Our Listing Agreement is nearing the contract expiry date, and we do not plan to extend the agreement. What should we know about the holdover clause within our agreement?

Hello and thank you for your question.

You did not share how, or if, you intend to continue with the sale of your property, so, I’ll explain how the holdover clause may impact you after the current listing agreement expires.

For explanation purposes, let’s say your listing agreement includes a 30-day holdover clause. This means that even though your listing agreement has expired, under certain conditions, you may be obligated to pay the listing brokerage commission if you sell your home during the 30-day holdover period.

Let’s say your house sells within the 30-day holdover period.

If the buyer viewed, enquired, or was otherwise introduced to your property by or through your brokerage, whether through your listing representative, or any other salesperson at their brokerage, at any point during your listing agreement, you may have to pay the listing brokerage a commission. This may also be true if the buyer attended an open house or followed up as a result of promotional materials produced by the listing brokerage.

The reason for this possible commission entitlement is that the sale resulted, in some part, from the marketing efforts of the listing brokerage. Since both you and the buyer benefited from the services provided by the listing brokerage, the brokerage is likely to seek compensation for aiding in the sale.

Now for another scenario, let’s say that after your listing agreement expired, you decide to try and sell the property yourself or list your property with another brokerage. If a buyer were to purchase your property – having never expressed interest in buying the property or having visited any open houses hosted by your former listing brokerage, the commission holdover would not likely apply. There are exceptions, so it’s important to carefully review the terms of a holdover clause (and all other clauses in the agreement) before you sign. Be aware that you are free to negotiate the terms of a holdover clause and if you have any questions, it’s a good idea to consult a real estate lawyer. Remember, this is a contract and you are bound by the terms of contracts you enter.

As always, I recommend that buyers and sellers hire a registered real estate professional to assist with any property transaction and a real estate lawyer to provide legal counsel in the process. The lawyer should review your listing agreement before you sign it.

If you have a question for Joe about the home buying or selling process, please email information@reco.on.ca.

Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.

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