The safety clause

A safety clause in a listing agreement entitles the broker to the agreed fee, when:

  • an individual has direct contact with the broker (or their agent) regarding the property during the listing period, called solicitations;
  • the broker treats the individual as a prospective buyer due to their inquiries or conduct by handing them a package of information about the property, called negotiations;
  • negotiations with the individual terminate without resulting in their entering into an agreement to purchase the property;
  • the listing period expires and the broker timely registers the individual by name with the seller as a prospective buyer; and
  • the individual and the seller, with or without the broker’s further involvement, later commence negotiations within an agreed-to period following the expiration of the listing, called the safety period, and eventually complete a sale of the property.

A safety clause is part of the fee provision in a listing agreement. Both the open and exclusive types of seller’s and buyer’s listing agreements contain safety clause provisions. [See RPI Form 102 §3.1(d); see RPI Form 103 §4.1(c)]

A safety clause in the fee provision of a listing agreement provides an additional period of time after the listing period expires for a broker to earn a fee. [See RPI e-book Real Estate Practice, Chapter 12]

The safety clause for seller’s agents

The safety clause imposes an obligation on the seller to pay a fee on a sale which results from negotiations with registered prospective buyers handled by anyone within the safety period. [See RPI Form 123-1]

However, several crucial activities need to be performed by the seller’s agent to perfect the broker’s right to a fee under the safety clause, including:

  • providing information about the listed property to any prospective buyers the broker or buyer’s brokers have contact with;
  • documenting dealings with prospective buyers by maintaining a File Activity Sheet in a property listing file [See RPI Form 520]; and
  • registering the prospective buyers with the seller on termination of the listing with the seller by providing the seller with a List of Prospective Buyers in a timely manner (e.g., within 21 days). [See RPI Form 122]

Related article:

Form-of-the-Week: Identification of Prospective Buyers and File Activity Sheet – Forms 122 and 520

The safety clause for buyer’s agents

Likewise, under the safety clause in a buyer’s listing agreement, the buyer’s broker is entitled to collect a fee within an agreed-to period after the expiration of the buyer’s listing when:

  • information specific to the property was provided to the buyer by the buyer’s agent during the listing period;
  • on expiration of the buyer’s listing, the buyer is handed an itemized list which identifies those properties the buyer’s agent brought to the buyer’s attention needed to perfect the buyer’s broker’s right to a fee [See RPI Form 123];
  • the buyer entered into negotiations with the owner of a registered property; and
  • the safety-period negotiations ultimately result in the buyer acquiring an interest in the property.

Although the buyer under a listing agreement promises to pay a full broker fee on the acquisition of property, in practice, the buyer will nearly always close the purchase without directly paying the promised broker fee. It is the seller who typically pays the fee the buyer has promised their agent. [See RPI e-book Real Estate Practice, Chapter 15]

Related Video: Provisions for Payment of a Fee

Click here for more information on fee entitlements.

The identification of prospective buyers/tenants

An owner’s agent uses the Identification of Prospective Buyers/Tenants — On Expiration of Listing published by Realty Publications, Inc. (RPI) when their employment has expired under a listing agreement for the sale or lease of a property containing a safety clause calling for the payment of a fee on a purchase or lease of the property within one year after expiration by a prospect the broker negotiated with during the listing period. The form allows the agent to identify these prospective buyers or tenants of the property to the owner. [See RPI Form 122]

The Identification of Prospective Buyers/Tenants form contains:

  • Facts, including which type of agreement the form is an addendum for, either:
    • a Seller’s Listing Agreement [See RPI Form 102];
    • an Exclusive Authorization to Lease Property [See RPI Form 110]; or
    • a blank space to list another listing agreement; and
  • the date the listing was entered into and the property address for the described real estate [See RPI Form 122 §1]; and
  • the identities of prospective buyers or tenants the broker solicited and negotiated with for the purchase or lease of the real estate. [See RPI Form 122 §2]

The owner is obligated under the listing agreement to pay a brokerage fee when, within one year after expiration of the agreement, the owner enters into a negotiations which result in the sale or lease of the real estate with any of the named prospective buyers or tenants. [See RPI Form 122 §2.2]

The identification of qualifying properties

A buyer’s or tenant’s agent uses the Identification of Qualifying Properties published by RPI when their employment has expired under a listing agreement to buy or lease property containing a safety clause calling for the payment of a fee on the client’s purchase or lease within one year after expiration of a property presented to the buyer or tenant during the listing period. The form allows the agent to identify prospective properties the broker brought to the attention of the client. [See RPI Form 123]

The Identification of Qualifying Properties form contains:

  • Facts, including which type of agreement the form is an addendum for, either:
  • the date the listing was entered into and the property address for the described real estate [See RPI Form 123 §1]; and
  • the identities of properties qualifying as the type sought by the buyer or tenant which the broker located, investigated, solicitated or negotiated for acquisition by the buyer or tenant. [See RPI Form 123 §2]

The buyer or tenant is obligated under the listing agreement to pay a brokerage fee when, within one year after termination of the agreement, the buyer or tenant enters into negotiations which result in the acquisition or lease of any of the named addresses provided on the form. [See RPI Form 123 §2.2]

Demand for payment of a fee

An agent uses the Demand for Payment of a Fee — Fee Earned on an Expired Listing published by RPI when, within one year after termination of a listing agreement, the client enters into negotiations which later result in a closed transaction with a registered person or property. The form allows the agent to initiate collection of an earned fee. [See RPI Form 123-1]

The Demand for Payment of a Fee form contains:

  • Facts, including whether the demand for a fee pertains to:
  • the date the listing was entered into, the broker’s identity, the client’s identity and the described real estate [See RPI Form 123-1 §1];
  • Demand for a fee, which includes:
    • whether an Identification of Prospective Buyers or Identification of Qualifying Properties was provided to the client on the expiration of the listing agreement [See RPI Form 122 and 123; See RPI Form 123-1 §2.1];
    • the identity of the person with whom negotiations resulted in a transaction with or, alternatively, the property which was located for the client within one year after termination of the listing agreement [See RPI Form 123-1 §2.2];
    • the broker’s fee earned under the listing agreement [See RPI Form 123-1 §2.3]; and
    • whether broker fees are due immediately upon receipt of the demand or another time period the broker will enter. [See RPI Form 123-1 §2.4]

When an agent or broker discovers a completed sale has occurred within one year for which the agent provided the client with prospective buyers or qualifying properties, the broker makes a written demand on the seller or buyer for their fee earned and unpaid under the safety clause in the expired listing. [See RPI Form 123-1]

Want to learn more about perfecting the right to a fee? Click the image below to download the RPI book cited in this article.

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