Best of the Hotline - Marketing Equitable Interests

November 2009

By James L. Goldsmith, Esq.

Facts: A buyer and seller have entered into an agreement of sale. Before settlement, the buyer seeks to "sell" his equitable interest in the property to any qualified buyer. This buyer-turned-seller approaches you and asks that you list the property for sale. He wants you to place the property's availability in the multi-list, advertise and do all of the things you would ordinarily do as listing agent.

Q: May you?

A: Yes. There is nothing inherently wrong with marketing an equitable interest in real property. However, there are several potential impediments. The Rules and Regulations of the Real Estate Commission require that you obtain an owner's permission to advertise the property. Your client has an equitable interest by virtue of the signed agreement of sale, but is not currently the title owner. Will the Commission apply its regulation to require you to have permission from both the equitable and the title owner? There are arguments to be made on each side of this question. The better practice, therefore, is to obtain permission from both the seller and the buyer-turned-seller.

Other concerns involve the possibility that the original transaction may fail for one reason or another. Is the original agreement contingent on financing and does the buyer-turned-seller have an obligation to submit a commitment on or before a certain date? Failures in this regard bring obvious consequences.

Clearly it is advisable to obtain the advice of counsel and certainly the permission of your broker before taking such a listing. Keep in mind that liability dramatically increases when you take on a practice that is well outside the normal everyday practices you are familiar with. Be advised!

Mr. Goldsmith is an attorney with Caldwell & Kearns and serves as general counsel to PAR. A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees and representing and defending real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. He routinely counsels employers on employee relations issues as one of the voices of the PAR Legal Hotline. He may be reached at realcompliance.com.