In a case of first impression, Newton Centre Realty, Inc. v. David R. Jaffe (June 23, 2020), the Appeals Court recently decided that the seller’s death terminates a real estate listing agreement and concluded that the broker was not entitled to recover contract damages from the seller’s estate.
In that case, the seller entered into three “exclusive right to sell” agreements with a broker to sell three real estate properties. Each agreement provided that the broker was entitled to a four percent commission provided that any of the three following conditions was met: (1) if the broker procured a ready, willing, and able buyer on terms acceptable to the seller; (2) if the subject property was sold through anyone’s efforts, including the seller’s; or (3) if the property was sold within ninety days after the term of the agreement to anyone the broker introduced to the property during the term of the agreement. Under each agreement, the exclusivity period lasted until August 31, 2018.
Before that date, the seller passed away and the personal representative of her estate promptly sold the three properties. The broker sued to recover his commission alleging that the properties were sold during the exclusivity period set by the agreements. The case was dismissed and the broker appealed.
The Appeals Court observed that courts in other states “uniformly hold that a real estate listing agreement creates an agency relationship between the broker and the property owner.” The general rule of agency is that the death of the principal automatically terminates the actual and apparent authority of the agent “because it negates the existence of the person on whose behalf the agent acts.” The exception to this rule is when the agency is coupled with an interest in the property.
Does a real estate listing agreement fall under the exception? No, decided the Appeals Court – agreeing with other jurisdictions – because such an agreement does not confer a property interest. Rather, it created a principal-agent relationship that entitled the broker to get a commission if the property sold within the exclusivity period. The agency relationship terminated with the seller’s death, thereby ending the broker’s contractual right to a commission.