The state Court of Appeals has ruled against Coldwell Banker, saying one of the firm’s brokerages failed to fulfill its obligations as an escrow agent, in a case involving a dispute over commission fee splits.
"I think the message is, when you agree to act as an escrow agent, you agree to accept the terms and conditions of the escrow," said Tom Moriarty, president of the Real Estate Bar Association. "You have to divorce your obligations as escrow from your own personal interests in the transactions….they may very well have had a valid claim in the dispute regarding the commission. But they allowed that to impact what they did [as escrow agent]."
The case involved a 2006 Boston condo sale in which a Coldwell Banker agent listed the property. After viewing the property, the buyer, Jonathan Zang, made a $1.2 million offer, $150,000 less than the asking price.
Negotiations reached an impasse at a little more than $1.2 million. Zang suggested Coldwell reduce its commission in order to facilitate the transaction. When the brokerage declined, he hired his own buyer’s agent to complete the negotiation, agreeing to pay the buyer’s agent a flat fee of $3,000, with any remainder over and above that flat fee to be repaid to him. Coldwell Banker disputed whether the buyer’s agent was entitled to the traditional fee split as he had only participated in the negotiation process.
When the sale closed, Coldwell acted as the escrow agent, receiving Zang’s 10 percent down payment. Though the escrow agreement stated that a 5 percent commission was to be deducted from the down payment and split equally between the buyer’s and seller’s agents, Coldwell retained the entire commission. When Zang sued, a lower court initially ruled in Coldwell’s favor.
In a recent ruling, the Supreme Judicial Court reversed that decision, declaring that retaining the full commission was an error and rendered summary judgment in favor of Zang. Zang has also alleged that Coldwell’s behavior amounted to an unfair and deceptive trade practice. That allegation has yet to be tried, and so damages have not yet been assigned.
It is not yet known if Coldwell will appeal the ruling. Aglaia Pikounis, communications manager for Coldwell Banker Residential Brokerage, said the firm could not comment on the litigation, but that "we are exploring our options."
