IN TODAY’S COMPETITIVE MARKET, it’s not surprising that consumers are comparison-shopping for better value and superior customer service – including their choice of real estate agent. Here are some common scenarios we see on the Legal Hotline involving client-initiated agency changes:

Q. BROKER B RECEIVED A CALL FROM SELLERS WHO ARE CURRENTLY IN AN EXCLUSIVE AGENCY AGREEMENT WITH BROKER A. SELLERS ARE UNHAPPY WITH THE SERVICE THEY ARE RECEIVING FROM BROKER A AND WOULD LIKE TO HIRE BROKER B. WHAT DOES THE CODE OF ETHICS HAVE TO SAY ABOUT THIS?

Article 16 of the Code of Ethics states that “Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors® have with clients.” Prior to engaging any new client, Standard of Practice 16-9 requires “Realtors® … to make reasonable efforts to determine whether the prospect is subject to a current, valid exclusive agreement ….”

Standard of Practice 16-6 adds that “when Realtors® are contacted by the client of another Realtor® regarding the creation of an exclusive relationship to provide the same type of service, and Realtors® have not directly or indirectly initiated such discussions, they may discuss the terms upon which they might enter into a future agreement or, alternatively, may enter into an agreement which becomes effective upon expiration of any existing exclusive agreement.”

 Bottom line: so long as the client can reasonably demonstrate that the agreement has expired or been terminated, Broker B is free to enter into a new exclusive representation agreement with Sellers.

Q. IF BROKER B HAS KNOWLEDGE THAT AN EXCLUSIVE AGENCY AGREEMENT STILL EXISTS, CAN BROKER B DO ANYTHING TO CONFIRM THE TERMINATION DATE?

One option would be to contact Broker A directly. If Broker A is unresponsive, Standard of Practice 16-4 states that “… if the listing broker, when asked by the Realtor®, refuses to disclose the expiration date and nature of such listing, i.e. an exclusive right to sell, an exclusive agency, open listing, or other form of contractual agreement between the listing broker and the client, the Realtor® may contact the owner to secure such information and may discuss the terms upon which the Realtor® might take a future listing or, alternatively, may take a listing to become effective upon expiration of any existing exclusive listing.”

Standard of Practice 16-4 is not an open license to contact represented sellers. In order to ascertain the “expiration date and nature” of the listing, Broker B must first inquire of Broker A.

Q. WHAT IF BROKER A IS UNREACHABLE AND SELLERS CANNOT LOCATE A COPY OF THE AGENCY AGREEMENT?

All NVAR brokerage agreements are exclusive agency agreements which may be terminated by the principal at any time by written notice. Depending on the terms of the agreement, the principal is still responsible for the “Broker’s Fee” for transactions occurring post-termination unless the client executes an agreement with another broker (See “Broker Compensation” paragraphs of the various NVAR Brokerage Agreements).

If the agreement calls for an early termination fee, then this fee must be paid before the agreement may be terminated without cause.

Q. IF SELLERS HAVE PROVIDED WRITTEN NOTICE OF TERMINATION TO BROKER A, IS A WRITTEN RELEASE REQUIRED?

While a written release is ideal, it is not necessarily required in order to terminate the exclusive agency. So long as the client has provided written notice of the termination to Broker A via the preferred delivery method established in the agreement and paid any early termination fees, the exclusive fees representation is over. Sellers remain liable for the “Broker’s Fee” as this payment obligation survives agency termination.

Q. WHAT IS BROKER B ALLOWED TO SAY TO SELLERS WHEN THEY ASK HOW TO TERMINATE THE AGREEMENT? CAN BROKER B ADVISE THEM ON HOW TO PROPERLY TERMINATE THE AGREEMENT?

No. Broker B should not counsel Sellers on how to terminate an exclusive agency agreement.

The mandate of Article 16 is broad – “Realtors® shall not engage in any practice or take any action inconsistent with exclusive representation or exclusive brokerage relationship agreements that other Realtors® have with clients.” By counseling Sellers on termination methods, Broker B is clearly taking an action “inconsistent” with Broker A’s exclusive representation, and arguably engaging in the unauthorized practice of law in violation of Article 13 of the Code of Ethics and Virginia law. When permitted by the Code of Ethics, Broker B’s inquiries should be limited to what’s reasonably necessary to ascertain “whether the prospect is subject to a current, valid exclusive agreement” (Standard of Practice 16-9) and “the expiration date and nature of such listing” (Standard of Practice 16-4).



Daniel B. Harris, Esq. is the NVAR staff attorney.