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Contract – Real Estate Commission – Brokerage Agreement – ‘Sold’ Property

Although defendant seller of a parcel in New Kent County alleges its sale of the property occurred after expiration of its “Exclusive Authorization to Sell” contract with plaintiff, a New Kent County Circuit Court overrules the seller’s demurrer to plaintiff’s contract claim for a commission on the sale.

Paragraph 4 of the Exclusive Authorization controls. The “initial period of time” referred to in that paragraph is defined in paragraph 1 as “commencing on October 15, 2007, and expiring at midnight on May 1, 2008.” Paragraph 4 describes seller’s obligation to pay a fee during the initial period of time or an extension, and also makes reference to sales to a purchaser to who the property was shown, offered or introduced by the broker or any salesperson affiliated with the broker.

Here, plaintiff does not plead there was any extension of “the initial period of time.” Plaintiff claims the property was “sold” during the 90-day period immediately thereafter, that is, the property was “sold” when defendants and the buyer, Jack Ass Flats, signed the contract on June 2, 2008.

The issue is: When was the property “sold.” “Sold,” of course, is the past tense of “sell,” the primary definition of which is: “to give up or make over to another for a consideration, dispose of to a purchaser for a price.” I do not believe the word is ambiguous. Ordinarily, there has been no sale until the seller has transferred the property and received the cash.

Having reviewed the parts of the contract you have called to my attention, I conclude the parties have used “sold” to mean “contracted to sell,” and I overrule the demurrer.

Under the last sentence of paragraph 4, the owner owes the broker a commission if, for example, the owner receives an offer during the initial period of time but accepts it thereafter. If this occurs “the Owner shall pay Broker the Fee as if the Property had been sold during the initial period of time …” Settlement is not required for the broker to earn the commission. If acceptance of an offer is sufficient to earn the broker his fee in this circumstance it is unlikely the parties intended “sold” to have a different meaning in the first two sentences of the same paragraph.

Plaintiff also claims the use of “sold” and “sale” in paragraphs B and G of the “Standard Provisions,” which were incorporated by reference into the Exclusive Authorization, support his interpretation. I agree. Paragraph B provides the property may be sold only by a written agreement. An agreement requires the assent of at least two parties; a deed does not. Paragraph G provides that in the event of a sale of the property, the owner “agrees to convey the property to any purchaser by general warranty deed.” Sale thus precedes conveyance.

Defendants claim this in effect turns a special brokerage contract into a general contract because the owner would owe the broker a fee if the contract failed to close in the absence of the fault by either the owner or the purchaser. Paragraph D of the “Standard Provisions” excuses the owner from payment of a commission if there is a default by the purchaser through no fault of the owner.

Paragraph E generally requires the commission to be paid if there is a default by the owner. How there could be a failure to close that would not be a “default” by either the purchaser or the owner is an issue I need not address.

Ware Creek Real Estate Corp. v. J&R Enterprises (Martin, J.) No. CL 10-90, Dec. 9, 2010; New Kent County Cir.Ct.; Bradley P. Marrs, Kevin W. Mottley for the parties. VLW 010-8-229, 4 pp.

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