Page 8 - Minnesota Vol 8 No 6
P. 8

The Overlooked Document: Listing Agreements in Commercial Real Estate Transactions
All too o en, clients engage an attorney for the  rst time in a commercial real estate trans- action when they desire to make an o er to purchase property, or a er having received an o er to sell prop- erty. Yet, there is an important step in the process that is o en overlooked – the review and negotiation of the listing agreement. Regardless as to whether an attorney is represent- ing the owner of the real property, the purchaser of the property, or the broker/salesperson who will be list- ing the real property for sale, clients need to be advised of the signi cant rights and obligations created and set forth in the listing agreement. List- ing agreements are not boilerplate agreements and can be negotiated in many ways.  ey must contain statu- tory requirements to be enforceable. Nonetheless, clients o en sign the listing agreement without any review or negotiation. Keep in mind that the owners of real estate property are not the only party to bene t from a thorough review and understanding of listing agreement; commercial real estate brokers and salespersons will bene t as well. Although the empha- sis in this article is on representing the seller or listing broker, counsel should be aware that many of the concepts discussed herein may also
apply to buyer/broker agreement.  e legal consequences related to listing agreements have been the subject of much litigation in Min- nesota. As a result, an understand- ing of the intricacies associated with listing agreements is essential to rep- resenting a client comprehensively in a commercial real estate transac- tion. At the outset, therefore, there are several issues the attorney dra - ing or reviewing a listing agreement should bear in mind. For example, the attorney should understand: (i) what type of listing agreement is ap- propriate for the subject transaction; (ii) what is the appropriate length or term of the listing agreement; (iii) which events or conditions entitle the broker to compensation; (iv) what is the length of the override period; and (v) what circumstances entitle either party to terminate the listing agreement. In addition, a broker (and broker’s counsel) must be concerned about and cognizant of language in a purchase agreement which gov- erns payment of the commissions to brokers. Such language must be con- sistent with the terms of the listing
 ere are at least three types of list-
ing agreements that can be used in commercial real estate transactions.  e  rst, and most common form, is the Exclusive Right to Sell Agree- ment. In this type of listing agree- ment, the listing broker is entitled to receive a commission even if the owner sells the property without the
listing broker being involved.  e Exclusive Right to Sell Agreement protects the broker’s commission by providing that the seller must pay the broker even if the property is sold through the e orts of the seller or the e orts of another broker without the participation of the listing broker. Gudim Realty, Inc. v. Hughes, 284 Minn. 39, 42, 169 N.W.2d 216, 218 (Minn. 1969); Dostal v. Fore-M, LLC, 2006 WL 1320501 at *2 (Minn. Ct. App. 2006).
 e second type of listing agree- ment is the Net Listing Agreement. In this type of listing agreement, a broker’s commission is the amount, if any, by which the actual purchase price for the property exceeds the price speci ed in the listing agree- ment.  e Net Listing Agreement implies that the broker is entitled to the commission when the sale is con- summated, regardless of whether the buyer pays the full purchase price to the seller. Stromberg v. Smith, 423 N.W.2d 107, 109 (Minn. Ct. App. 1988).  is type of listing agree- ment is not commonly used as there are potential con icts of interest be- tween the seller and the broker. For example, if the fair market value of the property is included in the listing agreement, the broker does not have an incentive to accept an o er in this amount since the broker will not re- ceive any commission.
 e third type of listing agree- ment is known as the Open Listing Agreement or Non-Exclusive List-
Mitchel Chargo and Marvin Liszt are shareholders at Bernick Lifson, PA, a full-service business law  rm in Minneapolis. Mitch and Marvin have over 65 years of combined experience in commercial real estate law. They represent clients in all aspects of com- mercial real estate transactions, with signi cant expertise in the areas of  nancing, ac- quisition, development, leasing, sale transactions, and property tax appeals. Their clients include lenders, borrowers, owners, purchasers, developers, property managers, lessors, and lessees of commercial properties.

   6   7   8   9   10