Q: I am a listing agent on a property that was in escrow with a buyer represented by another brokerage. In the middle of the escrow, my seller just decided not to sell. I discussed with the seller the potential liability for breaching the contract and seller said he just didn’t care because he wasn’t going to sell. The buyer, who had removed all contingencies, at first was going to sue the seller for breach but, having found another acceptable property, was content to get her deposit back and be reimbursed for her inspection reports, which seller agreed to do. The contract was mutually cancelled, buyer received her money, and off she went.
But, I didn’t get paid, and I’m upset; particularly because now my listing has expired and seller is listing the property with another agent. I want to file a “lis pendens” against the property. How do I do that?
A: You have a right to be upset and, if you used the CAR Exclusive Authorization and Right to Sell, you have earned a commission per the terms of paragraph 4.A (1), because the seller has clearly breached the contract.
But, you may not record a lis pendens against the property. There is no such thing as a “broker commission lien;” and the only time a party may record a lis pendens against a party is if that party has filed a lawsuit alleging a right to the title to that property.
For example, if the buyer in your example had wanted to enforce the contract against a breaching seller, that buyer could have filed a lawsuit for “Specific Performance” alleging a right to the title to the property because of the rights under the Purchase Agreement, and asking the court to compel the seller to sell the property to the buyer. Then, after filing that lawsuit, that buyer could record a lis pendens against the property.
A lis pendens is literally a “notice of pending action” which puts the world on notice that some party is claiming a right to the title to the property, and that a lawsuit has been filed wherein that party is pursuing that right. In such a case, no lender will lend, and no buyer should buy, the property until the lis pendens is removed.
This is because, the person who recorded the lis pendens has a superior claim to title over anyone who owns or liens the property after that date.
See Weekly Practice Tip: “Lis Pendens”
Because as a listing agent you are just claiming a right to money (i.e., the commission on the cancelled transaction), you may not record a lis pendens.
You can, however, pursue the seller to recover the commission claimed to be due to you.
PRACTICE TIPS:
1. You and your broker should talk to a good real estate litigation attorney about your rights to pursue the seller, as well as the costs both in money and time to do so.
2. Because all clients belong to the broker under California law, the right to sue the seller lies with the broker, not the salesperson, so it must be the broker who pursues the claim against the seller.
3. Also, remember that the listing agreements require Mediation before proceeding with Arbitration (if agreed to in the listing agreement) or Litigation.
DO NOT FORWARD THIS DOCUMENT TO CLIENTS. This Weekly Practice Tip is attorney-client privileged and for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2008 11-07-08