How to cancel a listing agreement in California

You can get out of a listing agreement in California without a fight by letting it reach its end date, by using a cancellation clause it contains, or by getting the broker to sign a written release. You can also revoke the broker's authority at any time, but then the agreement decides what that costs you, and under some forms it costs the whole commission.

So start with the paper. Business and Professions Code section 10142 requires the licensee to deliver your copy as soon as reasonably practicable after you sign, and everything below turns on its wording.

What your agreement already says about ending it

The clauses that control an exit are spread across a printed form. Find each of these before you say anything to the broker.

Then hold the end date up against the law. Under Business and Professions Code section 10176(f), the Real Estate Commissioner can discipline a licensee who claims a commission under an exclusive agreement that lacks a definite, specified date of final and complete termination. In Babcock v. Houston, a California court refused a broker recovery under an exclusive sales agreement with no such date. An exclusive listing that says "until sold," or renews with no end, puts the broker's claim to a fee on weak ground.

Withdrawing the building versus cancelling the broker

When an owner says "cancel the listing," it can mean stopping the sale while the broker stays hired, or ending the broker's contract. Under a form with a withdrawal-from-sale clause, the first can earn the broker its commission even though the building never sells.

The California Supreme Court took up that clause in Blank v. Borden, calling it "the familiar withdrawal-from-sale provision" of an exclusive right to sell. The owner there told the broker orally, with the listing still in effect, that the property was no longer for sale. The court held that the clause exacts no unlawful penalty, because it gives the owner a true choice of how to perform, and it is enforced according to its terms.

The MLS draws the same line. As CRMLS's knowledge base defines its statuses, a Withdrawn listing still has a valid listing contract in effect, with marketing and showings stopped, and it can go back to Active. Hold pauses the listing's visibility in the MLS and stops showings. Canceled means the listing agreement itself has been canceled, and a Canceled listing cannot be moved to any other status. If you ask for the building to come down and the status reads Withdrawn or Hold, your contract is still running.

Firing the broker has a rule of its own. Civil Code section 2356 ends an agent's authority when the principal revokes it, unless the authority is coupled with an interest in the property, so the power to end the agency is yours. The Court of Appeal separated that power from the right to use it without owing damages in Pacific Landmark Hotel, Ltd. v. Marriott Hotels, Inc., and in a listing, your agreement is what prices the difference.

Getting a written release

A release is the cleanest exit when the agreement has no cancellation clause, or has one you cannot meet. Civil Code section 1541 says an obligation is extinguished by a release given in writing, with or without new consideration, so the broker's signature can end what you owe without any money changing hands.

Make the release mutual, so each side lets the other go, and have it state:

• the date the listing ends, and that the broker's authority to market the building ends with it;
• whether a protection period survives, and if it does, the names of the buyers it covers and the day it runs out;
• any fee or reimbursement you agreed to pay, the amount and when it is due, or that nothing is owed;
• that the broker will change the MLS status to Canceled and take down signs, listing sites and any offering materials already sent;
• what happens to the confidentiality agreements buyers signed and the record of who asked about the building.

If the broker wants a fee to let you out, bargain over the protection period as well as the money. Its length and the names on its list decide how free your next listing will be.

What the broker can still claim afterward

A protection period is the main thing that outlives a listing. It gives the broker a commission if, after the listing ends, you sell to a buyer the broker introduced while it ran. A fair clause runs for a fixed time and covers only the buyers on a written list. Those are the protection terms to negotiate before you sign any listing. At cancellation, watch for these cases:

• A buyer who toured during the listing calls you directly once it ends. If that buyer is on the broker's list and the period is still running, a sale to them brings the fee with it.
• Your next broker brings back a buyer the first broker introduced. Unless both agreements deal with that buyer, two brokers can each claim a commission on one sale, so show the new broker the old list and have the new agreement exclude those names or cut the fee on them.
• The first agreement excluded a buyer you already knew. Have the release confirm that the exclusion stands, and have the new agreement repeat it.

What the dispute clause decides

If you and the broker cannot agree, this clause decides where the argument is heard and what it costs. Read whether it requires mediation before either side sues, what happens to a side that skips that step, and who pays attorney fees.

Arbitration needs the closest reading. Code of Civil Procedure section 1298 sets the form of a binding arbitration clause in a contract to convey real property, and it names marketing contracts among them. The clause has to be titled "ARBITRATION OF DISPUTES," and just above the space where the parties show their assent, the statute requires a notice that initialling it gives up a court or jury trial, along with discovery and appeal unless the clause keeps them. Look at whether you initialled it when you signed.

Take this clause, and any letter you plan to send the broker, to a real estate attorney first, because a notice worded as a breach can start the dispute it was meant to avoid. Shaya can tell you what your next listing agreement should say about the first one. Whether the first one lets you go is a legal question, and he is not a lawyer.

Getting out, in order

1. Find your signed copy and read the term, any extension, the cancellation and withdrawal clauses, the protection period and the dispute clause.
2. Say nothing about taking the building off the market until you know what the withdrawal clause says.
3. If the end date is near, weigh waiting it out against leaving early, since an expired listing leaves only the protection period to settle.
4. Write down what the marketing plan promised and what was done, with dates, as your case for a release.
5. Ask the broker in writing to cancel under the clause or to sign a mutual release, and for the list of buyers it claims.
6. Once the release is signed, confirm that the MLS status reads Canceled.
7. Give the next broker the release and the buyer list before you sign again.