In a recent Ontario case, the court denied a real estate agent’s application to be paid a commission after it found that he had made misrepresentations to the buyer about the document she was signing.
Real Estate Agent Claims Commission After Failed Deal
A real estate agent worked with a couple for more than a year to find a home in the Greater Toronto Area for their daughter.
On November 12, 2018, the couple decided to make an offer on a property in Mississauga. Because the couple lived in a country outside of Canada, the offer was made in their daughter’s name to avoid certain taxes. As such, the daughter signed the agreement of purchase and sale as well as a buyer’s representation agreement (“BRA”).
The BRA entitled the real estate agent to a 2.5 percent commission on the Mississauga property and any single-family home the daughter bought in the Greater Toronto Area between November 12, 2018 and March 11, 2019.
However, the daughter’s offer on the Mississauga property was rejected.
Subsequently, on November 22, 2018, the daughter put an offer on a home in Toronto through a different real estate agent. The offer was accepted and the deal closed on January 4, 2019.
The real estate then brought an application to court seeking an order that the daughter pay him a 2.5 percent commission on the Toronto property.
In response, the daughter brought an application seeking a declaration that the BRA was void and unenforceable. Specifically, the daughter relied on the defence of non est factum whereby a person may escape their legal obligation under a contract by proving that they were mistaken about the contents of what they were signing.
Court Rules That Daughter Does Not Have to Pay Commission
At the outset, the court explained that in order to succeed in a defence of non est factum, the daughter had to establish the following three elements:
- That she was mistaken about the nature of the BRA;
- That her mistake as to the nature of the BRA was the result of a misrepresentation by the real estate agent; and
- That she was not careless in signing the BRA.
On the first element, the court found that the daughter had been mistaken about the nature of the BRA. While the parties presented conflicting evidence, ultimately the court found that the daughter had not been adequately involved in the discussions between the real estate agent and the parents prior to signing the BRA. Additionally, there were issues relating to the parents’ understanding of the BRA themselves, as the document was not translated and the parents relied on the real estate agent’s translation of the content. As such, the evidence showed that the real estate agent had misled the parents into believing that the BRA only applied to the Mississauga property as opposed to all subsequent deals that might be made. As such, the parents and daughter were mistaken about the contents of the BRA.
Further, the court found that the daughter had proven the second element, holding that the real estate agent had misled the parents directly and the daughter indirectly about the content of the BRA. The court found that the real estate agent had misrepresented the BRA to the daughter’s father by stating that it related to the Mississauga property only. The father then relayed the information to the daughter before she signed the documents. The court therefore stated:
“[The daughter] misunderstood the fundamental nature of the BRA and her misunderstanding was the result of [the real estate agent]’s misrepresentation to [the father].”
Finally, the court found that the daughter had proven the third element. Because the court had already held that the real estate agent had been misleading about the contents of the BRA, it held that the daughter had not been reckless in signing the agreement, stating:
“[The daughter] received an explanation about the BRA from [the real estate agent] through her father. In my view, it was reasonable for [the daughter] to rely on the information she received from [the real estate agent] through her father as the basis of her understanding of the documents. I find that [the daughter] was not careless in signing the documents even though she did not read them.”
As a result, the court held that the daughter had established non est factum. It therefore ruled that the BRA was void and the daughter did not have to pay a commission to the real estate agent.
Real estate transactions represent some of the largest financial transactions in the life of any individual or company. Whether you are a first-time homebuyer or a large corporation acquiring a new space to grow your business, it is important to retain a law firm with the experience and skill necessary to ensure your interests are protected and the transaction closes without issue.
At Bader Law, we have an extensively experienced business law team and regularly represent our corporate clients in various real estate matters. We work with business clients ranging from small family-run operations to large enterprises, helping our clients manage their real property interests with an eye toward growth. Our business and real estate teams work closely together to provide thorough and strategic representation on all commercial real estate transactions, including commercial leasing issues affecting landlords and tenants.
The Mississauga real estate lawyers at Bader Law represent individual and corporate buyers and sellers in both residential and commercial real estate transactions in Mississauga and throughout Greater Toronto Area. We will advise you on your options, help secure your interests, and protect your financial investments. Contact us online or at (289) 652-9092to learn how we can help.