Recently, the legal department of the California Association of Realtors produced a question-and-answer (Q&A) format memo that addresses a variety of issues that arise when agents leave one office for another at a time when they (the agent) may currently be involved with a listing or sales transaction. The title of the Q&A is Changing Offices: Transfer of Listings, Buyers, and Procedures. The situation itself is not unusual. It happens all the time. But that doesn’t mean that there are well-established good practices for dealing with it.
First of all, the general question arises (Question # 11 in the memo):
Question: Does a listing agent have the right to transfer the listing to a new broker after the brokerage relationship with the [current] broker is terminated?
Answer: Generally, no, absent the current broker’s permission. The listing is a contract between the broker and the seller. It is not between the sales agent and the seller. Therefore, it is the broker that retains the listing. Inducing the seller to cancel one listing and sign another even if done by the agent that obtained the listing originally, is likely to be an intentional interference with contractual relations.
Furthermore, NAR code of ethics 16-20 states that prior to or after their relationship with their current firm is terminated, agents shall not induce clients of their current firm to cancel exclusive contractual agreements between the client and that firm.
Lastly, in most cases the independent contractor agreement will prohibit the agent from soliciting sellers with current listing agreements. (See paragraph 9 of the [California Independent Contractor Agreement]).
Suppose, though, as is often the case, that the first broker is agreeable to letting the listing go with the agent to the new broker. Typically, the first broker receives a fee or a portion of the ultimate compensation. How is this to be accomplished?
While there is no “one way” to do it, one thing is for sure: it is not simply a matter of switching the listing in MLS with an instruction from both brokers. For one thing, you wouldn’t want to try it without the written consent of the seller.
The CAR memo notes this: “There is no single way to accomplish this. But no matter how it is done, it is important to realize that first and foremost the agreement to transfer the listing is primarily between the current broker and the new broker. And secondly, there is presently no form on zipForm® designed for this purpose.”
Having noted that, the memo does suggest a list of terms that ought to be covered in whatever agreement is reached between the brokers:
1. That it is subject to seller consent to employ the new broker
2. That it is subject to seller signing a cancellation of listing (COL) with the former broker
3. That it is subject to the agent being employed with the new broker
4. That the current broker assigns all rights to the listing representation and commission to the new broker
5. That the new broker will fully compensate the listing agent at closing
6. That the new broker promises to pay any cooperating broker the full commission offered
7. That each broker agrees to hold harmless and indemnify the other
8. That it specifies the amount of commission, if any, the new broker agrees to pay the former broker
To be sure, a less complicated agreement could be memorialized between the two brokers; but why? If anything, there might be more terms to add. Although the sales agent may not be a party to the agreement, some of the terms may reflect the terms of his Independent Contractor Agreement with the first broker. That is also discussed in the CAR memo.