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Cancelling a Listing Agreement

by | Dec 1, 2023 | Forms, Miscellaneous, Uncategorized

BROKER RISK MANAGEMENT

WEEKLY PRACTICE TIP

 

For a number of reasons, a listing broker and/or seller may seek to cancel a listing agreement before it expires.  This tip addresses the proper handling of situations involving cancellations of listing agreements.

 

SCENARIO NO. 1:  I am a listing agent.  I had a personality conflict with the seller.  The seller asked to cancel the listing agreement.  I did that and now the seller is posting negative reviews on Yelp and other social media platforms.  Is there anything I can do?

 

RESPONSE:  At this point, there is nothing you can do.  As part of the cancellation, you could have included a non-disparagement provision.

 

SCENARIO NO. 2:  I listed a property and assisted the seller in preparing the disclosures.  The property did not sell and the seller asked to cancel the listing agreement before its expiration.  I agreed to do so.  The seller used the disclosures that I assisted the seller with.  The property subsequently sold and the buyer received those disclosures.  The buyer has now filed a lawsuit against the seller for non-disclosure.  The seller has sued me for indemnity relating to the disclosures that I prepared.  Could I have prevented this from occurring?

 

RESPONSE:  Yes, you could have included a release of liability in the cancellation agreement.

 

SCENARIO NO. 3:  I have a listing on a property which is not selling.  The seller wants to cancel the listing agreement and list it with someone else.  However, I have spent several thousand dollars in marketing expenses and do not wish to provide those marketing materials to the seller or new listing agent without being reimbursed.  Can I ask for reimbursement?

 

RESPONSE:  Yes, as a condition of cancelling the agreement, you may ask for reimbursement of your marketing expenses.

 

DISCUSSION:  For a variety of reasons, listing agents and/or sellers may seek to cancel a listing agreement before it expires.  Common reasons for cancelling a listing agreement include the following:  personality conflict; disagreements regarding the marketing and/or pricing of the property; disagreements regarding disclosure obligations by the sellers; or the property is not selling and the parties feel that a cancellation is appropriate.  In these circumstances, agents generally use a cancellation of listing agreement form.  However, recently, situations have arisen under which agents would have benefitted from including non-disparagement or a release of liability.  The language in the attached page can be added to an addendum to a cancellation of  a listing agreement, such as CAR’s “Cancellation of Listing” agreement, as appropriate.

 

PRACTICE TIPS:

 

  1. Because under California law all clients and all transactions belong to the broker, only the broker or a manager of a brokerage can cancel a listing. Agents who wish to cancel a listing prior to the expiration date should consult with their broker or manager to discuss how to proceed and to obtain their approval and signatures on the cancellation documents.

 

  1. When cancelling a listing agreement before its expiration, consider utilizing release, non-disparagement, and confidentiality provisions.

 

  1. Before cancelling the listing agreement, consider whether to request reimbursement of expenses incurred in the marketing of the Property. (It may make sense to include a reimbursement provision in the original listing agreement providing that if the sellers seek to cancel the listing agreement, the sellers will be obligated to reimburse the agent for all marketing-related expenses.)

 

  1. When using the CAR “Cancellation of Listing” form (form COL on zipForms):

 

  • Check the box in paragraph 5 “Other” and add: “See attached Addendum.”

 

  • Copy/paste the 4 paragraphs on the attached page onto an Addendum form and attach it to the COL form prior to delivery to the seller for signature.

 

  • If asking a seller to reimburse listing agent for out-of-pocket expenses, check the box in paragraph 3, add the dollar amount into that paragraph.  Also, consider itemizing those expenses in a fifth paragraph in the Addendum to the COL.  Sellers may also want to see receipts.

 

(Addendum Language to be added to a Cancellation of Listing agreement)

 

  1. Release of Claims. Upon execution of this Agreement and in consideration of cancelling the listing agreement before its expiration, Seller releases and forever discharges Listing agent and broker and its agents, insurers, brokers, from any and all claims, claims for damages, costs, expenses or compensation, which Seller has, had or hereinafter may acquire, whether asserted or unasserted, known or unknown, arising out of or relating to the Property (“Released Claims”).

 

  1. General Release. The release set forth in the preceding paragraph as it pertains to the Property is a general release in connection with the obligations, and/or liabilities, which arise out of the Property.  Seller expressly waives all rights or benefits, which they now have or in the future may have under the terms of Section 1542 of the Civil Code of the State of California, which reads:

 

A general release does not extend to claims that the creditor or releasing party does not know or suspect to exist in his or her favor at the time of executing the release and that, if known by him or her, would have materially affected his or her settlement with the debtor or released party.

 

The parties understand, acknowledge, and agree that this Agreement may be pleaded as a full and complete defense to and may be used as a basis for an injunction against, any action, suit, or other proceeding which may be instituted, prosecuted, or attempted in breach of this Agreement, and similarly may be used as a basis to set aside any judgment entered in breach of this Agreement.

 

  1. Non-Disparagement. The Parties will not make any negative, disparaging, defamatory, or libelous statements to any other parties, including social media, such as Yelp, Google, or any other social media platforms.

 

  1. Confidentiality. Except as otherwise required by law, judicial process, or court administrative agency order, as necessary to enforce this Agreement, as necessary to obtain employment, as necessary to obtain advice from tax or legal advisors, or as necessary to obtain or maintain insurance coverage, the Parties agree that each shall refrain from disclosing, discussing, publicizing, or commenting on the facts and allegation relating to the dispute between the Parties and the Property asserted therein, the consideration exchanged pursuant to this Agreement, or any other term of this Agreement.  In response to any inquiry, the Parties agree to reply to substance that there was a dispute between the Parties, all allegations of which were denied, and the dispute was amicably resolved.