Lang McLaughry Spera Real Estate, LLC v. Hinsdale: Part of Commission Lost for Inaccurate Property Description

Vermont’s highest court has considered whether a brokerage could collect a commission from the sale of business assets when the listing agreement only contained the property’s physical address.

Clark and Suzanne Hinsdale (“Sellers”) owned a parcel of land that contained a two-family residential as well as a berry farm. The Sellers sold the berries commercially under the name “The Charlotte Berry Farm” and there was a farm stand on the property. In 2007, the Sellers listed the property for sale at $1.2 million with real estate brokerage Lang McLaughry Real Estate LLC (“Brokerage”). The property description contained in the listing agreement only set forth the property’s street address. The listing agreement also contained a clause that the prevailing party in any litigation would recover its attorney’s fees.

The Brokerage determined that the best way to market the property was as a country estate. The Brokerage prepared brochures describing the property as a berry farm, and those brochures also included information about the farm-stand store and the other farm-related buildings on the property.

In 2009, the Sellers entered into an agreement to sell the property for $900,000. The purchase contract broke down the purchase price as follows: $725,000 for the land (81% of the purchase price); $100,000 for the business; and $75,000 for various equipment and machinery.

At the closing, the Brokerage miscalculated its commission by $9000. When it discovered the mistake, the Brokerage requested payment of the additional amount from the Sellers. The Sellers claimed that the listing agreement only covered the sale of their real estate and so refused to pay the additional amount to the Brokerage. The Sellers stated that the paid commission was 84% of the commission amount sought and the real estate was only 81% of the purchase price. The Brokerage argued that it had sold the entire berry farm including the farming equipment and so should receive the full commission.

The Brokerage filed a lawsuit seeking the additional commission amount, and the Sellers filed a counterclaim alleging that the Brokerage had breached the listing agreement, failed to follow the state’s license laws, and various other fraud allegations. The trial court ruled in favor of the Brokerage and awarded the Brokerage the full commission and also its attorney’s fees.

The Supreme Court of Vermont partially reversed the trial court. The court first considered the Sellers’ argument that the Brokerage did not comply with the state’s license laws by only listing the property address. The state’s license laws require a “clear description” of the property being conveyed.

While the property address adequately described the real estate component of the listing, the court found that the failure to include information about the berry farm within the property description barred the Brokerage’s commission claim for that portion of the purchase price. The Brokerage did not need a real estate license to sell the berry business, but the Brokerage had not entered into a separate agreement for the sale of those assets and instead was trying to use the listing agreement to collect payment for its services in the sale of the berry farm assets. Because these assets were not clearly described in the listing agreement, the Brokerage could not use the listing agreement to collect a commission from the sale of those assets. Therefore, the court reversed the award of commission, but allowed the Brokerage to retain the commission that it had already received.

The court next considered the award of attorney fees. First, the court reversed the award of attorney’s fees to the Brokerage because the Brokerage was no longer the prevailing party in the litigation.

Next, the court considered the Sellers’ arguments that it was prevailing party in the litigation. The Sellers argued that the Brokerage’s low cooperative commission offer in the MLS constituted consumer fraud because it discouraged other real estate professionals from showing the property to potential buyers. The court rejected this argument, as there was no misrepresentation by the Brokerage because the parties had never discussed the commission split nor was there evidence that the offered split negatively impacted the marketing of the property. The court concluded that neither party was the prevailing party in the litigation and so did not award either party attorney’s fees.

Lang McLaughry Spera Real Estate, LLC v. Hinsdale, 35 A.3d 100 (Vt. 2011)

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