Early termination notices must be in writing 

How does the 2008 listing contract change early termination situations?

A new provision in the 2008 WB-1 Residential Listing Contract, Termination of Listing section provides, “Seller and Broker agree that any termination of this Listing by either Party before the date stated on line 259 shall be indicated to the other Party in writing and shall not be effective until delivered to the other Party in accordance with lines 193-198. CAUTION: Early termination of this Listing may be a breach of contract, causing the terminating Party to potentially be liable for damages.”

The termination is effective upon delivery. To ensure there is time to deliver the termination notice to the seller, the broker may wish to modify the listing to exclude delivery of termination notices by mail. The broker may modify the delivery provisions to require written notice of termination to be personally delivered or faxed.

Seller termination/damages

How can a seller terminate a listing when the listing provides that neither the broker nor the seller has the legal right to unilaterally terminate the listing absent a material breach by the other party? What damages can the broker claim if the broker has costs or fees for advertising or virtual tours or other fees?

The listing is a personal service contract and the seller has the power to terminate the listing at any time because the power to cancel the listing is distinguishable from the right to do so. The listing contract establishes a fiduciary relationship between the seller and broker. The broker cannot compel the seller to remain in the agency relationship or to continue as a party to the listing contract. Cancellation of the listing prior to the expiration date will typically constitute a breach of contract.

A termination without cause may subject the terminating party to a claim for damages. The law allows a broker to seek damages that may include reimbursement for expenses, including the cost of advertisement, and a fee for the broker’s time and services. Assuming the broker had not yet procured a buyer, allowable damages may include out-of-pocket expenses for advertising, marketing, mileage, staging and time. Brokers who keep detailed, thorough and accurate records will be well-served if they are required to prove their damages in court, and they may also increase their likelihood of successfully settling the issue with the seller without litigation by clearly documenting their losses.

Remember, under no circumstances should a broker refuse to stop marketing and advertising a listed property, refuse to remove the listing from the MLS or tell a seller that the seller cannot unilaterally terminate the listing, as these statements do not reflect the seller’s rights. On the other hand, the broker is always free to negotiate with the seller for an acceptable amount of compensation for the loss stemming from the seller’s breach.

Termination fees

Can the broker include a liquidated damages provision so that the seller agrees to a fee for early termination?

Brokers may consider including a liquidated damage clause or early termination fee in their listing contracts. A liquidated damages clause allows the parties to agree to a set amount of damages in the event a party breaches the contract. If brokers wish to use a liquidated damages clause, they should retain an attorney to draft it in order to ensure its enforceability. A broker may seek legal remedies for breach of contract in court, but this may be time consuming.

Listing protection 

What does the agent need to do for listing protection if the listing is terminated early?

The listing contract states, “Should this Listing be terminated by Seller prior to the expiration of the term stated in this Listing, this Listing shall be extended for Protected Buyers, on the same terms, for one year after the Listing is terminated.” This makes it clear that the override period will begin upon the early termination date. Brokers follow the standard procedure for protecting buyers, except that the early termination date is used (in place of the expiration date) to measure the three-day deadline for submitting any lists of buyer names. The broker may still deliver written notice within three days of the termination of the contract to protect buyers who negotiated to acquire an interest in the property during the term of the listing. If the broker intends to assert listing protection, he should not agree to a WB-45 Cancellation Agreement and Mutual Release (CAMR).

Forms

The agent has tried to talk to the seller and respond to his demands about the listing but is unable to keep the relationship intact. What paperwork is used to respond to a seller’s request to terminate?

Depending on the nature of the termination, a notice, amendment or CAMR may be appropriate means for responding to the seller and documenting the termination. The WB-42 Amendment to Listing Contract is an appropriate form if the seller and listing broker have an agreement to amend (shorten in the case of early termination) the expiration date in the listing contract. If the listing broker does not agree to amend the listing and is merely acknowledging the seller’s termination, a notice is appropriate. The listing broker may wish to work with his or her attorney regarding the language of the notice to ensure that any remedies available as a result of a seller’s bad-faith termination are preserved (i.e., include language that the broker retains all legal rights under the contract and law stemming from the seller’s breach). If the seller and the listing broker agree to waive all rights under the listing including listing protection, damages for bad-faith termination, the right to collect commission if earned, etc., a CAMR form may be used if properly modified to reflect the parties’ intent.

Broker termination of listings

A seller is refusing to let the agent hold open houses or allow any showings. If the client refuses to cancel the contract, can the listing agent unilaterally cancel the listing contract for breach of contract? 

Both the seller and the listing broker have the ability to cancel the listing, but they do not have the right to unilaterally cancel the listing absent a breach by the other party. The seller is apparently in breach of the basic seller cooperation duties in the listing contract. Note also that the agent enters into the listing on behalf of the broker/owner and does not have the right to unilaterally terminate the listing. The agent should discuss the situation with the broker, who may assign another agent to service the transaction, offer to service it himself, or offer the seller the opportunity to terminate the listing contract. If the broker elects to terminate the listing and the seller will not agree, the broker may wish to confer with legal counsel.

Agents moving

An agent is thinking about moving to a different company. Can the agent take listings with him?

Agents do not have the authority to terminate the listing contract or shorten the term of the listing. The termination of listing provisions found in the “Termination of Listing” section in the listing contract explicitly state that an agent does not have the authority to terminate or shorten the term of a listing or amend the commission amount without the written consent of the agent’s supervising broker. This provision exists primarily to protect the listing broker from the unauthorized conduct of unscrupulous agents who may attempt to take the listing to a new employer. These provisions also make it clear that the contract is between the listing broker and the seller so the contract remains with the broker (absent an agreement between the listing broker and seller to the contrary) even when the listing agent leaves the company.

Tracy Rucka is a Staff Attorney for the WRA.