It is very common, and Ruminations believes appropriate, for a real estate broker to bargain for a commission to be paid if a property is sold or leased even after its brokerage agreement expires. Basically, most brokerage agreements have some language providing for such payment if the broker had something to do with bringing forth the buyer or tenant. Those provisions have to deal with three major principles

One is “how does one know that the buyer or tenant was introduced to the property by the broker during the term of the agreement?” Another is “what does ‘introduced’ mean in this context?” The last is, “how long after a brokerage agreement expires will this protection for the broker continue?”

As to the “how does one know” question, we think the broker should furnish a list of the prospects introduced to the property. And, “prospects” should include affiliates of whatever person or entity had been introduced. The broker should be preparing its list throughout the term of the brokerage agreement and should deliver the final list at the end of the agreement’s term or within a day or two later. As to what is meant by “affiliate,” we think any normal definition would be fine so long as it captures real affiliates, not just people with the same first name. [Read more…]