/n Court Upholds Broker’s Right to Commission Under Exclusive Listing Agreement
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/n The Michigan Court of Appeals recently issued a decision upholding a Broker’s right to receive a commission, where the Seller attempted to terminate a listing agreement, then sold the property, unbeknownst to the Broker, before the listing period expired.
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/n What happened? The parties entered into an exclusive listing agreement. Broker agreed to use commercially reasonable efforts to sell the property, a Howard Johnson motel in Traverse City. Broker agreed to present the property to other licensed real estate companies upon request, and to engage in marketing efforts to expose the property. The listing agreement provided that, if the property sold to any person within one year, the Broker would be entitled to a 5% commission. Since the parties executed an ‘exclusive’ listing agreement, the Broker is entitled to a commission regardless of who finds the buyer, even if it is the seller.
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/n A few months after the listing agreement was signed, the Seller sent the Broker a letter stating it no longer wished to sell the property. In its reply letter, the Broker stated that, while it would not terminate the listing agreement, it would cease all marketing efforts for the rest of the listing period. The property owner sold the property to a third person, with whom the Broker had no contact, 11 months after the listing agreement was signed. Broker then sued the property owner to recover a commission.
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/n In ruling for the Broker, the Court of Appeals determined that, when an exclusive listing agreement is supported by consideration, it may not be unilaterally revoked by the Seller. The requirements to make a listing agreement irrevocable are: (1) a provision for exclusive sales rights, (2) a reasonable time limit, and (3) substantial performance of the Broker’s duties as promised, although the Broker is not required to furnish an actual purchaser. In addition, the Broker does not have to prove actual marketing costs incurred in order to recover damages. An unambiguous listing contract provision stating a rate of commission (here, 5%) is sufficient to entitle the Broker to receive the commission.
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/n The Court found that the property owner had sold the property within the initial one-year listing period, the parties’ exchange of letters had not terminated the listing agreement, and the Broker was entitled to its commission. Maybe.
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/n Michigan law requires a Broker to allege and prove he or she was a licensed Broker at the time of performance in order to recover a commission. MCL 339.2512a. Here, the Broker failed in its pleadings to allege and prove that it held a broker license. The Court of Appeals sent the case back to the Trial Court with instructions: if the Broker could prove it had a valid license, it is entitled to the commission. Otherwise, no commission is due.
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/n For further information, contact Gregg A. Nathanson, Esq., an attorney at the law firm of Couzens, Lansky, 39395 W. 12 Mile Road, Farmington Hills, Michigan 48331, telephone 248-489-8600 or gregg.nathanson@couzens.com
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/n The information contained herein does not attempt to give specific legal advice. For advice in particular situations, the services of a competent real estate attorney should be obtained. These materials are the exclusive property of Gregg A. Nathanson, Esq., and no reprint or other use of the information contained herein is permitted without Mr. Nathanson's express prior written authorization.
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/n ©2013 Gregg A. Nathanson, Esq.
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/n O:kdrarticles-speeches2013Michigan Court of Appeals Upholds Broker.docx
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