately, despite the listing agreement still being in force.

The seller argued that he was able to sell the property and didn’t owe the agent any commission because the listing agreement is not valid. He argued that the termination provision in the Professional Marketing Plan and Warranty conflicted with the expiry date in the listing agreement. Such conflict raised uncertainty and, therefore, rendered the listing agreement unenforceable.

Thankfully, the judge found that the listing agreement complied with the legislation and was not rendered uncertain by the termination provision in the warranty. This is because the warranty did not alter that expiry date. Rather, the warranty was an entirely separate document:

The fact that the parties to the contract could agree to cancel it if the vendor became dissatisfied with the services of the plaintiff does not detract from the certainty of the expiry date of October 31st, 1989 in both listing agreements.

Despite this positive outcome, this case contains important judicial comments that may be used to invalidate your listing agreement. Ensure that you’ve not only accurately filled in the expiry date of the agreement, but that you also don’t create any accidental side agreements – such as agreements to amend listing agreements via email exchanges and marketing materials. If you confuse the terms of the listing agreement, you may be risking your rights to collect.