A Written Agreement Is Necessary To Establish A Client RelationshipDuty Owed to a Client vs. a Customer

Situation: 

• A broker represents a seller pursuant to an exclusive listing agreement. However, the seller wrote a letter terminating the listing agreement in order “to step back and re-examine future plans for the property.”
  
• The terminated listing agent received an offer for the property one month after termination of the listing, presented it to the seller and answered the seller’s questions regarding the offer. The seller accepted the offer.
  
• The contract provided for the payment of an 8% commission to the broker.
  
• The final price accepted by the seller was lower than the seller expected. The seller claimed the broker was negligent and that because the broker answered the seller’s questions about the contract, it was evidence that the listing agreement had been renewed and that the seller’s status was thus that of a client. In addition, the seller argued that the payment of a commission established a client relationship.
  
• The brokerage firm argued that the seller was a customer rather than a client and as such owed no special duties to the seller. 
  

Questions:

• Was the seller a client of the broker, owing a duty to the seller for which he could be found negligent?
  
• Is a commission owed to the broker from the seller?
  

Findings:
These facts are an actual Georgia case decided in 2022, Starks v. Carver, 360 Ga. App. 366, 861 S.E.2d 193 (2021). The Georgia Court of Appeals found the following:

• BRRETA is clear that one’s status as a client is dependent upon there being a written agreement to that effect between the broker and the client. The Court found that the listing agreement terminated without either party entering into an extension or another written agreement. Thus, Carver’s status was a matter of law, no longer that of a client. As stated by the Court, to consider the broker to be a client, “based solely on the parties’ actions would run counter to the explicit language of the statute.”
  
• The payment of a commission does not determine whether a brokerage relationship has been created under the plain language of BRRETA. 
  

According to Seth Weissman, General Counsel of Georgia Association of Realtors, this case helps answer the question many brokers have asked about whether a broker can be found to be a de facto client of a party through the broker’s actions, even when there is no written agreement establishing a client relationship. The answer to that question, based on this decision by the Georgia Court of Appeals, appears to be no. 




Source: Georgia REALTOR® Magazine. Judicial Update 2022 Seth Weissman, author.
https://garealtor.com/wp-content/uploads/Judicial-Update-2022.pdf

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