A Colorado appellate court has considered what liability, if any, transaction brokers in that state face if they fail to perform all of the obligations listed in that state's statute.
Rudy Byler ("Seller") agreed to pay real estate broker Hoff & Leigh, Inc. ("Brokerage") a commission if it obtained a purchaser for the Seller's property. It was later agreed that the Brokerage would serve as a "transaction broker" in this transaction. The Brokerage obtained a purchaser for the property, and the transaction closed. The Seller did not pay the Brokerage the agreed upon commission, and so the Brokerage filed a lawsuit seeking payment of its commission. The trial court awarded the Brokerage the unpaid commission amount, finding that the Brokerage had met the only two requirements for receiving a commission- procurement of a buyer and a sale of the property. The Seller appealed the trial court's ruling.
The Colorado Court of Appeals affirmed the ruling of the trial court. The court considered the Seller's argument that the Brokerage had not met the statutory requirements imposed on a transaction broker, and thus was not entitled to receive a commission. Colorado was the first state to create non-agency real estate brokerage relationships, which are brokerage relationships defined by statute and not by the common law of agency. A "transaction-broker" is defined as a broker who is not an agent for either party but instead a broker who assists one or more of the parties with the transaction and is not an advocate for any of the parties. The transaction broker statute sets forth all of the duties transaction brokers owe to their client(s), such as: performing all contractually agreed upon duties and responsibilities; accounting for funds received; keeping clients informed; and making required disclosures. The Seller argued that since the Brokerage had only procured a purchaser for the property and not performed the other acts described in the statute, the Brokerage should not receive a commission.
The court rejected the Seller's argument. The court found that there was no remedy set forth in the statute for a transaction broker's failure to perform all of the enumerated duties. The court ruled that forfeiture of commission was not the appropriate remedy for a transaction broker's failure, finding that the Seller's reliance on a case denying a commission for a licensee's breach of fiduciary duty to be misplaced.
The court next considered whether the Seller could offset his damages against the Brokerage's commission. Looking at the Seller's claimed damages, the court found that the damages were payments that the Seller would have incurred regardless of whether the Brokerage had performed all of the duties listed in the statute. Therefore, the Seller had not demonstrated any damages from the Brokerage's alleged failure to perform the requirements listed in the Colorado transaction statute and thus the trial court had properly refused to award the Seller any damages. Thus, the court affirmed the trial court's commission award to the Brokerage.
Hoff & Leigh, Inc. v. Byler, 62 P.3d 1077 (Colo. Ct. App. 2002).