Robert Freedman is the former director of multimedia communications at NAR.
Commission Cut Due to Property Description
An incomplete property description means a reduced commission.
January 1, 2012
Lang McLaughry Spera Real Estate LLC. v. Hinsdale; Supreme Court of Vermont
A brokerage lost out on a part of its commission after failing to include non-real estate–related assets in its description of a Vermont berry farm in its listing agreement with the seller.
The brokerage listed the property at $1.2 million and marketed it in brochures as a country estate. In addition to having a two-family residential unit, the property included a farm-stand store and other farm-related assets. But in the listing agreement’s property description, the brokerage included only the property address; it included no information on the non-real estate assets. The listing agreement also contained a clause awarding attorney’s fees to the prevailing party in the event of any litigation.
The property sold for $900,000, but the brokerage miscalculated its commission and later sought the balance—$9,000. The sellers refused, claiming the brokerage was owed only for the real estate portion of the transaction.
The brokerage sued, arguing that it had sold the entire berry farm, including the farming equipment, so it should receive the full commission. The sellers filed a countersuit, alleging the brokerage had breached the listing agreement by failing to follow the state’s license laws. The countersuit included fraud allegations. The trial court ruled in favor of the brokerage and awarded it the full commission and attorney’s fees. But on the seller’s appeal to the Supreme Court of Vermont, the trial court decision was partially reversed. The higher court agreed with the sellers that the brokerage was owed commission only on the real estate portion of the deal because there was nothing in the listing agreement that awarded the brokerage a commission on the other assets. But the court rejected the fraud claim.
The sellers argued that the brokerage offered a too-low cooperative commission in the MLS, which constituted consumer fraud because it discouraged other practitioners from showing the property to potential buyers. But the court rejected this argument. On the attorney’s fees, the court ruled that neither side had prevailed, so neither was owed the fees.