Broker A has a valid Buyer Brokerage Agreement with an individual Buyer.
Broker A and the Buyer view a property together with Broker B,
representing the Seller. The Buyer submits an offer on the property, but
withdraws it before the offer is accepted.
Later, while the Buyer Brokerage Agreement is still in effect, Buyer crates
an LLC with a partner and submits a 2nd offer to purchase the same
property. The Buyer’s Broker is not included in the new transaction. The
transaction closes with the new LLC, of which the Buyer is a Member. The
Buyer is at the closing and signs the security deed.
Buyer as a Legal Entity and Commission Owed to Buyer’s Broker
The Buyer Brokerage Agreement at paragraph 7(f) includes the Buyer as
"Any legal entity in which buyer or any member of Buyer's immediate family
owns or controls, directly or indirectly, more than ten percent (10%) of the
shares or interest." Where the buyer changes its legal entity to another
either to avoid its obligation or innocently, the Buyer is still obligated on a
Buyer Brokerage Agreement that is still in effect.
No, the Buyer cannot avoid its obligation to the Buyer’s Broker by changing
its legal entity so long as the Buyer owns more than 10%. And yes, the
Buyer continues to owe a commission to the Buyer’s Agent. It may take
legal action to recover the commission, but it is owed.
The Listing Agent’s Obligations
REALTORS® have an affirmative obligation to ask prospects whether they
are a party to any exclusive representation agreement and may not
knowingly provide substantive services concerning a prospective
transaction to prospects who are parties to exclusive representation
agreements. In this case, the Seller’s agent was fully aware of the original
buyer, having shown the property to the buyer previously, along with the
Buyer’s agent. Even if the Seller’s agent thought the Buyer Brokerage has
expired or was terminated, the listing agent should have investigated. Had
he called the Buyer’s agent he would have learned that the Buyer
Brokerage was still in effect. He violated both Georgia License Law and
the REALTORS® Code of Ethics.
(GA Code § 43-40-25 (14) and § 43-40-25 (26), REALTORS® Code of
Ethics Standard of Practice 16-9)
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