Failure to Ensure Payment of the Deposit ~ Agent Discipline
This particular case ends up being rather complicated. On the surface, there were 3 offers, and the agent failed to ensure that the deposit got paid. That was true, and that’s how the discipline committee saw it, when it levied a $10,000 fine.
However, the first offer made reference to a $100,000 deposit, and an additional $100,000 to be paid later. The buyer paid two instalments of $50,000. These were credited toward the first or initial deposit. When the first instalment was paid, the agent followed up to ensure that the balance was paid.
The first deal fell through because it was subject to lawyer’s approval, and the vendor’s lawyer never approved the agreement.
Then, there was a second offer. This time, no further deposit was required. It made reference to the $100,000 deposit, and it was already sitting collecting interest in the brokerage’s trust account.
Again this time the deal fell through for failure to satisfy all the conditions
Now, the third offer called for an additional sum of $100,000 to be paid. This was simply overlooked and the agent never collected it, advised the
Vendor that it was not received, or otherwise dealt with this extra $100,000.
This third agreement called for a substantial reduction in the purchase price.
The sale price was initially $8,500,000. It was a substantial commercial complex. Title problems arose, and it looked like the purchaser got either “cold feet” or “buyer’s remorse”. In any event, the vendor decided to pursue litigation as against the purchaser.
And, in the meantime, why not file a complaint against the real estate agent?
So, “yes” that second $100,000 never got paid, but who was in charge? Who was carrying the ball? Should the lawyer have obtained that second deposit?
After all, this deal took place over several months, law office to law office, without the negotiations having been under the control and direction of the real estate agent.
Nevertheless, this was a “big deal”. There was a lot of money at stake, and even though the lawyers were “doing the deal”, the RECO Discipline Committee imposed liability upon the agent.
Be careful, if you start out the quarterback in a real estate deal, you are still the quarterback unless told otherwise.
You can appreciate that the agent in these circumstances reasonably thought that all the paperwork was under the control and direction of the client’s lawyer, who now in effect had “carriage of the deal”.
So, don’t be tempted to fall into this trap. Don’t acquiesce or lose control of the deal. It’s yours and RECO will impose liability, if you make a mistake, even if it really wasn’t your fault.
On a large commercial transaction, it can be easy to allow the lawyers to take over. That could be risky, so stand your ground.
As a rule, I use fictitious names or do not mention any names if it is not necessary. The actual case is published on RECO's website and is available to the public. For educational purposes, the names of the parties really don't have any bearing. If you need to quote the case, you will have to obtain the proper legal citation.
Brian Madigan, LL.B., Broker is a Manager at RE/MAX West Realty www.iSourceRealEstate.com