Understanding commission agreements

An Ontario Court has ruled that you can’t get away with not paying commission when you sign an agreement with a real estate agent.

It means when you agree to pay an agent to find a home, it means that if you end up buying a home during the time period of your contract, you have to pay commission. You can’t change your mind later.

Bahareh Vali and her partner Hamid Sadri, were looking for a home to buy in North York in 2005. They started working with Shoreh Forjani, a real estate agent and over a period of two and a half months visited several properties.

Ms. Vali signed an agreement to pay Forjani 2.5 per cent in commission if she ended up buying a home through the agent. her partner did not sign the agreement.

The couple made offers on three properties and none were accepted. The last offer was $601,888 for a home on Otonabee Ave. in North York. The couple were particularly upset that this offer was not accepted, blamed Forjani and tried to cancel the agent agreement. Forjani refused to release them.

Independently, Sadri approached the agent who was selling the home on Otonabee and made a deal to buy it in his name, for $615,000. He didn’t tell Forjani who later found out and sued for the lost commission.

In a decision released April 16, 2010, Justice Grace, of the Ontario Superior Court, ordered Vali pay to Forjani $15,375 plus GST, a sum representing the commission of 2.5 per cent of the purchase price.

Forjani had emails proving she had introduced the couple to this property. As the judge said: “The efforts of Ms. Vali and Mr. Sadri to obtain the services of two real estate agents for the price of one cannot succeed.”

In other cases, buyers have agreed to pay their agent commission, and then changed their minds and bought the property through a company that they controlled instead. Same result. The agent sued for their commission and won.

Buying a home is not easy. Some of the advantages of using a real estate agent are that he or she will:

•Work exclusively on your behalf.

•Introduce you to experts who can assist you, such as lawyers, home inspectors, mortgage brokers and planners.

•Find you the property that best suits your needs.

•Negotiate the best price on your behalf.

•Protect your interests.

The lesson here is that if you think you can buy or sell a home on your own, without professional help, that’s fine. But you can’t take up an agent’s time and then cut them out at the last minute. Not only will you lose the benefit of their advice at the most critical part of the negotiations, you will end up probably having to pay them anyway.

Mark Weisleder is a Toronto real estate lawyer. Contact him at [email protected]