Automatic Termination of Your Listing Contract

The Massachusetts Court of Appeals has held that when a person lists their property for sale with a real estate agent and then dies before it is sold, the Decedent isn’t the only thing that expires.  In Newton Centre Realty, Inc. v. David R. Jaffe,   Shirley Jaffee had entered into three separate Exclusive Right to Sell agreements with a real estate agent for her three residential properties. During the term of the agreement, Ms. Jaffee passed away.

Probate is the process of applying to the Court for the appointment of a person (known as the personal representative) to be in charge of an Estate.  Once appointed, the personal representative has the responsibility of marshaling the assets of the Estate and, in most cases, liquidating the assets, including real estate.  On Newton Centre Realty the Personal Representative retained the services of a different broker to sell the properties. The exclusivity period of the agreements with the first agent had not expired when the listing contract was signed. The first agent then sued to collect the commissions owed under the agreements.  The broker was unsuccessful before the trial judge and filed an appeal.

The Appeals Court upheld the trial court’s decision and relied on common law principles of agency in reaching its decision.  Agency law governs the legal relationship between two parties in which one gives the authority to act on their behalf to the other. The party who acts for the other is called an “agent.” The party that gives the agent authority is called the “principal.”  Agency law also defines the relationship among agents, principals, and third parties who interact with them.  The Court held that under the law of agency, the seller’s death terminated the relationship and the listing contract between the seller and the real estate agent. Therefore, the first broker was not entitled to a commission. Although the Nevada courts have yet to address a similar case, it seems likely the outcome would be the same as the rationale for the court’s decision appears sound.

It should be noted that the court distinguished agency relationship agreements, such as listing agreements, from other contracts.  While the agency relationship does not survive the death of the principal there are certain situations where an agreement would survive. For example, if the Decedent had executed a Residential Purchase Agreement before her passing, the Buyer could proceed with the enforcement of the listing contract.  It should be noted that when a  Personal Representative elects to utilize the services of the same broker, a new Listing Agreement should be prepared in order to create a new agency relationship.