LEGAL HOTLINE ARCHIVE
Reservation Of Listing

Q. Realtor "A" listed a property for six months and the listing agreement expires. The day after the listing expires, Realtor "A" gives a list of prospective buyers to the seller and tells him he wants to register these customers/clients because he has shown the property to them.

The following day, the seller lists the property with Realtor "B" and tells Realtor "B" that Realtor "A" has registered these clients/customers with him.

The next day, Realtor "A" takes a contract directly to the seller and tells him, "This is a contract from one of the clients/customers I have registered with you."

The seller accepts the contract and then tells Realtor "B" that he as accepted the contract. Realtor "B" calls Realtor "A" and asks him why he didn’t bring the contract to the current listing realtor to present it to the seller. Realtor "A" said that he did not have to because he registered these buyers with the seller and Realtor "A" is entitled to receive the whole commission.

If this is true, then a listing Realtor could be subjected to receiving no commission, even though he has a signed listing agreement.

Question: What are Realtor "B’s" rights?

A. Seller’s obligations to Company A depend to a large extent on the terms of his contract with Company A. In general, contractual provisions addressing the circumstances under which a listing company can "reserve" prospects after the listing period expires are enforceable, unless contrary to public policy. If the A Listing includes such a provision, the terms of such provision will likely control Company A’s right to reserve prospects. The reservation clause may also include time limits for selling to the a particular "reserved prospect" and/or a provision that the reservation is null if the property is listed with a new company (sometimes included in standard listing contracts). If the A Listing does not include a reservation provision, the issue will be whether Company A’s notice to Seller of the Reservation List constituted an amendment to the A Listing by which Seller is bound. Resolution of this issue will depend on an analysis of all the facts and circumstances surrounding the Reservation List. Thus, absent the governing provision in the A Listing, we cannot determine whether Seller is contractually obligated to honor the Reservation List.

It is also possible that the Seller is contractually obligated to honor the Reservation List in the A Listing and the B Listing includes an "exclusivity" provision, thereby the Seller could be at risk of having to pay commissions to both Company A and Company B. Again, this will be determined by the exact wording of the listing contracts.

Finally, absent a governing contract provision, Company A (or Company B) nevertheless may have a claim against Seller for a commission upon sale if the Company (or its agent) was the "procuring cause" of the sale. Procuring cause is judicially defined as a cause originating or setting in motion a series of events which, without a break in continuity, results in the accomplishment of the prime objective of the employment of the broker, i.e., a sale or exchange of property, and ultimate agreement between the principal and prospective contracting party, or the procurement of a purchaser who is ready, willing and able to buy on the principal’s terms.

The question of procuring cause is almost always problematic. It is intensely factual, requiring a detailed analysis of all underlying facts and circumstances surrounding the matter, including the prior course of contact of all parties vis-à-vis their relations to one another with respect to the property at issue. Without additional facts, we cannot determine who would have a colorable claim for commission on a procuring cause theory.

Q. REALTOR "A" listed a property for six months. A total of $500.00 of advertising was spent on this one listing. At the end of the fifth month the seller sent a letter cancelling this listing. An agent from this same office had shown this property to a prospective buyer. The buyer wanted to make a contract on this house but her husband was TDY and she was unable to sign a contract until he returned.

We explained this situation to the seller and asked her to hold up on the cancellation but she gave us 10 days. We then proceeded to reserve this customer with both the board office and called the R.E. Commission to be sure we handled this properly.

The listing was cancelled and the buyer came back to town and wrote a contract. Realtor B listed this property the day before we wrote the contract. We presented the contract to the new Agency and explained the situation. We now have an accepted contract.

Our problem is that if we have to split our commission with Realtor B then our listing agent will not receive any compensation. Marge with Realtor A was the listing Agent. Eunice with Realtor A is the selling Agent. Realtor B is the new listing agent. If Realtor B receives 1/2 of the commission then the previous listing Agent "Marge" will not receive any compensation.

We feel that through our expensive advertising and five months of marketing this property, plus we are the procuring cause of this sale. We also informed this seller what was happening.

Realtor B had this listing all of one day and did not spend a dime on marketing. How do we handle this situation? Are we entitled to the full commission?

A. The seller’s obligations to Company A depend to a large extent on the terms of the reserve generated. In general, contractual provisions addressing the circumstances under which the listing company can reserve prospects after the listing period expires are enforcable, unless contrary to public policy. In this case the Company A listing agreement provides that compensation to Broker A is due if the property is contracted to be sold, exchanged or leased

... (b) within 90 days after the termination of this agreement or the termination of a lease, to a vendee, exchange recipient or lessee with whom negotiations had been carried on and/or the property was shown by anyone if Owner knows of such negotiations or showing or the identity of the parties negotiating or if the names of such parties are furnished in writing to the Owners within seven (7) days after termination hereof: provided that if the Owner lists the property with another Broker during this protection period and that Broker sells, exchanges or lessess the property, then Broker waives any and all compensation. (emphasis supplied)

This provision appears to waive any compensation due to the Company A listing agent since the property was relisted with Company B during the protection period.

Nevertheless Company A’s listing agent may have a claim against seller and/or Company B for a commission upon sale if Company A’s listing agent was the procuring cause of the sale. "Procuring cause" is judicially defined as a cause originating or setting in motion a series of events which, without a break in continuity, results in the accomplishment of the prime objective of the employment of the broker, i.e., a sale or exchange of property, and ultimate agreement between the principal and prospective contracting party, or the procurement of a purchaser who is ready, willing and able to buy on the principal’s terms. Company "B" will most certainly claim that any such claim of procuring cause was waived by the contractual provision of the Company A listing agreement.

Q. Company A had a listing agreement (the "A Listing") with a homeowner ("Seller") which expired December 31, 1998. Approximately one week before the A Listing expired, a representative of Company B showed Seller’s home to a client of Company B (the "Prospect"). After the A Listing expired, Seller listed the home with Company C (the "C Listing"). Company A then gave Seller a list of individuals "reserved" for Company A (the "Reservation List"). It appears from your letter that the Reservation List included the name of the Prospect. However, Seller was unaware that clients of companies other than Company A were included on the Reservation List. Approximately one week after the C Listing went into effect, Company A contacted Seller directly and advised Seller that the Prospect was on the Reservation List and would be viewing Seller’s home again. Seller was surprised that clients of companies other than Company A were on the Reservation List. Seller does not wish to honor the Reservation List except for clients of Company A who were shown Seller’s home by Company A while the A Listing was in effect. This would not include the Prospect, since Company A did not show Seller’s home to the Prospect.

What are Seller’s obligations under these circumstances?

A. Seller’s obligations to Company A depend to a large extent on the terms of his contract with Company A. In general, contractual provisions addressing the circumstances under which a listing company can "reserve" prospects after the listing period expires are enforceable, unless contrary to public policy. If the A Listing includes such a provision, the terms of such provision will likely control Company A’s right to reserve prospects. If the A Listing does not include such a provision, the issue will be whether Company A’s notice to Seller of the Reservation List constituted an amendment to the A Listing by which Seller is bound. Resolution of this issue will depend on an analysis of all the facts and circumstances surrounding the Reservation List. Thus, absent the governing provision in the A Listing, we cannot determine whether Seller is contractually obligated to honor the Reservation List.

We should caution that if Seller is contractually obligated to honor the Reservation List and the C Listing includes an "exclusivity" provision, Seller could be at risk of having to pay commissions to both Company A and Company C. Thus, we suggest that Seller carefully review the terms of the A Listing and the C Listing, and consult an attorney if he has any questions regarding his obligations to Company A or Company C.

Absent a governing contract provision, Company A may nevertheless have a claim against Seller and/or Company C for a commission upon sale if Company A (or its agent) was the "procuring cause" of the sale. Procuring cause is judicially defined as a cause originating or setting in motion a series of events which, without a break in continuity, results in the accomplishment of the prime objective of the employment of the broker, i.e., a sale or exchange of property, and ultimate agreement between the principal and prospective contracting party, or the procurement of a purchaser who is ready, willing and able to buy on the principal’s terms.

The question of procuring cause is almost always problematic. It is intensely factual, requiring a detailed analysis of all underlying facts and circumstances surrounding the matter, including the prior course of contact of all parties vis-à-vis their relations to one another with respect to the property at issue.

Without additional facts, we cannot determine whether Company A would have a colorable claim for commission on a procuring cause theory.

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