Real EstateThe Tagre Law Office recently helped a Modesto-based real estate company recover costs and commission compensation due under a Real Property Listing Agreement breached by the property owner. Arbitration in the matter commenced in August 2012 and was resolved in September 2012.

The Tagre Law Office initiated arbitration proceedings on behalf of its client, the broker and listing agent for the real property sale transaction, to address the property owner’s refusal to pay the broker’s costs and commission as agreed under their Listing Contract. The Residential Listing Agreement used in this transaction is the standard C.A.R. Form RLA used by many, if not most, of the real estate agents throughout California.

It was established during arbitration that the broker was owed payment because, under Section 4 of the Listing Agreement, it had found a buyer for the property that offered to purchase on terms acceptable to the seller and because the seller had withdrawn the property from sale during the agreed-upon listing period without the broker’s written consent. Although the seller and buyer had agreed to a price and terms for the sale, the seller refused to proceed with the sale and stopped communicating with the broker, effectively withdrawing the property from the market.

Seller argued, unsuccessfully, that no payment was owed because it did not enter into a binding sale agreement with the buyer. While the seller signed a standard Purchase and Sale Agreement setting forth the agreed-upon price and terms, the seller did not remove the Multiple Counter Offer provision (“Line 7”) of its Purchase and Sale Agreement Counter-Offer, without which seller would not be legally obligated to sell the property. Seller argued that the price and terms could not be deemed acceptable to seller unless it signed the Multiple Counter Offer Line 7.

It was established during the arbitration hearing that the purpose of Line 7 is to allow sellers the ability to submit counter offers to more than one potential buyer while reserving the right to choose the best from among those offers. Line 7 is not an opportunity for Seller to withdraw from all negotiations without becoming liable to the broker for payment of its commission. The Tagre Law Office successfully argued that failure to sign Line 7 does not relieve Seller of the obligation to pay the broker a commission if the commission has been earned as set forth in the Listing Agreement.

In the end, it was found during arbitration proceedings that seller’s unilateral and unreasonable refusal to proceed with the sale constituted a breach of the Listing Agreement and that, accordingly, the broker was owed payment.