Trends in the Real Estate Marketplace
Why Study Real Estate Law?
Legal System
• Common Law = court made law
• Statute Law = gov't made law
Division of Powers
• Federal law effects real estate bc they can indirectly regulate it
o Ex. Real estate developers cannot build tall building...
LAW 703 – week 3
5. Legal Framework
Seller’s Listing Agreement
Buyer Representation Agreement
Seller’s Listing Agreement Listing property for sale/lease at certain price & terms
(SLA) “invitation to treat”
Generally, S’s A does not have authority to enter into an APS to sell the S’s property.
o But S could expressly give authority to the A (agent)
o No expressed authority in the doc for A’s to make contract on behalf of the S. BUT could give them.
o The S could expressly give it to them
o (Wragg v Lovett (1948) 2 All ER (CA)).
when you have to pay (what Triggering event for payment of commission
has to happen for you to pay o “sale effected”
them commission) – what the sale is actually completed (this is how the the court understood it)
triggers the event of earning but real estate agents don’t like that because they do stuff, but just because it didn’t close,
a commission? they don’t get paid.
o “procuring the offer” – getting an offer
because of the above, moved to this
means if the A gets an offer from someone, and inform the principal of it
that was the event that trigger payment of commission. Doesn’t have to be accepted to be
paid
but this doesn’t sit well with S’s: if read the contract, would take it out.
o Current Wording in SLA --- “…for any valid offer to purchase…”
The language of what they agreed to
“form any source whatsoever during the listing period, on the terms set out here in” – the
contract is for a certain period; but if its from your friend, you still have to pay the agent,
the A doesn’t have to bring it to you
“any other terms the S accepted”
See page 11 – Commission - clause 2 of SLA
Good to change terms to “commission is paid on completed deal”
Is the A entitled to be paid commission if:
o (a) S refuses to complete the transaction? Or
seller’s fault it doesn’t close
no legal valid reason to refuse the close but for some reason don’t accept
yes they still have to pay commission
o (b) B refuses to complete the transaction?
, Buyer refuse to close
not very clear. Doesn’t talk about it.
But based on the language in the contract; can say should be paid
Buyer is not in the contract. Buyer is not addressed. So could also ague that they don’t
have to pay
o If agent’s fault:
From legal principle: if the A is negligence, you’ll have cause of action against the A for
breach of duty.
What is a “holdover” clause?
o Built into the doc SLA or BRA
o There’s a fixed time period
o Ex: 120 days: you’re listing the property for this period. Has to be a fixed time period
During that time, they hope to put a deal together
If that doesn’t happen, it was expire
There will be a 90 days holdover clause
holdover clause: if one of the B’s comes the to S and buys the property, should the A get
paid? Original A gets paid 5%: 3 possibilities
1. S does not get a new A
S could get a new A (xyz) once the period is over
B1 approaches the S directly
Created during the holdover period, should the original A (ABC) get paid?
Yes original A gets 5% commission
2. S does get a new A and charging 4%
does the original A get commission?
Yes 1% (the difference between what they charge and what the new A is
getting)
Old A commission – New A commission = how much old will get.
3. S does get a new A and charging 5% or more
ABC gets 0%
o This is to protect Agents. B1 could just wait until the holdover period is over to do the deal. Then
the holdover would expire.
Buyer Representation What is triggering event for a B to pay commission?
Agreement (BRA) o Have to look at agreement
o Buyer agrees to pay as follow:
If during this agreement, buyer enters into an agreement of purchase/lease real ppty
Has to be an agreement, in writing and signed (for purchase) but lease can be n vocal if less
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