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Does expired listing agreement needs a commission for the purchase of property by tenant

Discussion in 'Buying & Selling a Home or Residence' started by tiya, Oct 22, 2021.

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  1. tiya

    tiya Law Topic Starter New Member

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    Jurisdiction:
    Illinois
    2 yrs back a real estate agent's company and us executed a rental listing agreement which has the following clause :

    Term: The term of this Agreement (“Term”) shall commence on the Effective Date and shall terminate upon the earlier of: (i) the execution of a lease for
    the Property (the “Property Lease”); (ii) the Closing (as defined below) of a Property Sale (as defined below); or (iii) one (1) year from the Effective Date. If
    the Effective Date is inadvertently left blank, the Effective Date shall be the date upon which the Agreement is fully executed and delivered. Upon expiration
    or termination, all obligations of both parties shall cease except as otherwise set forth herein; provided, however, such termination shall not affect Owner’s
    obligation to pay (or cause xyz-real-estate-company to be paid) any and all Leasing Commissions (as defined below) or Property Sale Commissions (as defined below),
    along with all other amounts due xyz-real-estate-company hereunder.

    Purchase Of Property By Tenant: If both the Approved Tenant and Owner execute a real estate purchase contract (the “Purchase Contract”) for sale of
    the Property and complete the Closing (as defined herein) (a “Property Sale”), Owner agrees to pay xyz-real-estate-company, or cause to be paid to xyz-real-estate-company, a
    commission equal to six percent (6%) of the Purchase Price of the Property (“Property Sale Commission”) as set forth in the Purchase Contract. Payment to
    xyz-real-estate-company of the Property Sale Commission shall be made by the escrow or closing broker, and payment shall be made simultaneously with the
    disbursement of proceeds of sale and payoff of any mortgage indebtedness on the Property. As used herein, the term “Closing” shall mean the time at which
    the proceeds of Property Sale are disbursed to or at the direction of Owner or Owner’s lender and a deed is delivered to the Approved Tenant.


    We asked the real estate agent about the above clause and the response was "this is a company policy and we cannot do anything about it".
    The real estate agent found a tenant for us and we paid all the service fees for the service they provided back then.
    We executed a 2yrs rental listing agreement with the tenant 2 yrs back.
    Towards the end of the tenancy, the tenant expressed interest in buying the property.
    We approached the real-estate-company and told them that we are not interested in any service from your side, but for the above said clause we would like to see if the 6% can be negotiated, we called and the company person would never answer our call. We emailed and he didn't negotiate a lot.
    We spoke to a real estate attorney after this and he said, the listing agreement term is over long back and the obligation to pay the commission was not triggered during the term of the agreement. So you do not owe the company anything.
    We took his legal advice and sold our property to the tenant.
    Now, the real-estate company sent us a 'Debt Collection' notice and has given us few days to respond otherwise a lawsuit seeking not only the 6% but attorneys’ fees and costs.
    We approached the lawyer who advised us that time and he said he cannot commit to accepting our case.Any guidance on how to find a lawyer?
    My question -
    1. any guidance on the overall case to help us is appreciated.
    2. they said "lawsuit seeking not only the 6% but attorneys’ fees and costs" - what does the costs mean here?
     
  2. zddoodah

    zddoodah Well-Known Member

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    Use your preferred internet search engine to find local lawyers. Call a few. Arrange consultations. Hire one you like.

    Most courts charge a filing fee when a party initiates a lawsuit. Most plaintiffs hire a process server to serve a lawsuit. There are costs associated with taking depositions. There's often a jury fee. Etc., etc.
     
  3. adjusterjack

    adjusterjack Super Moderator

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    The time to negotiate a contract is before you sign it, not when the you know what hits the fan.

    Google real estate lawyer for your city. Pick one. Call and make an appointment to have the agreement analyzed. Agree to pay him for his advice and representation.

    Looks to me that the sale occurred more than one year after the agreement's effective date. My opinion for the two cents that it's worth is that you are not obligated to pay the commission.

    However, what you do about that depend on whether you fear a lawsuit or not.

    Read the entire agreement and look for a lawyer fee provision. There probably is one that says, if you lose, you pay their lawyer fees. If you win, they pay yours.
     
  4. tiya

    tiya Law Topic Starter New Member

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    When the property sale occurred, I am 100% sure the rental listing agreement was expired.
    However, there is this clause in the expired rental listing agreement which states :
    "Upon expiration
    or termination
    , all obligations of both parties shall cease except as otherwise set forth herein; provided, however, such termination shall not affect Owner’s
    obligation to pay (or cause xyz-real-estate-company to be paid) any and all Leasing Commissions (as defined below) or Property Sale Commissions (as defined below),
    along with all other amounts due xyz-real-estate-company hereunder.
    "

    So I am confused whether we owe the agent or not but my lawyer said that this above stated clause is true if the sale had occurred before the rental listing agreement had expired.
    Since our sale happened after the agreement expired, we do not owe anything.

    I wanted attorneys here to provide their insight on this. Do you agree with what my attorney said?
     
  5. adjusterjack

    adjusterjack Super Moderator

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    I sort of agree but I see a couple of problems. First, listing agreements often do come with a tail. Meaning that if you sell the house after the expiration to somebody who has seen the house prior to its expiration you pay the commission. However, those listing agreements clearly define the amount of time involved after the listing expires.

    Your contract creates an ambiguity because it's not clearly defined as to when that obligation occurs. Ambiguities are often construed against the person who wrote, or offered, the contract.

    Is it during the listing period? Fine, you owe nothing. But if it occurs after the expiration without a time limit then it also creates a perpetuity. What happens if the tenant is there 5 years and buys the house? 10 years? 20 years? if it was the agent's intent to collect after that many years, a court is unlikely to enforce it.

    At this point, depending on how much money is at stake, your options are to either pay it or refuse to pay it. If you refuse and get sued, you hire the lawyer to defend you.

    Meantime you should probably hire the lawyer to write a letter to the agent refuting his claim for the commission and then see what happens.

    You're just wasting your time asking strangers on the internet to second guess your lawyer.
     
  6. tiya

    tiya Law Topic Starter New Member

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    Thanks for your response.
    I am looking for real estate attorney who can help me with my case, but apparently the couple of attorneys I contacted are more interested in property sale.
    Please suggest what should I google to find a relevant attorney? Should it be a General Litigation Attorney or just keep looking for more real estate attorneys?
     
    Last edited: Oct 26, 2021
  7. adjusterjack

    adjusterjack Super Moderator

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    Sure. Or any attorney who studied Contracts in law school. Hint: they all did.

    ;)
     
    army judge likes this.
  8. tiya

    tiya Law Topic Starter New Member

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    Thanks again. My attorney who had advised me that I don't owe anything to the agency, has denied taking our case because he said he is too busy with other cases. However, has offered us to help and suggested us to go for settlement with an offer and that he can help communicate.
    Does we offering a settlement amount means we think we are guilty? So if the other party does not like our offer and continues with the lawsuit then we have less likely chance of winning because we went for a settlement?
     
  9. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    No, offering a settlement will not affect your chances in court.
     
  10. Zigner

    Zigner Well-Known Member

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    The mere offer of a settlement cannot be used "against" you in court. It may make sense to offer a settlement when the costs of trial will exceed that settlement amount, if you don't want the hassle of a trial, etc.
     
  11. adjusterjack

    adjusterjack Super Moderator

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    No. You make the offer with no admission of liability. In fact, there is wording you can use. The lawyer will be able to suggest the proper wording.
     
  12. tiya

    tiya Law Topic Starter New Member

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    Thanks.
    I know it is hard to predict a win if there is a lawsuit in my case. However, to offer the negotiation amount I need to understand how much am I willing to pay? The agency wants 6% commission, if I have to pay all 6% then I might as well go through the lawsuit because even if I loose the lawsuit I have to pay 6% (attorney fees of agency are not mentioned in the contract).

    So, I am trying to understand how strong is my case which is based on 2 things :
    1. the sale was not triggered when the rental listing agreement was valid
    2. perpetuity

    From agency point of view :
    1. there is clause of 6% commission in the rental listing agreement, which states even after termination/expiration of the agreement, seller owes property sale commission
    2. since I had written emails trying to negotiate this 6% with the agency before selling the condo, they say - I was aware of the commission I owe.

    What usually happens in such cases?
     
  13. Zigner

    Zigner Well-Known Member

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    You need an attorney...not random and ignorant (of your matter) strangers on the internet.
     
  14. adjusterjack

    adjusterjack Super Moderator

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    How many dollars is that?
     
  15. tiya

    tiya Law Topic Starter New Member

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    selling price around $500k
     
  16. adjusterjack

    adjusterjack Super Moderator

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    With $30,000 at stake, you really should PAY a lawyer to handle this for you. At least to respond to the demand.
     
    Zigner likes this.
  17. tiya

    tiya Law Topic Starter New Member

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    Called bunch of lawyers till now. Every lawyer I am calling is only dealing with real estate purchase and sale and the deadline to respond to the threat email is fast approaching.
     
  18. PayrollHRGuy

    PayrollHRGuy Well-Known Member

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    Then find one that specializes in contract law but virtually all lawyers could handle a fairly simple contract case as you describe the situation.
     

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