Reece & Nichols REALTORS® v. Zoll: Commission Awarded from Second Purchase Contract

A Missouri appellate court has considered whether a buyer’s representative could recover a commission when a buyer purchased property following the expiration of the buyer’s representation agreement.

Patricia Zoll (“Buyer”) entered into a buyer’s representation agreement with Reece & Nichols (“Brokerage”) so that the Brokerage would aid her efforts to find a home and negotiate a sales price. The term of the agreement was from May 23, 2003 to July 31, 2003. The Brokerage located a suitable property, and helped the Buyer negotiate a sales price with the seller. The purchase contract made arrangements for the payment of the Brokerage’s commission, and was contingent upon the Buyer obtaining mortgage financing.

The bank rejected the Buyer’s loan application because of a child support order against the Buyer, and the purchase agreement was terminated. The Buyer hired a lawyer to resolve the child support issue. The Brokerage had no further contact with the Buyer or the seller regarding the sale. The seller then initiated contact directly with the Buyer, telling her that the property had been removed from the market and asking her if she would like to rent the property. The parties executed a rental agreement which did not include any rent-to-own language or lease-option language.

The Brokerage discovered the rental agreement between the Buyer and the seller, and sent a letter to the listing broker (with a copy to the Buyer) in July 2003 stating that it expected a commission upon the closing of the “sale”. In August 2003, the bank approved the Buyer’s loan application and so the parties revived the earlier purchase agreement with the earlier contract terms, except for removing the portion of the contract which addressed the payment of the Brokerage’s commission. The Brokerage filed a lawsuit against the Buyer alleging breach of contract. The trial court ruled in favor of the Buyer, and the Brokerage appealed.

The Missouri Court of Appeals, Western District, reversed the trial court and sent the case back to the lower court with orders to enter judgment in favor of the Brokerage. The Brokerage argued that it was entitled to a commission because of a protection clause in the buyer’s representation agreement which required the Buyer to pay the Brokerage a commission if she purchased a property shown to her by the Brokerage within 180 days after the expiration of the buyer’s representation agreement. The Buyer argued that the Brokerage had not properly extended this provision and so she did not owe a commission.

The court found that a broker’s right to a commission is based on the terms of his/her contract and the broker can recover a commission if he/she has substantially complied with the terms of the contract. The contract required the Buyer to pay a commission if the Buyer purchased a property shown to her by the Brokerage within 180 days of the buyer representation agreement’s expiration, so long as the Brokerage provided, within seven days after the buyer representation agreement’s expiration, a description of the property where it would seek a commission from a sale. Therefore, the question before the court was whether the Brokerage’s letter to the listing broker which copied the Buyer substantially complied with the contract notice provision.

Looking at earlier Missouri case law, the court determined that the Brokerage’s slight deviation from the contract’s notice provisions entitled the Brokerage to a commission. An earlier case had determined that a broker was entitled to recovery under a similar provision in a listing agreement when he submitted written offers to the seller prior to the listing contract’s expiration. Since the Brokerage had given the Buyer timely notification of its intent to seek a commission from the letter the Buyer received prior to the expiration of the buyer’s representation agreement, the court determined that the Brokerage had substantially complied with the terms of the agreement and so was entitled to a commission.

The court rejected the Buyer’s argument that the letter to the listing broker only notified her that the Brokerage would seek a commission from the seller, ruling that the letter had provided sufficient notice that the Brokerage would be seeking a commission from the closing, whenever it occurred, and so the Buyer should have notified the Brokerage of her intent to purchase the property. Thus, the court reversed the trial court and ordered that the lower court enter an order awarding the commission amount to the Brokerage.

Reece & Nichols REALTORS® v. Zoll, 201 S.W.2d 516 (Mo. Ct. App. 2006)

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