Honest Error Doesn’t Void Debt to Brokers
Question: We sold a small office building in Ahwatukee Foothills just off the I-10 freeway. Under the purchase contract, we agreed to pay the commissions of both brokers at closing. During the escrow period, the purchase price was increased because the buyer needed additional time to close the transaction. When the transaction finally closed, we received a title company check for the sales proceeds, which we deposited in our bank and paid bills. The title company apparently made a mistake by calculating the brokerage commissions based on the original purchase price, not the increased purchase price. The title company has admitted the mistake but claims to have no responsibility to pay the brokers the correct amount of the commissions. Do we have responsibility to pay both brokers after the title company’s mistake, especially when the brokers immediately cashed their commission checks?
Answer: Yes. Although the title company made a mistake, it did not profit from the mistake. The brokers also made a mistake and should not have immediately cashed their checks without double-checking the amounts. The brokers, however, should still be able to collect the additional commissions from you. Otherwise, you would be unjustly enriched by other people’s honest mistakes. If there had been a dispute between you and the brokers on the amount owed, and you had marked the commission checks “paid in full,” the cashing of these checks by the brokers should bar any claim for the additional commissions.
If you would like assistance regarding commercial or residential transactions, potential litigation, HOA issues, estate planning or other legal matters, please call our office at 602.957.9810 and arrange for an initial consultation with one of our real estate attorneys.
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