The relevance is because any person who acts as a Real Estate Agent must be licenced and cannot recover a fee or commission if they are not licenced.
In a recent case, our client agreed to help a guarantor, who was also sole shareholder of a company in receivership. Our client agreed to promote interest amongst his circle of associates to engage in an expression of interest process. The expression of interest process was being conducted by a real estate agent representing a receiver which had been appointed by the mortgagee in possession. The guarantor/shareholder agreed to pay him a fee for doing this.
One of the obvious benefits to the guarantor was that the greater the price achieved by the mortgagee the less the guarantor would owe if there was any shortfall. A further potential benefit was that one of those associates may be interested in taking over the project whereby the guarantor may have had the opportunity of maintaining some degree of participation in the project.
Our client promoted amongst his contacts interest in participating in the bidding process. Following the bidding process the appointed real estate agent negotiated a sale.
The guarantor then refused to pay our client claiming that our client had acted as a real estate agent and was therefore prohibited from claiming his fee because our client did not have real estate agent’s licence.
The Supreme Court of Appeal found that although our client engaged in real estate activities described by the legislation, he did not do so as an agent for either the company in receivership, the mortgagee in possession, the selling agent or the buyer or even the guarantor.
The guarantor argued that for our client’s activities to be undertaken as a real estate agent it was sufficient that they were undertaken for the benefit of another person, not necessarily a buyer or seller and it was not necessary that the agent have authority to negotiate the price or terms of sale.
The Court held that our client’s agreement with the guarantor lacked the elements required for him to be her agent, because in undertaking each of these activities, he had no arrangement with or authority from the owner, mortgagee in possession, the buyers or selling agent to represent them in the expression of interest process nor did he hold himself out as representing them. The Court also found that in his agreement with the guarantor, our client “was not undertaking or required to engage in any activity representing the guarantor, who was not a participant in any capacity in the expression of interest process”. The mere “identifying potential investors from his existing business and other connections and using his own reputation and experience as a senior project development consultant to encourage them to participate in the selling process” did not rise to the level of him representing the guarantor. His agreement did not require him to act as the guarantor’s representative.
Consequently our client was not the guarantor’s agent, real estate or otherwise.
If anyone would like to read the whole of the judgment, it may be found at the following link: