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Goodmans Publications

Working with Agency and Commission Agreements

May-17-2004

Lawyer Ira Barkin
Area Commercial Real Estate

Summary


This paper was presented at The Law Society of Upper Canada's Real Estate Law Summit held on April 21 & 22, 2004. 

The financial and legal implications of agency and commission agreements are often overlooked by parties to a real estate transaction-with the result that real estate lawyers are only consulted infrequently on the agreements. This is unfortunate given that cost differences between typical commission rates, such as 2.5% and 5%, will often exceed the legal costs for the entire transaction. It is doubly unfortunate as many listing agreements promise little to the party to the real estate transaction, and contain vague terms that can lead to legal uncertainty in litigation.

This paper attempts to provide some practical advice for negotiating and drafting agency and commission agreements. First, it highlights terms in the agreements that can lead to trouble by contrasting a 'model' agreement with standard-form agreements. Next, it discusses the legal implications of the inclusion of certain standard-form terms, illustrated by reference to recent case law. Brief reference will also be made to the effect of recent legislative developments, as a new act regulating realtors is likely to be proclaimed shortly. As most listing agreements are contracts between a vendor and its realtor, the focus of the discussion will be on these listing agreements, not so-called "selling agent" agreements with the buyer. Commercial realty agreements involving freehold properties are presented as examples, but many of the same principles apply when dealing with leasehold and residential realty.

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