Broker's Right To Real Estate Commission Expands
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Transcript of Broker's Right To Real Estate Commission Expands
BROKER’S RIGHT TO REAL ESTATE
COMMISSION EXPANDS
Attorney Terry J. Gerbers
December 7, 2015
Real Estate
Real Estate Broker Entitled to Commission Even When Sale Fails Through No Fault of the Seller
The Wisconsin Supreme Court recently decided that a real estate broker was entitled to a commission from the
seller under a listing contract between the real estate broker and the seller even though the underlying purchase
and sale agreement failed to close through no fault of the seller. (Ash Park, LLC v. Alexander & Bishop, Ltd,
et. al., 2015 WI 65).
The Case Details
Re/Max Select, LLC solicited a single-party listing contract from Ash Park. The listing contract identified
Alexander & Bishop, Ltd as the party Re/Max intended to present to Ash Park. Re/Max presented an offer to
purchase on behalf Alexander & Bishop which was accepted by Ash Park. Alexander & Bishop subsequently
defaulted on the purchase and sale agreement. Notwithstanding Ash Park obtaining an order for specific
performance requiring Alexander & Bishop to purchase the real estate, the circuit court was unable to compel
such performance on behalf of Alexander & Bishop as it had no means to obtain the funds necessary to
purchase the subject property.
Despite the party presented by Re/Max, Alexander & Bishop, being unable to honor the terms of its contract
with Ash Park, Re/Max sued Ash Park for its full commission under the listing contract as though sale had
occurred. The basis for such claim on behalf of Re/Max was that the listing contract provided that a
commission was due once Ash Park and Alexander & Bishop entered into an “enforceable contract” as
provided for by the standard listing contract promulgated by the Wisconsin Department of Safety and
Professional Services.
The circuit court initially dismissed Re/Max’s claim for a commission under the theory that the purchase and
sale agreement between Ash Park and Alexander & Bishop was not an “enforceable contract” because the
court could not compel Alexander & Bishop to comply with its obligations under the contract. Re/Max
appealed. Re/Max asserted that the term “enforceable contract” required only that the contract be “legally
enforceable” and not necessarily “capable of enforcement”. The Wisconsin Supreme Court agreed. The
Wisconsin Supreme Court concluded that the purchase and sale contract between Ash Park and Alexander &
Bishop was an “enforceable contract” and required Ash Park to pay a commission under the single-party
listing agreement even though Alexander & Bishop lacked the funds to purchase the property and could not be
compelled to honor the circuit court’s prior order for specific performance.
Conclusion: Broker’s Commission Earned Once
Contract Has Been Entered
The Supreme Court’s decision is the first in Wisconsin where a seller has been responsible for payment of a
broker’s fee even though the transaction failed to close through no fault of the seller. The Court’s reasoning
was the pre-printed language of the listing agreement. Interestingly, all such listing agreements, which are
approved by Wisconsin Department of Safety and Professional Services, have the same language regardless of
the type of real estate being sold or leased. In other words, a broker’s commission is earned once the contract
has been entered into between a seller and purchaser and all contingencies have been satisfied or waived,
regardless of a buyer’s subsequent default. Most would agree it is not the intent of a seller to pay a
commission to a broker without selling the seller’s property. From a seller’s perspective, a seller should
consult with legal counsel before entering into any listing agreement with a real estate broker. From a real
estate broker’s perspective, the right to a commission has been dramatically expanded. However, the broker
must consider the future relationship with the seller when deciding whether to pursue a claim for a commission
on a failed transaction. Obviously, the seller would not expect to pay a broker commission when the
transaction fails to close through no fault of their own.