Real Estate Brokers: Beware
Divisional Court recently overturned a Small Claims Court decision that awarded commission to a real estate agent who failed to have a prospective client enter into a representation agreement. The agent introduced the purchaser to the property and later learned that the purchaser was talking directly to the seller's agent. The seller's agent asked the purchaser if there was another agent involved and was told "no". The seller's agent then entered into a representation agreement with the purchaser, thereby becoming entitled to commission for both purchaser and vendor.
Because the seller's agent had assisted with the due diligence, the court ruled that the agent had "earned" the commission which negated a secondary argument that the seller's agent had been unjustly enriched at the expense of the introducing agent.
The Lesson: Get the representation agreement signed. An oral agreement is not enough.
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