Real Estate Brokerage Contracts (Listing Agreements)
You have gone through the trouble of incorporating your business, buying real property in the name of the corporate entity, and now it is time to enter into a listing agreement with the real estate broker of your choice. Each listing agreement is different- which is why you must read the document presented to you carefully. Lesson 1: your name should only appear in one place on the document; in the signature block, singing in your corporate capacity (ie. President). If your personal name appears at the top of the letter/Agreement ( ie. “Dear James Brown”), or if there is a signature block at end of the contract with a place for you to sign your name- don’t sign it! Cross-out your name at the top and write-in “James Brown, Corp.” After all, this is not a contract that you are personally entering into! Your corporation is the party- not you. Lesson 2: The contract is to bind your company-Only! Don’t be dazzled by legal language that reads: “this agreement shall bind the personal representatives, successors, and assigns of the parties.” By signing a contract with a provision that includes the “personal representative” of the corporation (Ie. a corporate officer, or agent of the company). You just exposed yourself to being personally liable for your companies breach of the agreement. That’s right, with the single stroke of your pen, you pierced your own corporate veil for the benefit of the other side. Sign your own name to this agreement and you just put your personal assets at substantial risk. Lesson 3: Many rental listing agreements provide a provision that makes your real estate broker the ‘procuring cause’ in the event that the tenant that they locate for you, ends up purchasing the property from you. Yes, that means you will owe the broker a real estate commission if the tenant they procure your for you, eventually purchases the property from you. This very clause, exposed our client to over $150,000 in real estate commissions for a sale that occurred over ten years after the purchasing tenant originally took possession. The court’s have long upheld these provisions, and the statute of limitations does not run on this provision of the contract until the sale to the tenant takes place. Talk about a bitter pill to swallow. Cross-out this provision in the listing agreement- it can only hurt you. When it comes to reading Listing Agreements, read the document carefully, and above all, contact your real estate attorney and get some quick advice.