Often, an agreement to purchase real estate will have a conditional period to allow for various steps to be completed by either the buyer or seller.
An appeal decision in Ontario’s Divisional Court affirmed that a party cannot generally sue for compensation under an agreement until it is firm and binding. This principle applies to real estate agents seeking to recover a commission as well as the parties to the conditional agreement, as demonstrated by Covenoho v. HomeLife Response Realty Inc.
The decision arose from a dispute between a real estate agent and two brokerages. In January 2019, the agent executed an Independent Salesperson’s Agreement with a brokerage, Right at Home, and was provided with a salesperson’s manual.
In June 2020, a property in Mississauga, Ont. was listed for sale on MLS for $799,800.00. The agreement to list the property was signed by the listing brokerage, Homelife, and the owners of the property.
The agent presented a conditional offer on behalf of some prospective buyers to purchase the property for $805,000. The offer contained conditions for the buyers to arrange financing, conduct a home inspection, and confirm they could obtain insurance.
If the property had been sold to the agent’s clients, she would have been entitled to a portion of the sales commission because she would have been the cooperating broker. Unfortunately for the agent, the sellers did not accept the conditional offer. Despite this development, the agent demanded that Homelife pay her the cooperating brokers’ portion of the real estate fees. Homelife understandably took the position that it was not required to pay the agent any commissions since there was no sale.
In response to a threat by the agent to commence a lawsuit against Homelife for the commissions, the vice president of legal for Right at Home advised that she did not have the standing to bring the lawsuit and that she was required to withdraw it. Further, the agent was advised that Right at Home believed they did not have any claim against Homelife for unpaid commissions either.
Undeterred by these developments, the agent commenced a lawsuit for the commissions. Shortly after, her Independent Salesperson’s Agreement was terminated by Right at Home.
In December 2021, a deputy judge of the Ontario Small Claims Court dismissed the agent’s claims against both brokerages. The agent then appealed to the Divisional Court.
On appeal, while the agent raised numerous issues about the real estate industry in general, the court focused on what actually took place between the parties from a legal standpoint.
The appeals court found that there was never a binding purchase and sale agreement between the buyers and sellers. For parties to agree on the contract terms, they must have reached the same understanding as to the essential terms of the agreement.
In this case, the sellers had listed their property for sale, which was, at most, an expression of interest in selling and an invitation for offers.
The agent argued that her clients’ conditional offer to purchase the property was an “interim acceptance” of the seller’s offer to sell. However, this position was contrary to Canada’s well-understood principles of contract law.
In the court’s words, “a conditional offer is not a valid offer.” An offer conditional on certain events or conditions coming to pass may only be completed if those happen. Here, the buyers may not have been able to obtain financing or insurance, in which case they would not have been required to complete the purchase.
The agent argued that Right at Home was negligent in not suing Homelife to obtain her commission. The court rejected that argument since, under the listing agreement, even if the sellers had an obligation to accept an offer such as the one tendered by the agent’s clients, the only party that could enforce that obligation was Homelife. The listing agreement was a contract between Homelife and the sellers. The agent and Right at Home had no rights under the listing agreement. Nothing in any of the applicable rules, regulations or policies imposed a legal obligation on the sellers to accept the offer.
The agent asserted that she was being “denied access to justice” because her claim against Homelife was not pursued by Right at Home. However, a person who does not have a valid claim is not being denied access to justice simply because a third party refuses to advance that claim on their behalf. The court noted that Right at Home was within its rights not to advance the agent’s claim and to terminate her position under the Independent Salesperson’s Agreement. The agent was not denied access to justice since her claim was adjudicated at both the trial and the appeal level. As a result, the appeal was dismissed by the Divisional Court.
The decision shows that an agent is not generally entitled to recover a commission that would have been payable had a conditional offer become firm and binding. This result may be unfortunate to an agent who puts a substantial amount of time and effort into assisting clients with putting forth a conditional offer. Still, it reflects well-established principles of contract law. Absent a binding contract, formed by the fulfilment of all outstanding conditions, there are likely no valid grounds for enforcing a commission payment, and one should not have any reasonable expectations of compensation until an offer becomes firm.
James Cook is a partner at Gardiner Roberts in Toronto and has been with the firm since he articled there in 2002. As a litigator in the firm’s Dispute Resolution Group, he has experience in a broad range of commercial, real estate and professional liability litigation. Phone 416-865-6628; email email@example.com. This article is provided for educational purposes only and does not necessarily reflect the views of Gardiner Roberts LLP.
Wow! This is real estate 101 and contract law 101. How did this person obtain a license to sell real estate. We need to rid our industry of unprofessional members.
GTA people are the problem
*Some* GTA agents…
We all know that real estate commission is paid snd received for bringing about a firm transaction contract – I would have found it more interesting had the agent brought a full price, no condition offer with closing matching date requested —- then if property was mls Homelife had promoted a commission to co-operating broker. That is the law case that needs to be addressed – will the courts Side with our entitlement to the commission.
What do you mean GTA agents are the problem?
LOL, if GTA people are the problem, what about others out of GTA, are they solutions??
This is discrimination.
Well said. I can’t believe it even went to court. I hope she had to pay all legal fees.
I totally agree with you.
you are right.
Either RECO didn’t find all the cheaters or she is not very smart as is evidenced by the saying, “a man who represents himself has a fool for a client.
In either case, for the good of the public, she should be retaking all courses and forced to work under supervision until she passes them.
As Forest Gump said “You can’t fix stupid”.
Clearly yet another example of still how low the educational requirements are to be licensed and the lack of many brokerages (not all) to not continue to educate or support their sale representatives appropriately. Just keep adding more to the roster. No wonder the public opinion of our experience and expertise is where it is now.
Blame our associations, they encourage a system of a high volume licences to maintain their existence. And I guess you can blame us as agents for allowing it to continue.
You raise a good point. Associations should enforce higher standards so that we do not continue to embarrass ourselves.
Blame the association for handing out licences to incompetent people. Licence should have been revoked but apparently the governing body has approved this incompetent person to run their own brokerage. It’s the licensing bodies that want the volume to keep their own incompetent existence. We don’t need them, they do nothing for us. We can get insurance through our board. Orea and Reco both need to be downsized and brought up to date.
Fortunately the courts do get it right in most cases. Right at Home is to be applauded for terminating the agent and not being a part of this fiasco. How embarrassing for our industry.
Yes! Good on Right at Home for terminating the agreement with their own agent (I struggle to even call her an agent). I just really hope this ‘agent’ isn’t still practice as a Realtor
This is by far the most preposterous, ie stupid, thing I have read in ages. I kept expecting to read how there was some dirty business behind this…but nope just outrageous ignorance and entitlement. Curious what brokerage took her on….
I don’t even have my license and I know her claim was complete BS. Imagine what else she tried or will try to get away with.
I suggest perhaps that it was her first deal and she figured she was robbed! A petulant child ! “ that’s my money”
I believe she should have to take a legal updat course or basic contract course.
Perhaps she best goes back to hairdressing….
WOW.. we let every stupid idiot into this industry.. I think it is time we ensured the educational mandates are brought up to the standard of other professions. We are allowing people like this to get their license and in the process allowing them to potentially misguide and ruin the lives of others.. not to mention making the rest of our lives miserable as we practically have to do the job for people like this agent. I have to review the buyer’s offers before presenting quite often as there are so many blatant issues but on the flip side, I get these lazy agents and discount brokerages that can’t even be bothered to put a listing together properly which inhibits my ability to draw up the offer until I call them to get clarity on their listing. Come on RECO.. ensure educated people representing the real estate profession. Making it too easy for people to get their license diminishes the value of the entire industry.
The part that pisses me off the most about this is all the man-hours wasted by other professionals to humor this incompetent agent. I hope she was charged for all legal costs including lawyers on all sides. Why are the taxpayers having to front these bills, even if just a portion of it?
I guess the phrases “Firm and Binding” and “Upon completion” have no meaning to her. Get her a dictionary !!
I find it alarming and concerning that this article was published mentioning two brokerages without any mention of the name of the incompetent fool who caused this situation in the first place. I totally agree with the brokerages position and they did not need to be identified, especially if it was decided not to expose the individual.
I really think that this agent had or has some mental issues. I have never heard of a case like this one. It sounds insane to me, sorry. Glad RAH let her go, but other brokerages have the right to know the identity of this agent, she should be stripped of her R.E. license and no other brokerage should hire her.
I found the case summary with all parties in under two minutes.
Frankly this article was being kind.
I do not understand how this.. agent could have convinced a … lawyer to take this … case
I found the case summary with all parties in under two minutes.
Frankly this article was being kind.
It sure why the agent’s name is not mentioned. It’s publicly available knowledge.
Joss Covenoho currently with her own company of one: SHOW MORE AND MORE REALTY CORPORATION
Steve, see the last post, and thanks for the public advertising.
The above agents have never read the MLS rules, nor the listing agreement, while they are licensed professionals.
If you read Canlii, you will see the judge refuses to quote the MLS rules which allow our brokerages to fight the case on our behalf in court.
Are you able to tell me why Lamba would be paid in the Popova case for a valid offer, but not the agent, who procured him that offer, while the MLS rule states that a listing by making an MLS posting, makes an offer to the cooperating brokerage? Did you also miss the MLS Rules which state, that your brokerage can enforce the listing agreement, and that listing agreement states, that a seller must pay for ANY valid offer. Well the judge did too, but wanted to. MLS Rules were written to ensure that listings do not operate as auctions, with people bidding blindly, with conditions. Read the Lamba cases and the Wilaert cases. It cannot be that ONLY the listing agent is paid for UNACCEPTED valid offers, while a buyer’s agent bought that offer in. Buyer’s agents are exploited by listing agents, by ignoring MLS rules.
Are you aware that roughly 50% of all court decisions err, especially where a self rep exists, and especially when a minority is before them?
Read your MLS Rules, All of them, especially the ones starting with 7. A listing on MLS is an Offer to a Cooperating. A seller promises to accept ANY valid offer. The failure to accept results in a breach. In my case, the agent flatly stated he wanted more money than the listing price, while the buyer went above the listing price. He had no reasons, but if the seller did this to him, he could sue her in court, as Lamba did. A listing price is NOT an opening bid. Brokerages are not permitted to run auctions. NOT one agent, including you, has realized, that first come, first serve, truly applies in MLS listings. There is no reason why any buyer’s agent should be exploited by a listing agent, who had done their job. There is no other professional who is licensed, who works for free. There is NOTHING in any of our contracts which states we are working on contingency. The Agreement of Purchase and sale tells the buyer that their deposit will be used to pay the seller’s commission; this is the first part of how a brokerage sets both the listing agent and buyer’s agent to become unpaid for work done. You as a professional licensed realtor, have never read your listing agreement, and noticed that there are TWO offers there. 1 is an offer to sell the home. The other is an offer to pay a realtor. Completion is NOT required to be paid for procuring a valid offer; it is a courtesy, there is truly nothing that prevents a brokerage from immediately billing a selling for commission for the job done. A realtor’s sole job, is to procure a valid offer for a seller. MLS sells 93% of all homes, such that no other form of marketing is necessary. The listing agent will use MLS for the advertising component, and hope to procure a buyer himself, and ignore the offers of buyer’s agents. It is entirely exploitive, the only licensed professionals who are not paid for work done. Do you disagree that putting in valid offers, is work? and the work that was promised was done? The judges have made decisions for listing brokerages, who never turned around and paid the buyer’s agent who bought that offer. That is disgusting. The aim is to appeal to all levels until someone can actually read.
— Neither judge so far, understood the Re/Max Welland case.. the judge in Re/Max Welland IN FACT makes it clear that a conditional offer, also known as an interim offer, is a valid offer.
In law, what makes an offer valid, is that all terms are legal and doable, AND NOT that they are firm. The amount of writers above who think they know what valid means, while they issue listing agreements all day, is shocking. To protect buyers the majority of what we issue will be conditional offers. When a judge tells the world that conditional offers are not valid offers, while all employment offers are conditional, then we have a problem. Yes? No?
Every poster above practices without truly understanding their job and without understanding what their contracts say… it is scary. It is precisely why brokerages NEVER pay for and fight for your cases, as they are required to by MLS. It is because of you.
None of the agents above, nor the lawyer posting know MLS rules and how it protects agents in an MLS transaction.
None of them know the cases of Lamba v Popova or Willaert v Fody.
The listing agreement states that a seller will accept any valid offer.
When they don’t, that is a breach.
Under MLS, the buyer’s agent must be paid, by having the cooperating brokerage take the listing brokerage to court to enforce the listing agreement.
Lawyers who ignore MLS rules and adhere only to contract law, while also ignoring that a listing agreement contains 2 offers, should not be publicly posting.