EstatePass
Agency LawHARDFREE

A listing broker sells an office building to a syndicate of which the broker is a member without informing the seller of this interest. Before closing, the seller discovers the broker’s interest and refuses to sell. What would happen in a civil suit to collect a commission?

2:45
0 views

Question & Answer

Review the question and all answer choices

A

The case would be transferred to the Real Estate Commissioner.

Civil commission disputes are adjudicated in civil court, not transferred to the Real Estate Commissioner, who handles administrative licensing matters such as license suspension or revocation rather than contract disputes between parties.

B

No commission would be due.

While the broker clearly breached their fiduciary duty of disclosure, the automatic denial of commission applies most cleanly when the transaction does not close or when the seller successfully rescinds; since the sale was completed and the seller received the benefit, a court would not automatically bar the commission in a civil suit.

C

The broker would be awarded their full commission.

Correct Answer
D

The court would demand a mitigation hearing.

There is no legal mechanism called a 'mitigation hearing' in California civil commission litigation; mitigation is a principle applied to damages calculations, not a separate hearing type that courts order in broker commission disputes.

Why is this correct?

Answer C is correct because, under California law, if the seller proceeds with the sale to closing despite discovering the broker's undisclosed interest, the courts have generally held that the broker remains entitled to their commission since the seller received the benefit of the bargain. The seller's proper remedy upon discovering the conflict was to rescind the contract before closing, not to accept the sale proceeds and then deny the commission. Because the sale was completed, a civil court would likely award the broker their full commission while leaving the seller to pursue a separate action for damages arising from the breach of fiduciary duty.

Ready to Ace Your Real Estate Exam?

Access 2,000+ free video lessons covering all 11 exam topics.