But some may wonder why the arbitration clause is removed from the registration agreement? Finally, it is optional. Yes, it is optional; However, keep in mind that the vast majority of listing agreements are negotiated between sellers and individual agents who are representatives of the broker. Few agents have the slightest idea of their broker`s position on arbitration (and shame on the broker for it). Even less, even if they knew that the broker does not want to engage in arbitration, would feel comfortable telling their client that the broker does not want to sign the arbitration clause. It is best to remove it and leave the conversation for another day. Or not a day at all. I had the opportunity to represent a broker who had entered into a registration agreement with the owner of a large commercial property. From my client`s perspective, the agreement required the landlord to pay a commission for each lease entered into during the term of the contract, as well as for each subsequent lease with the same tenant for the same property. A few years after the broker received a commission, the broker learned that the tenant had entered into another lease that he believed fell under the terms of the registration agreement. The broker then charged the landlord a commission for the new lease. After the landlord refused to pay the bill on the grounds that the registration agreement did not require commissions for future leases, the broker filed a lawsuit for breach of contract. With perhaps hundreds of thousands of dollars at stake, the issue has been actively negotiated.
Two years after the start of the dispute, the parties wisely agreed to reach an agreement, thus avoiding the uncertainty of a trial and the possibility of an appeal. In my opinion, the issue could have been resolved much more quickly – and with less legal fees – if the registration agreement had included an arbitration clause. That provision could also have provided that the lawyers` fees of the unsuccessful party were to be borne by the unsuccessful party. Another common question is whether a real estate agent® (often a broker cooperating with a claim that is arguably an arbitral one) can thwart the process by remaining silent for one hundred and eighty (180) days and then suing another real estate agent (often the listing broker). As noted above, requests for arbitration must be filed within one hundred and eighty (180) days of the closing of the transaction, if any, or within one hundred and eighty (180) days after the facts constituting the arbitral case could have been known in the exercise of due diligence, whichever is later. Real estate agents® cannot reasonably be expected to seek arbitration if they have no reason to know that a dispute with another broker or business exists. In these circumstances, without prior knowledge of a dispute, a listing broker would have one hundred and eighty (180) days from receipt of the notice of claim to initiate arbitration with the other broker. Depending on the type of claim claimed, a listing broker may be subject to mediation and arbitration clauses for all claims against that broker, provided that one of the claims relates to the obligation to pay damages. If this were the case, this listing broker would be faced with dispute resolution through mediation and binding arbitration, without the selling broker being obliged to participate in any of these proceedings. In our example, let`s say the listing broker is broker A, the cooperating broker that has been paid is broker B, and the cooperating broker that has not been paid but claims to be the cause of the purchase of the sale is broker C. It is not uncommon for arbitration claims from a cooperating broker to designate another cooperating broker as the defendant.
This is based on the assumption that the funds paid by the listing broker to Broker B are unique and that the listing broker`s obligation to compensate any other broker expires upon payment to Broker B, regardless of whether Broker B was the buyer of the sale or not. However, the mere fact that the listing broker paid broker B in error does not diminish or nullify the listing broker`s obligation to indemnify broker C if a hearing panel determines that broker C was in fact the purchaser of the sale. (Revised 11/96) My second example concerns a dispute with a smaller but still substantial commission at stake – about $20,000. In this case, after the broker brought a commercial tenant to the landlord and the lease was signed, the landlord claimed that he could not afford to pay the full commission. .
