NEW COURT CASE: What Happens if the Seller Dies During the Term of the Exclusive Listing Agreement
June 30, 2020 Legal Updates MAR Legal Hotline
Have you ever encountered a situation where a seller has unexpectedly passed away during the term of an exclusive listing? The Massachusetts Court of Appeals recently addressed this question for the first time.
The Case, Newton Centre Realty, Inc. v. David R. Jaffe, personal representative
Shirley Jaffee had entered into three separate Exclusive Right to Sell agreements with Newton Centre Realty for her three residential properties. During the term of the agreements, Ms. Jaffee passed away and her estate’s representative sold the properties without using the brokerage during the exclusivity period of the agreements. Newton Centre Realty then sued to collect the commissions owed under the agreements. The case addresses the question of whether the death of the seller terminates a real estate brokerage agreement.
The court relied on well-established common law principles and held that the seller’s death terminated the agency relationship between the seller and real estate agent. Therefore, the broker was not entitled to a commission in this instance.
Additionally, the court distinguished agency relationship agreements, such as listing agreements, from other contracts, noting that while the agency relationship does not survive the death of the principal there are certain situations where an agreement would survive. One key example for REALTORS® is that a contract to purchase real estate is a type of agreement that does survive the death of the principal because it includes an interest in real property.
What This Means for Realtors®
If the unfortunate situation arises where a seller passes away prior to entering into a contract to sell the home, a REALTOR® may not be entitled to a commission, even if the property sells during the period of exclusivity. A seller’s estate is not obligated to continue working with that brokerage, though may choose to do so. If that is the case, the brokerage should enter into a new Exclusive Right to Sell Listing Agreement with the estate’s personal representative before selling the property.