A recent case decided in Bristol County Superior Court emphasizes the importance of documenting in sufficient detail the specific terms of any listing agreement between brokers and sellers of commercial real estate.

In Brenner et al. v. Marchione et al., the plaintiff, a broker, entered into a listing agreement with the defendants, owners of property in Fall River. The listing agreement failed to properly describe the property that was being marketed, which was a complex development project requiring a detailed purchase-and-sale agreement. The listing agreement did state that a 6 percent commission was due if a buyer was procured.

The broker filed suit after the defendants terminated the listing agreement, alleging, among other arguments, that he was owed commissions in connection with several offers submitted for the property.

While the listing agreement was pending, a prospective buyer submitted an offer for $3 million, the list price, contingent on the buyer obtaining financing, subject to the execution of a mutually satisfactory purchase-and-sale agreement, and requiring that the sale include the completed development of the property. The defendants found the contingencies unacceptable, and rejected the offer.

The property being offered for sale was then enlarged, so that the plaintiff was marketing a larger site for a revised selling price of $5.5 million. A detailed addendum was attached to the listing agreement to reflect this change, but was not signed by either party. Shortly thereafter, a prospective purchaser offered a sum close to $5.5 million, and a draft purchase-and-sale agreement was prepared. However, the defendants determined that they would not accept less than the asking price, and the offer fell through, after which the defendants chose to terminate the listing agreement.

The court ruled for summary judgment in favor of the defendants, finding that the broker was not entitled to a commission in either case.

No Commission

In its ruling, the court cited Tristram’s Landing v. Wait, 367 Mass. 622 (1975), in which the Supreme Judicial Court held that a broker earns a commission when “(a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner; (b) the purchaser enters into a binding contract with the owner to do so; and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract.” This rule, however, may be circumvented by contrary language within an agreement between a seller and a broker.

The court found that the listing agreement in the current case did not contain all of the essential terms required for a sale.

The two offers at issue failed to comply with the limited terms of the listing agreement since both offers contained contingencies that were not provided for within the agreement, the court held. Furthermore, the court observed that “the language of the listing agreement fails to contain any language that the broker is entitled to its commission where, after finding a ready, willing and able buyer, the seller, for whatever reason, refuses to accept,” indicating that no exception to the Tristram’s Landing rule was warranted in this case.

Although the court’s holding in the case followed established law, it serves as a reminder to prospective sellers and commercial brokers that clarity and detail are essential in a listing agreement in order to avoid ambiguity and potential litigation.

Karen Bell is an associate in the real estate and finance department at Nutter McClennen & Fish, Boston. Email: kbell@nutter.com.