When is a real estate broker entitled to commission without closing? Fairbourn v. American Housing Explained

In Fairbourn v. American Housing, the Utah Court of Appeals addressed a question of first impression: whether a real estate broker whose commission is “due and payable at closing” is entitled to payment when no closing occurs. The court’s holding provides important guidance for practitioners drafting listing agreements and represents a significant development in Utah real estate law.

Background and Facts

American Housing Partners entered into a listing agreement with Fairbourn Commercial for the sale of West Jordan property. The agreement provided for a $1,500 per lot commission “due and payable at closing.” Fairbourn successfully procured a buyer, Rochelle Properties, which signed a purchase contract agreeing to pay $2,277,000 cash at closing. However, American later terminated the contract, claiming Rochelle failed to provide adequate evidence of financial capability as required by a contract provision. American then sold the property to another buyer, and Fairbourn sued for its commission.

Key Legal Issues

The central issue was whether the phrase “due and payable at closing” created a condition precedent requiring actual closing for commission entitlement, or merely established the timing for payment. The court also had to determine whether Fairbourn had fulfilled its contractual obligations under the listing agreement by procuring an acceptable offer.

Court’s Analysis and Holding

The court adopted the majority rule that “at closing” language, standing alone, does not create a condition precedent to commission payment. The court emphasized that Utah law presumes brokers are entitled to commission and are not insurers of buyer performance, citing Bushnell Real Estate, Inc. v. Nielson. The court noted that American and Fairbourn could have included explicitly conditional language such as “only,” “unless,” “until,” or “if” but chose not to do so. Since Fairbourn procured an offer meeting the listing agreement’s terms and American accepted it, Fairbourn earned its commission regardless of the subsequent contract termination.

Practice Implications

This decision clarifies that timing language differs from conditional language in listing agreements. Practitioners representing sellers who want commission payment contingent on actual closing must use explicit conditional terms. The ruling protects brokers who fulfill their duties by finding ready, willing buyers, even when deals fail due to factors beyond the broker’s control.