SMALL CLAIMS COURT – REAL ESTATE – CIVIL LITIGATION

Small Claims Court

Legal Update

Toronto Small Claims Court Judge rules that a Real Estate Broker is not entitled to a commission from a Buyer client due to non-completion of the Purchase transaction due to financial failure of the builder.

Real Estate – Civil Litigation – Toronto Small Claims Court – July 2015

In a recent decision the Toronto Small Claims Court ruled that Real Estate Brokerage & Agent representing a prospective Buyer (the Plaintiff) were not entitled to a commission because the condominium unit which the Buyer – Plaintiff wanted to purchase was never completed due to the financial failure of the builder-vendor. [Kwan Tong Poon v. Sultan Realty Inc. Brokerage and Eric Hau 2015 CanLII 45137 (ON SCSM)]

Background

The Defendant, Brokerage (the Real Estate Agent was also named as a Defendant but did not appear at trial) submitted that it is entitled to the real estate commission pursuant to a Buyer Representation Agreement (BRA).

The Real Estate Agent did not find a condominium unit for direct purchase from the builder however, did find a purchaser who was willing to assign her original Agreement of Purchase and Sale (APS) to the Plaintiff. By Assignment of the APS, all rights, title and interest to the APS were assigned to the Plaintiff. Before any agreement or document had been signed the Real Estate Agent demanded that Plaintiff pay $5,000 to the Brokerage as a deposit towards the purchase of the condominium which the Plaintiff paid. The Plaintiff paid a further deposit of $6,300 a few weeks later. The transaction for the purchase of the condo was never completed because the entire condo project was not completed due to the financial failure of the builder-vendor.

Decision

The Buyer Representation Agreement stated that:
“commission to be paid …. once assignment of APS has been successfully completed”.
“The Buyer agrees to pay such commission as described above if a transaction contemplated by an agreement to purchase or lease agreed to or accepted by the Buyer or anyone on the Buyer’s behalf is not completed, if such non-completion is owing or attributable to the Buyer’s default or neglect. Said commission, plus any applicable taxes shall be payable on the date set for completion of the purchase of the property.”

The Real Estate Broker testifying on behalf of the Brokerage submitted that the words “has been successfully completed” means that the Brokerage became entitled to the commission and its payment immediately upon the signing of the Assignment and did not have to wait until the successful completion of the purchase of the condo transaction. The Judge was of the view that these provisions in the BRA were contradictory and it could be similarly argued that the words “successfully completed” could refer to the actual completion of the purchase transaction of the condominium unit and that it does not mean that commission would be payable merely on the signing of the Assignment. This view – the Judge reasoned – was also reinforced by the doctrine of contra proferentem in terms of which any ambiguity in a contract will be construed against its maker, in this case against the Defendants as makers of the contract. The Judge found that since the condominium purchase was never completed and since the non-completion was not attributable to any default of the Plaintiff the defendants were not entitled to any commission.

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