When Mike Armstrong and his wife Jessica set out to sell two cabins nestled in the trees at Lake Errock east of Mission, they had planned to use the proceeds to move to Vancouver Island to be closer to family.
He never expected five years later they would be left facing tens of thousands of dollars in real estate commission fees without having sold either of the properties.
“Never. Nerd. I mean, who would? he said. “You’re trusting.”
A BC Supreme Court ruling issued April 25 ordered the couple to pay Century 21 Seaside Realty $52,500 in commission.
In her decision, Justice Sheila Tucker found there was an enforceable contract of sale, even though the deal never closed.
“The Commission Clause does not refer to a closing or completion,” she said. “The Commission Clause read on its own discloses that commission is tied to the existence of an enforceable contract.”
She also referred to a term in the multiple listing agreements (MLS) contract covering the brokerage’s remuneration, which stated: “The remuneration due to the Listing Brokerage shall be payable on the earlier of the date the sale is completed, or the completion date, or where no contract of sale has been entered into seven days after written demand by the Listing Brokerage”.
Armstrong alleged a breach of fiduciary duty against the realtor in the court proceedings, saying they were not informed the commission would still be payable without a sale. Tucker disagreed, and said while the amount of time the couple spent reviewing the MLS contracts is unclear, it is “undisputed” that they did review them before signing.
Armstrong said their lawyer is reviewing the court decision.
“One thing we’ve learned with the court case is it doesn’t matter what they tell you,” he said. “Even the judge said transaction doesn’t necessarily mean a sale transaction. A sale transaction could mean just signing the contract. Well…does anybody actually consider that when you go buy something? Do you not exchange cash for the product?”
Armstrong said a buyer came forward months after the lots were listed in April 2017. Following an extension, the purchase price was eventually set at 1.35 million with a closing date in July 2018, but the sale never happened.
In the court decision, the judge said the prospective buyer, Vans Intrust Investments Ltd. represented by Michael Tran, was identified by the couple’s real estate agent Fabian Saul, and Tran was taken to view the lots in August 2017.
According to the ruling, later that month the Armstrongs entered into a limited dual agency agreement, where the same brokerage would represent seller and buyer. The judge said they also entered a sale agreement, where one clause stated: “buyer to visit properties before completion date with help of seller”. The cabins are only directly accessible by boat. Vans also paid a $60,000 deposit at the time.
The judge said in April 2018, Vans asked for an extension to close the sale. Armstrong agreed, with Seaside reducing its commission to $52,500 as part of that agreement. The purchase price also increased by $50,000 to 1.35 million, and the deposit was also increased by $10,000. The new closing date was set for July 27, 2018.
However, the decision notes that day passed without a closing taking place.
The Armstrongs argued the sale agreement was unenforceable because the clause requiring Tran to visit the properties again with the help of the seller was never met. Tucker said the realtor attested he did bring Tran to see the properties twice in 2018.
“I am satisfied that he did so at least once before the original completion date, and then at least once again during the extended completion period,” she said. “Mr. Saul did so as the Armstrongs’ agent.”
Vancouver realtor Tom Everitt with eXp Realty said this type of situation is not unheard of, although he added in his own personal experience “I don’t know very many realtors who chase down a commission if the deal falls apart”.
“One of the reasons for these clauses is a realtor can spend one, five, $10,000 marketing a home…and the seller could just fire you on Sunday at four and then go to the buyer and do a deal,” he said. “Part of this is protecting us as realtors, which I hope is understandable.”
He said he strongly encourages people to make sure they understand what they’re agreeing to when it comes to contracts, and even suggested seeking help from a third party if they’re not satisfied.
“Even take it to a lawyer. Make sure you know what you’re signing,” he said. “It’s all fun and games until it goes to court.”
Armstrong said he has filed a complaint with the BC Financial Services Authority, and has also contacted his MLA. He’s hoping to see changes that will keep sellers from finding themselves in this scenario, including altering legislation if necessary.
“Yes, definitely, if that’s what needs to happen to protect others from having this happen to them,” he said. “There are clauses in the real estate services act that allows the superintendent to protect British Columbians…he can issue an order today. Tomorrow. So I’m hoping they do this.”