Here is another cautionary tale: a broker’s fight to assert his rights to protection of his commission at the end of a listing term. In this case (recently settled), a well-meaning broker marketed a unique but multi-use property for sale. It was a stable, a dog kennel, and a canine training facility, and also an event center used for banquets. Located in a southwest suburb of Chicago, it had some appeal to those who owned or trained horses and bred and trained dogs. It also was located on a 10-acre parcel. Some would say multi-faceted use, others might say a property with limited appeal. Our broker, “Jared,” (who happens to be an SIOR I might add), struggled mightily to find a buyer, and managed to get a fully executed but non-binding LOI toward the end of the first year of his two-year listing term. However, the owner had the right to terminate the listing on 30 days’ notice at the end of the first 12 months of the term. Even while PSA negotiations were ongoing with that buyer who was under an LOI, the owner served notice that the listing agreement would be deemed terminated 30 days hence.

Yes, it seemed odd that an owner would terminate the listing while negotiations were ongoing, but that is what happened. Just a few days prior to the end of that final 30-day notice period, the owner mentioned to Jared that he had a call from a “woman horse therapist” who expressed interest in buying the property. Jared did what you all would have done, he asked the name and contact information for “the woman horse therapist,” in order to follow up on her interest in the property. The owner refused to divulge the identity of this person. When Jared sought to “register” the horse therapist as a prospect for post-term protection, the owner refused to accept that party as a protected one; and as luck would have it, the negotiations with Jared’s other prospect (who had been registered) failed after three months of unsuccessful efforts to complete a PSA. Jared kept his ear to the ground, and after another month or two, sensing that a deal was imminent with the mysterious unnamed prospect, convinced me to prepare and record a notice of broker lien. One great thing about a broker lien (among others) is that it gets an owner’s attention, and that is when the real fun began.

I served the lien on the owner by certified mail, return receipt requested, as our statute requires. It drew an interesting response, one which I had not ever seen before. (That is saying something, because broker lien rights have now existed in Illinois for more than 30 years, and I have drafted and served more than my fair share of broker liens.) This time, the owner’s counsel invoked a statute which made it a criminal offense to wrongfully cloud another’s title to real estate. The owner’s attorney’s response drove me to the statute, and of course, the full statute actually exempted liens prepared by attorneys from the criminal sanction of clouding title, on the theory that an attorney acts in good faith and with reasonable judgment when asserting a lien—so goodbye to threatened criminal sanctions! I brought this to the owner’s attorney’s attention in a calm response enclosing the full statute. It drew yet another response, this time from another (new) attorney claiming to represent the owner. That response consisted of 39 pages!

I thought the 39-page response was somewhat overkill, but it consisted of a number of documents, including a copy of the PSA with the unidentified horse therapist executed 5+ months after the listing expired, Jared’s registration letter that did not contain the unidentified horse therapist on the list, and (brace yourselves), a challenge that if I did not file suit to foreclose my lien within 30 days, the lien would be extinguished. You may have heard me call this provision of the lien act, the “Fish or cut bait” provision. Jared insisted that we “fish,” so we forged on. The 39-page response also contained another first: a draft motion to dismiss the complaint that I had not yet written, indeed challenging our lien and commission claim position before we even prepared the complaint. 

You might be familiar with the saying, “where there’s smoke, there’s fire.” My teammate Gina Kempf and I prepared a complaint to foreclose the lien (along with a count for breach of contract), filed it, filed a notice of lis pendens, and published the notice of foreclosure to inform all unknown owners and occupants, as required under Illinois foreclosure law. The listing agreement contained language obligating the owner to “refer all inquiries and to cooperate with Broker’s efforts to sell the property,” and we asserted that when the owner failed to refer the inquiry and identify the prospect, the owner breached the listing agreement, making the failure to register the horse therapist as a prospect moot, and therefore there was no waiver of any post-term protection rights. Quite a donnybrook, wouldn’t you say?

The attorneys representing the owner then went silent, refusing to return my calls (another sure sign of something happening, in my experience). Not knowing where the deal might close (we knew there was no deed recorded yet), we peppered all the title companies we knew with a copy of the recorded lien. You would be amazed how many different title companies there are in the Chicago market; and yet, the owner and the horse therapist closed over our lien at a title company I had never seen or heard of, in the first 45+ years of my real estate practice in this market. We expected that the title company, if it had found the lien, would have required that an amount of money would be escrowed to insure over the lien. The term is “title indemnity,” which is music to my ears. (Just how many clichés can I fold into this one column?)

As we placed the complaint with the county sheriff for service, I received a call from the first of the two owner’s attorneys, the one who had threatened criminal sanctions, this time with a settlement offer that was more than so-called “chump change,” and that led to a few rounds of offer and counteroffer. Jared hung in there, taking a very strong position in the settlement negotiations.  In the end, we got our number, which was reasonably close to a full commission; and the funds were wired as agreed.

Lessons learned from this cautionary tale are many. Look closely at your exclusive listing agreement, and always include language such as “Owner agrees to cooperate with Broker and refer all inquiries of any party expressing interest in the Property.” You might improve on that by adding “…and to identify all such parties to Broker and to provide Broker with copies of all drafts of letters of intent, contracts, and leases.” Hopefully that encourages the owner to cooperate, and if not, there is your basis for a breach of contract claim. Next, make sure that you have some form of post-term protection rights, and while that period might be defined with a number of days or months, add language to the effect that the period is extended so long as negotiations continue or commence and thereafter continue during that period, resulting in a sale or lease of the property. Owners have been tempted to “wait out” the post-term protection period to save a commission; and this owner tried—in fact, the PSA for this deal wasn’t executed until almost 6 months after the listing term expired. It turned out that during that period, the owner had continued to negotiate with the first (registered) prospect for three months, and then “dropped him like a hot rock” (Yes, that’s my last cliché for this article), on the very same day that he signed an LOI with the horse therapist.

Another thing that I have learned is that there will always be an owner or two out there who thinks he or she can save a commission, so you need to stick to your guns on the terms of your well-drawn listing agreement when it is proposed. Too much push-back from owners on post-term protection language is usually a sign of future conflict. Bless these owners (they keep my practice thriving), but double thanks for clients like Jared who will fight for what is due to them, and have confidence in their agreements, their legal strategy, and their counsel…"’Cause breaking up is hard to do.” Thank you Neil Sedaka, and thank you Jared!