In Pennsylvania, property owners, commercial tenants, and real estate brokers all should know about the Real Estate Licensing and Registration Act, 63 P.S. §§ 455.101, et seq. (the "RELRA"). Why? Because a real estate broker generally cannot recover any commission absent a signed agreement that complies with the RELRA.
Recently, Pennsylvania courts have seen real estate brokers suing property owners and others for commissions based on oral agreements or agreements that do not contain all of the terms required by the RELRA. The courts have refused to allow the brokers to recover any commissions in these circumstances. The failure to comply with the RELRA has been outcome determinative in and of itself.
How do you comply with the RELRA? Like many other things, by being careful. The RELRA specifies what must be in the contract. Specifically, all contracts subject to the RELRA must be written and contain the following information:
(1) Notification that a Real Estate Recovery Fund exists to reimburse a person who has obtained a final civil judgment against a Commonwealth real estate licensee owing to fraud, misrepresentation or deceit in a real estate transaction and who has been unable to collect the judgment after exhausting legal and equitable remedies;
(2) Notification that payments of money received by the broker on account of a sale -- regardless of the form of payment and the person designated as payee (if payment is made by an instrument) -- shall be held by the broker in an escrow account pending consummation of the sale or a prior termination thereof;
(3) Notification that the broker’s commission and the duration of the agreement have been determined as a result of negotiations between the broker, or a licensee employed by the broker, and the seller/landlord or buyer/tenant;
(4) A description of the services to be provided and the fees to be charged;
(5) Notification about the possibility that the broker or any licensee employed by the broker may provide services to more than one party in a single transaction, and an explanation of the duties owed to the other party and the fees which the broker may receive for those services;
(6) Notification of the licensee’s continuing duty to disclose in a reasonably practicable period of time any conflict of interest;
(7) In an agreement between a broker and a seller/landlord, a statement regarding cooperation with subagents and buyers agents, a disclosure that a buyer agent, even if compensated by the listing broker or seller/landlord will represent the interests of the buyer/tenant and a disclosure of any potential for the broker to act as a dual agent; and
(8) In an agreement between a broker and a buyer/tenant, an explanation that the broker may be compensated based upon a percentage of the purchase price, the broker’s policies regarding cooperation with listing brokers willing to pay buyer’s brokers, a disclosure that the broker, even if compensated by the listing broker or seller/landlord will represent the interests of the buyer/tenant and a disclosure of any potential for the broker to act as a dual agent.
Additionally, any "exclusive" listing agreement with a broker, including an exclusive right-to-lease, may be unenforceable if it contains a listing period exceeding one year, an automatic renewal clause, or requires a cancellation notice to terminate the agreement.
The RELRA is a powerful piece of legislation. Any business owning or leasing real estate should know about it. Brokers must comply with it, or they run the risk of not getting paid.