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More on Listing Agreements: Think Carefully About What You Promise

By: James Hochman

A pending case that has garnered its fair share of notoriety has prompted me to think about listing agreements in this particular vein. A well-drawn exclusive sale listing agreement should set forth exactly what the broker promises and is obligated to perform, and likewise, also set forth what areas of the future transaction are not included in the scope of the broker’s duties. Experience has shown that when a deal fails or goes sideways, unhappy parties look for others to blame and to share the pain or bear the loss. After all, here in America, all parties have access to counsel and to the courts. Where blame (and liability) can be shifted to brokers, there are lawyers and judges who will consider that to be quite fair and proper. Accordingly, as brokers seek to win and execute business, it is important that these brokers don’t over promise (and under deliver); and more specifically, brokers should not take on responsibilities in the transaction which are beyond the scope of their competence.

A simple example is one where the broker takes a listing, erects a sign, and sure enough, there is a “slip and fall” or personal injury claim. The plaintiffs’ bar will always name as many defendants as it can, that opens more pockets for settlement and resolution of the plaintiff’s claim. For that reason, it is wise to state clearly in the listing agreement that the care and management of the property, the maintenance of its condition, is not included in broker’s duties. The existence of language, excluding property maintenance, will either preclude the broker from being sued in that slip and fall case or serve as a basis for the dismissal of the complaint against the broker. Language such as the following is well advised and would serve as an example: “Owner acknowledges that Broker shall not be responsible for any management, maintenance, repair, upkeep, or operation of the Property or for any condition of the Property…”

Another issue is that the broker should be careful not to describe its responsibilities too broadly. The only affirmative duty for the broker should be along the lines of “Broker shall make commercially reasonable efforts to market the Property for sale (or lease)” without being too specific as to exactly what the Broker affirmatively commits to do. There may be a marketing plan that was prepared and discussed when the broker pitched the listing. However, it is better not to include that plan as an exhibit if it can be avoided. If you must commit to a marketing plan in the listing, you might add words to the effect of “Provided however, that Broker’s failure to perform one or more of the foregoing tasks shall not be a bar to Broker being otherwise entitled to its compensation.” If you find a buyer in week 1 or 2 of the listing term (before the brochure is done, before the sign is erected) you don’t want the owner seeking a reduction of your fee.

There is pending litigation where a listing broker obtained a review of existing plans which overstated the size of the building, and quite possibly led to a catastrophic overstatement of the size of the building on its sale, leading to an unhappy buyer and claims against Seller and Broker that followed. Brokers should not take credit or blame or any responsibility for measurement of the size of a building or parcel of land. Representation of size should always be attributed to the source, whether an architect, a surveyor, or both. Descriptions of the broker’s responsibilities as the owner’s full service real estate advisor might just come back to haunt you, if something done by others or facts received from others turn out to be negligent, improper, or just incorrect. I believe the current phrase is the warning to “stay in your lane.”

I am not saying that you should do any less than your best to market a property for sale or lease; but be careful of what you promise in obtaining, and within your listing. Overbroad promises or too broad a description of your role might lead to liability that you never envisioned possible. Remember, when deals go sideways, unhappy parties find defendants to pay the price, and sadly, brokers in the deal can find themselves in a lawsuit that they never envisioned.


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James Hochman
James Hochman
Schain Banks Kenny & Schwartz

Jim Hochman is a partner at Schain Banks Kenny & Schwartz law firm and freelance writer. Contact him at jhochman@schainbanks.com.