Westside Estate Agency, Inc. v. Randall

Facts: A broker is contacted by a buyer who is personally known to the broker to locate a property. A written listing agreement employing the broker is not entered into. The broker locates a property whose listing states the seller’s broker is to pay the buyer’s broker a cooperating broker fee. The buyer’s broker submits an offer to the seller and numerous counteroffers are exchanged. The buyer and seller do not reach an agreement concerning the purchase terms. Later, the buyer submits another offer to the seller using a different broker, which is accepted.

Claim: The original broker seeks a broker fee from the buyer, claiming the buyer breached an implied employment contract since the broker located the property which the buyer ultimately purchased and the listing referenced a cooperating broker fee.

Counter claim: The buyer claims the broker is not entitled to a fee since they never entered into a written listing agreement employing the broker, a requirement of the statute of frauds.

Holding: A California appeals court holds the broker is not entitled to a fee since the broker is required to enter into a signed listing agreement with the buyer in order to be eligible to collect a fee. [Westside Estate Agency, Inc. v. Randall (December 1, 2016) __ CA4th__]

Editor’s note — A verbal agreement to represent a client in a real estate transaction is sufficient to establish employment and impose an agency obligation on the broker to act as a fiduciary to that client.

However, all assurances of a broker fee on a real estate transaction are required by the statute of frauds to be in writing and signed by the person who agreed to pay a fee to entitle the broker to enforce collection. This is the case whether or not the broker performs as agreed.

Formal documentation of an obligation to pay a fee — a written agreement containing a fee provision and signed by the client — is the legislatively enacted and judicially mandated requisite to the right to enforce collection of a broker fee from a client who has agreed to pay it. The written agreement contains the client’s promise to either pay a fee or cause a fee to be paid by someone else, such as by the seller when the buyer is the client in a sales transaction under a buyer’s exclusive listing agreement. [See RPI Form 103]

Here, the client was a long-time friend of the broker, which likely induced the broker to disregard this fundamental requirement of contract law — much to their ultimate detriment.

Further, the broker’s fee would have been protected by a safety clause had the broker entered into a written exclusive listing agreement. [See RPI Form 103 §4.1(c)]

Form-of-the-Week: Demand for payment of a fee – Forms 123 and 123-1

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