Termination of a Buyer Brokerage Agreement by the ClientAre You Owed A Commission?
Can a Client Terminate a Buyer Brokerage Relationship?
The GAR Brokerage Relationship Agreements do not contain any early termination clauses.
In the absence of an express early termination provision or a material breach by the broker, clients do not have the right to unilaterally terminate brokerage engagement agreements. If the client does unilaterally terminate, that client is in breach of the agreement.
Am I Owed A Commission if a Buyer Unilaterally Terminates and Purchases Within the term of the Agreement and Protected Period?
Yes, so long as the BBEA is an Exclusive BBEA and the broker is not in default. If the buyer’s obligation to pay a commission is in the agreement, the broker is owed a commission, regardless of whether the property is one that the broker identified for the buyer or not. (Exception for a non-exclusive BBA. See below.)
The Exclusive BBEA provides that the buyer’s real estate broker will seek to be paid his commission from the seller or seller’s broker pursuant to a cooperative brokerage arrangement. In the event neither of these parties pays a commission to the buyer’s broker, then the commission may be paid by the buyer if such obligation is indicated in the brokerage agreement, regardless of whether the property is one that the broker identified for the buyer or not. This provision contractually modifies the general common law rule that the broker is only entitled to a commission if the broker is the procuring cause of the sale (i.e., the broker’s efforts resulted in an uninterrupted series of events that resulted in the sale). Under Georgia law, the parties to a contract are free to agree on whatever terms and about any subject matter in which they have an interest in the absence of a violation of public policy or law. The GAR BBEA contractually makes this distinction.
Consider this recent example.
A buyer has executed an Exclusive BBEA with a broker. The buyer goes alone to an open house within the term of the agreement and tells the listing agent that she does not have a brokerage agreement with any buyer broker. The buyer purchases directly from the listing agent.
Is the buyer obligated to pay the Buyer’s Broker? Yes, the buyer is obligated to pay the amount agreed in the GAR Exclusive BBEA. The Agreement specifically states that the commission is to be paid on all property that the buyer purchases during the term of this agreement. It does not matter whether the property has been identified to the buyer by the real estate broker or not.
One of the buyer’s contractual duties listed in the Exclusive BBEA is to work exclusively with the broker and not with any other real estate broker or licensee because, if Buyer identifies, previews or sees property with another broker or fails to disclose to the seller’s broker that Buyer is working with Broker, a Commission will likely not be paid to Broker by the seller’s broker. If the seller’s broker does not pay the buyer’s broker, the buyer is responsible for the commission.
Is the Listing Agent Obligated to Share Commission with the Buyer’s Broker?
Not necessarily. The obligation of the listing broker to share commission will come down to procuring cause.
If the buyer identifies, previews or sees property with another broker or fails to disclose to the seller’s broker that Buyer is working with a buyer’s broker, a commission will likely not be paid to the broker by the seller’s broker. The buyer would then be responsible for payment of the commission to the contractual broker.
The Protection Period
The GAR Exclusive BBEA provides that the broker is entitled to a commission, if the buyer purchases or contracts to purchase, for a period of time after the termination or expiration of the brokerage agreement, a property identified or shown to the buyer by the broker or about which the broker provided information to the buyer during the brokerage agreement. While the terms “identified” and “shown” are not defined, the terms were intended to protect brokers in situations where the buyer learned of the property through the broker’s efforts. The language allowing a broker to collect a commission if the buyer purchased property based on information the broker provided to the buyer accomplishes the same goal. As such, it is not required that the broker actually show the property to the buyer, provided that the broker has taken other reasonable steps to make the buyer aware of the property.
The GAR Exclusive BBEA can reduce disputes over the procuring cause between competing brokers. The growth of buyer brokerage in Georgia in recent years has created many disputes over whether the buyer’s broker is the procuring cause of the sale and thus entitled to share in the seller’s broker’s commission. The term “procuring cause” is difficult to define but refers to the general common law principle that a broker who is unable to finalize a sale of property can still claim a commission if the broker can show that their efforts triggered a key series of events that, without significant interruption, resulted in the sale of the property.
A variety of factors influence whether a broker is the procuring cause of a sale, including whether the broker initiated the series of events leading to the sale, whether there was a break in negotiations, and the reason for any break in the negotiations. The common law doctrine of procuring cause is inapplicable when an express contract term addresses what constitutes the “procuring cause” of the sale.
The Non-Exclusive BBEA – The Critical Difference from the Exclusive BBEA.
The GAR Non-Exclusive Buyer Brokerage Engagement Agreement is similar to the GAR Exclusive Buyer Brokerage Engagement Agreement discussed in the previous section in that the broker agrees to look to the seller or seller’s broker for his commission. However, there is a critical difference between the two agreements. With the GAR Non-Exclusive Buyer Brokerage Engagement Agreement, the broker can only recover a commission from the buyer if the buyer purchases property identified to the buyer by the broker during the term of the agreement—in other words, if the broker was the procuring cause. This is in contrast to the GAR Exclusive Buyer Brokerage Engagement Agreement, under which the buyer’s broker can claim a commission for sales made during the term of the agreement whether the property was identified to the buyer by the broker or not.
Other Important BBEA Contract Provisions:
Source: Weissman, Seth. The Red Book on Real Estate Contracts in Georgia (p. 1445-1452). BookBaby. Kindle Edition.
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