Oral Extension of Listing Agreement. The Superior Court says do not expect to be paid.

The Pennsylvania Superior Court has addressed the issue of whether a real estate broker was entitled to receive a commission under the terms of an expired written listing agreement that had been extended by oral agreement. The broker and owner had originally entered into a 120-day exclusive listing agreement for the leasing of commercial space. When the agreement expired, there were no ongoing negotiations with any prospective tenants. At the time of expiration, however, the broker and owner entered into an oral agreement to extend the listing for an unspecified period of time.

After reaching the oral extension to the listing agreement, the broker continued to show the property to prospective tenants without objection from the owner. Eventually it was showed to a party who negotiated and ultimately leased the property. When payment of the broker’s commission was not forthcoming, the broker sued for his commission.

The trial court granted the owner’s motion for summary judgment ruling that under the Real Estate Licensing and Registration Act (“RELRA”), a broker is not entitled to recover a commission in the absence of a signed, written agreement or an oral agreement (open) accompanied by a written memorandum setting forth the terms. The court noted that the written listing agreement had expired prior to the date that the broker showed the space to the tenant and while the court found that an oral agreement had indeed been reached, the failure to have that agreement writing violated RELRA and the broker was not entitled to payment.

The Superior Court agreed, taking note that RELRA is clear in its pronouncement that a licensee is not entitled to recover a fee in the absence of a signed agreement

A licensee may not perform a service for a consumer of real estate services for a fee, commission or other valuable consideration paid by or on behalf of the consumer unless the nature of the service and the fee to be charged are set forth in a written agreement between the broker and the consumer that is signed by the consumer. This paragraph shall not prohibit a licensee from performing services before an agreement is signed, but the licensee is not entitled to recover a fee, commission or other valuable consideration in the absence of such a signed agreement. RELRA, § 606.1(b)(1).

Despite having proved the existence of an oral agreement and despite having placed the original terms of listing set forth in writing, and despite further having produced a tenant, the broker could not collect a commission! I think the moral of this story is somewhat evident!

Copyright © James L. Goldsmith, Esquire, CALDWELL & KEARNS, P.C., 2011

All Rights Reserved

Jim 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. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends REALTORS® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. He may be reached at www.realcompliance.com.