Careful With Your Contract: Realtor Keeps Commission Despite No Closing
It is an important lesson, and unfortunately many learn the hard way: courts are reluctant to intervene and “rescue” a party who later regrets contractual arrangements. This is because contracts hold a special place in our society. They enable all sorts of other agreements to help us function without the constant direction of judges and other officials. There is great value in allowing parties to seek terms to which they are agreeable, and there is a general sentiment that if someone feels they are being offered a bad deal then they can go elsewhere.
There are of course some exceptions where courts will order a contract unenforceable, but the case of Century 21 Seaside Realty Ltd. v Armstrong, 2022 BCSC 646, is not one of them. In that case, the plaintiff, a real estate brokerage, sought to uphold the terms of what were called “standard form multiple listing agreements” or “MLS Contracts”. It was a term of the contracts [section 5A(1)] that commission was owed to the plaintiff if “a legally enforceable contract of sale between the Seller and a Buyer” was entered into during the term of the contracts. The defendants reached a sale agreement for the properties. The sale agreement did not close. The defendants did not seek to enforce the sale agreement against the buyer. The real estate brokerage then sought to enforce their commission fee pursuant to the MLS Contracts.
Of particular interest, the BC Supreme Court appears to have adopted the reasoning from the Ontario Court of Appeal that: despite the realtor owing the defendants a fiduciary duty after executing the MLS Contracts, no such duty existed prior or in regard to the negotiation of the MLS Contracts themselves. The parties “were independent, arms’ length parties contemplating entering into a contract together.” In short, it was for the defendants to act in their own interests in entering into the MLS Contracts – be it through seeking legal advice, negotiating the terms and/or seeking a different realtor if necessary.
Practically, realtors or others may be reluctant to enforce contractual terms where there is a general sense of unfairness, and bad publicity. Legally, they can do so. It is important to not sign a contract without a careful reading, and do not assume concerns with the wording can be fixed later. Negotiate before you sign, and if there are any uncertainties, contact a lawyer.