Cancellation of a real estate listing
At times property owners choose to cancel their Real Estate Agency agreement for a variety of reasons. The simplest being that they have decided not to sell their property and are therefore withdrawing from the market. Cancellation of the Agency agreement in this instance isn’t usually a problem; after all, the Agent will only achieve a successful sale with the Vendor’s cooperation and as such there is little point in the Agent trying to bind the Vendor to any Agency agreement.With the current market and the lengthening list to sell dates, Vendors may perceive during the existing Agency period that their needs may be better met elsewhere, that is with another Agent. From my observations it is common in New Zealand for the second Agent to supply the vendor with a ‘Cancellation of Agency’ form, such forms following a fairly standard template. The Vendor on advice from the second Agent, signs the form, which is then faxed to the original Agent thereby supposedly cancelling the Agency and releasing the Vendor from any previous commission commitment.
Herein is the problem as a ‘Cancellation of Agency’ form does not release a Vendor from the pre-existing terms of the prior Agency Contract. Most importantly, it does not exclude the original Agent from claiming commission should the property be sold to someone that they introduced.
On the ‘Cancellation of Agency’ forms that I have seen, this point is not clear leaving the Vendor potentially exposed and reliant on the second Agents understanding and interpretation of the situation.
In order to mitigate the risk to the Vendor of being liable for two commissions, the incoming Agent needs to clearly ascertain whether or not any prospective buyer had already been introduced to the property by another Agent and in doing so protect the Vendor. When drafting a Sale and Purchase Agreement, clauses covering this particular situation must be included.
July 08 2010 11:10 pm | Real Estate Industry News and Selling Rural Waikato Real Estate
Steve Taylor on 09 Jul 2010 at 4:17 pm #
Hi Sharon, How would the clause be worded?
Sharon James on 09 Jul 2010 at 4:48 pm #
Hi Steve
As an example, something along the following lines inserted into the S & P Agreement:
(i) Upon an offer being submitted the buyer will be required to give an undertaking that they were not introduced or interest initiated nor consulted another agent regarding the property who may have a claim for commission against the vendor.
(ii) Should any Agency have a legitimate right for remuneration based upon agency work under pre-existing Agency agreements the new sole agent shall have no right of claim against the client in relation to that transaction.
That will go a long way to protecting a vendor from having to pay twice.
Sharon
Russell on 09 Jul 2010 at 6:30 pm #
Those agency cancellation forms are no longer valid, they are pre REAA and no longer have any relevance. They are old school REINZ documents and should be avoided.
What would be better would be that the first agents authority should say “Should we fail to sell it during our agency period then we shall have no future claim to any commission after our agency expires, even if the property sells through a different agency at a later date”
REAA requires care as per:
9.11 A licensee must not invite a prospective client to sign a sole agency agreement without informing the prospective client that if he or she enters into or has already entered into other agency agreements, he or she could be liable to pay full commission to more than one agent in the event that a transaction is concluded.
Sharon James on 09 Jul 2010 at 8:00 pm #
I agree Russell that those forms have no relevance, however they are still in regular circulation which is why I wrote the article. They were also irrelevant pre-REAA as they were (and still are) an attempt by one agency to interfere in the trade of another agency, something that the Commerce Commission will certainly take a dim view on. It may even be suggested that these restrictive trade practices are in direct contravention to Section 27 of the Commerce Act 1986.
Drawing a prospective client’s attention to Rule 9.11 is not enough, not when it is followed up with handing them a revocation form which in itself suggests that by revoking the former agency they will not be held liable for double commission.