What is a holdover period? Am I required to pay the real estate agent commission after the listing agreement expires?
by: Robert Pacan
It’s not uncommon that a listing agreement between a real estate agent and a seller include a “holdover period”. This clause states that the seller is liable to pay the commission to the real estate agent should the property sell within ‘x’ number of days after the listing agreement concludes, provided that the buyer was introduced to or saw the property during the listing period. An agent who puts in a lot of time and effort wants to be protected should a buyer decide to make an offer shortly after the listing agreement expires. A recent Ontario Court of Justice decision upheld the holdover period clause after the seller attempted not to pay the real estate agent’s commission.
In Sutton Group v. Kim (2014 ONSC 891), the Court heard arguments on whether the seller was required to pay real estate commission for the sale of his property 2 days after the expiration of the listing agreement between the seller and the seller’s agent. This listing agreement contained a 90 day holdover period. As stated, the property sold 2 days after the listing agreement expired, well within the holdover period. The seller contacted the agent after the property was sold and offered $2,000 for her time, but stated the commission was no longer payable because he sold the property himself. The brokerage pursued the agent’s commission in court. The seller argued, among other things, that he wasn’t liable under the listing agreement because he wasn’t informed of the holdover period, nor was the purchaser introduced to the property during the listing period or shown the property during the listing period. With respect to the first argument, the Court agreed that the seller was not informed by the holdover clause by his agent, but did not see that as justification not to pay. The Court reasoned that it was a well-established principle that a party could not escape liability through carelessness in not reading through a document that he or she had signed.
The seller also argued that the purchaser was introduced to the property prior to the listing period and not shown the property during the listing period. The Court found that while the seller was partly successful with this argument, it failed on the showing of the property during the listing period element. First, the seller argued that the purchasers had seen the property the year prior when they saw a ‘for sale’ sign near the property and were shown around by the tenant living at the property at the time. This having not been during the listing period, the Court agreed that the purchaser was not introduced to the property during the listing period. However, the second part of the holdover clause was met. It was determined that the purchaser was shown the property during the listing period once more, leaving the Court to conclude that the 5% commission was to remain payable to the agent as the holdover clause was engaged.
The takeaway from this case as a future seller is that if you sign a listing agreement, be attentive to the holdover period. This provision can be amended to however many days you feel is reasonable for an agent to receive commission. Whether you decide on 7, 30, or 90 days, be conscious of the fact that you still may be liable for commissions to your previous real estate agent. Before you sign an offer, vendors would be well advised to obtain advice on their particular circumstances prior to accepting an offer during the holdover period from anyone who was shown the property during the listing period.
This blog contains strictly general information and is not intended to replace advice from a qualified legal professional. The contents of this blog are therefore not to be relied upon as such. Any facts or examples used are for illustrative purposes only and not intended to address specific incidents or problems. Use of this information does not constitute a lawyer-client relationship. Retain a lawyer for legal advice prior to making any decisions referenced in this blog.