Brokers want to make sure they receive their commission if an interested party they have identified as a purchase or lease after the end of the listing agreement. This is an understandable wish, but the owner must always ensure that the provision is appropriate. In real estate transactions, the seller may have such an agreement with the broker to list the property on a multiple list service that allows members of the multiple list service to find a buyer. The broker who receives a buyer receives a share of the commission. Too often, clients hire a lawyer for the first time in a commercial real estate transaction when they wish to make an offer to purchase a property or after receiving an offer to sell real estate. Nevertheless, there is an important step in this process, which is often overlooked – the revision and negotiation of the list agreement. Whether a lawyer represents the owner of the property, the buyer of the property or the broker/seller who lists the property for sale, clients must be informed of the essential rights and obligations established and exposed in the listing agreement. List agreements are not boiler platform agreements and can be negotiated in many ways. They must have legal requirements to be enforceable. However, clients often sign the list contract without verification or negotiation. Keep in mind that property owners are not the only party to benefit from a thorough audit and understanding of the list agreement; Commercial real estate agents and sellers will also benefit.
Although the article focuses on the representation of the seller or broker, the consultant should be aware that many of the concepts discussed here may also apply to buyer/broker agreements. In an ideal world, the owner wants to have the opportunity to terminate the offer for a reason (or not). It is understandable that many brokers oppose it, which is why negotiations start here. It is customary to have some kind of notice to avoid immediate termination. Negotiation of termination “for reason still free” is also common. A savvy broker will generally require that he or she be authorized to collect the commission if any interested person he or she identifies. Many brokers will also try to reimburse all out-of-pocket fees if they are terminated for no reason. First, the seller must know which potential buyers the broker will ask for a commission for (knowing that this may allow the seller to withdraw these buyers from a later offer from another broker and avoid a double commission). The seller can do this by limiting the applicability of this provision to buyers whose names appear on a written list of interest that the broker has served on the seller within a specified period, perhaps in the order of ten days, after the expiry of the offer. However, the seller should go further and limit the names that may be on the list of interested parties. For example, if the broker sent an email explosion to thousands of potential buyers, the seller would not want to get a list of interested people with thousands of names.