Expert: Jim Avancena, CPM - 2/20/2009

Question
I am about to sign an exclusive leasing agreement and find that there are no provisions to protect the landlord.  Is it reasonable to ask a broker to insert a clause that specifies a default by broker.  For instance, what happens if a brokers becomes disabled and is not able to exert his best efforts in locating a tenant - am I still liable for a commission if I find the tenant during the term of the listing?  What protective clauses can I insert to insure that the broker is actively marketing the property during the term of the listing?  Thanks for your input.

Answer
Ed-

Of course you can insert a clause dealing with a default by the broker.   Your agreement must also address how the parties will treat cooperating brokers and how they will be compensated.   

You should specify that your broker/agent shall meet with you on a regular basis - for example every two weeks - and present you with a written report in sufficient detail to tell you exactly what actions they have taken during the previous two weeks, the names of each prospect they are actively engaged with regarding your property, and the current status of the discussions/negotiations with each prospect.

If a broker is disabled for more than a few days, terminate the brokerage agreement unless they formerly present and provide you with an acceptable replacement agent until such time as the disabled agent can return. It is up to you to advise them what you expect.

Some brokers are deadbeats, and some are worth their weight in gold, however, it is generally accepted that the owner of a property that has listed his property with a brokerage firm will pay the broker the commission stipulated in the listing agreement if the owner/landlord finds a tenant while the agreement is active.  Sorry, but that is a commonly accepted industry practice.

Generally, a broker must accept your integrity.   Include language that says that you, at any time, and for any reason whatsoever, have the option to cancel the listing agreement by written notice to the broker. Furthermore, provide that the broker shall, provide you with a list of ALL of the transactions with which they are actively involved within 48 hours of their receipt of your written termination notice.  If any of those prospects move toward consummating a deal you should have your former broker continue to service any of those prospects.  If you later come to an agreement with any of the listed prospects, your former agent must be paid the commission delineated in the initial agreement.

If you treat your broker/agent unfairly by canceling their listing without cause - and that is often highly contentious - your actions will very quickly be known throughout the industry in your market area and every broker will be aware of your actions.  A broker/agent must be expected to actively work your listing, and in return, you must be certain to treat every broker/agent equitably.   Brokers will often "talk" about each other, however, the truth will become known to the public and practitioners in your market.

If your listing is significant and provides enough financial reward to make their efforts worthwhile, a broker will accept your terms.  If your property does not carry enough incentive to make your listing worthwhile, you will obviously have to compromise your listing terms.  

Finally, although you did not ask, the quality of a brokerage firm or a particular agents services are not necessarily related to the size of the brokerage firm.  Check out the references of the brokers/agents who will actually be working on your listing on a day to day basis.  Working with a realtor involves common sense and natural give and take by both parties.

Good luck with your property.

-Jim