Plain Language

Plain English in ResidentialReal-Estate Listing Contracts

By George H. Hathaway

A residential real-estate listing con-tract is a contract between theowners of a house, who promise

to pay a real-estate agent a commissionfor selling the house, and a real-estateagent, who promises to use his or herbest efforts to sell the house. All of thelisting contracts now used in Michiganare written in legalese. This is unnec-essary because these contracts are not"too complicated for plain English,"nor is the legalese required because of"case precedent," or "statute," or "pre-cision." All of these contracts shouldbe and can be written in plain English.

Pieces of the PuzzleMore than 99 percent of the listing

contracts now written in Michigan arewritten on printed forms in which theparties fill in the blanks. Each real-estate formbook contains one or moreof these forms. But many different list-ing contract forms are used in Michi-gan. And each different form is simplyone piece of a gigantic jigsaw puzzle.Therefore, to get a good overall view oflisting contracts, ifs helpful to find outhow many total listing contracts arenormally written in Michigan each year,

"Plain Language" is a regular feature of theMichigan Bar Journal, edited by JosephKimble for the State Bar Plain English Com-mittee. Assistant editor is George H. Hathaway.Through this column the Committee hopes topromote the use of plain English in the law.Want to contribute a plain English article?Contact Prof. Kimble at Thomas Cooley LawSchool, P.O. Box 13038, Lansing, MI 48901.

and how many different forms are usedfor these contracts.

Number of ListingContracts Written

Michigan currently has about 9.1million people and about 2.1 millionowner-occupied single-housing units(homes).' An estimated 100,000 ofthese homes are sold each year. Someof these homes are listed but not sold.And other homes are sold by the ownerwithout a listing contract. For simplic-ity we will assume that these two itemscancel each other out, and therefore es-timate that about 100,000 listing con-tracts are written in Michigan each year.

Number of DifferentListing-Contract Forms

All real-estate agents in Michiganmust be licensed with the MichiganDepartment of Licensing and Regula-tion under the Licensing Act, MCL339.2501 et seq.; MSA 18.425(2501)et seq. The term real-estate "agent' abroad general term usually meaninganyone who buys and sells real estatefor a fee, is not used in the Act. In-stead, the Act uses the following threeterms: "Broker"-an individual or cor-poration that buys and sells real estatefor a fee; "associate broker"-the prin-cipal officers of a broker corporation;and "salesperson"-a person employedby a broker. The Department presentlylicenses 10,000 active brokers, 7,000active associate brokers, and 31,000active salespersons. If we assume thathalf the 10,000 brokers are individuals,there are 43,000 licensed, active real-estate agents in Michigan. About 22,000of these agents belong to the MichiganAssociation of Realtors (MAR). Only

members of MAR can refer to them-selves by the registered trademarkterm "REALTOR" (pronounced real-tor, not real-a-tor). They representabout 3,000 real-estate companies 2 andare geographically grouped into 51 lo-cal boards (12 large boards with from500 to 2,000 members each, 17 me-dium size boards with from 200 to 500members each, and 22 small boardswith from 30 to 200 members each).Little is known about the 21,000 li-censed, active real-estate agents whoare not members of MAR. They arelicensed but are probably not work-ing full-time in the residential home-sales field. Therefore, it will be as-sumed that non-MAR realtors accountfor less than 1 percent of the homesales in Michigan.3

Within most of the 51 local MARboards, there is an entity known as aMultiple Listing Service (MLS), whichlists all the homes for sale within theboard. Each MLS is organized and op-erated (either directly or indirectly) bythe local board. Each MLS has its ownlisting-contract form. All the real-estateagents in each local board use the list-ing-contract form of the MLS in theirlocal area. But the MLSs in some of thesmall-board areas do not have a listing-contract form. In these boards eachreal-estate company has its own dif-ferent listing-contract form. Therefore,in actual practice, there are about 100different listing-contract forms nowused in Michigan.

Analysis of Listing-Contract FormsEach of these 100 listing-contract

forms is different from all the oth-ers. They have many titles, such asListing Contract, Listing Agreement,Sales Agency Contract, Exclusive Sales

MICHIGAN BAR JOURNAL DECEMBER 1991MICHIGAN BAR JOURNAL DECEMBER 1991

PLAIN LANGUAGE

Agency Contract, Exclusive Right ToSell Contract, and so on.4 Each of thesecontract forms are on one page. Theyusually cover many of the same topics.But the words used in each of theforms are different. See Figure 1 for anexample comparison of the commis-sion clauses in the listing contracts ofthe 12 large boards in Michigan.

Case Precedentsfor Listing Contracts

Many case precedents for listingcontracts are referenced and discussedin the Michigan legal literature.5 In allthis literature, one thing stands out-the literature discusses substantiveitems that should be covered in a list-ing contract (e.g., a statement of theamount of commission, when it will beconsidered as having been earned, andwhen it will be paid) but does notdiscuss specific words that should beused.6 The reason for this is that thereis case precedent for substantive itemsthat should be covered in a listingcontract, but there is no case prece-dent for specific words that must beused for certainty in interpreting a list-ing contract.

"Brokerage listing contracts are notprepared with an eye opened wideenough to precedent and authority, asthe areas of dispute in the brokeragecontract are areas of continued litiga-tion, with similar fact situations andsimilar contracts yielding antagonisticholdings-indicating a sufficient lackof specificity and enough ambiguity torender contemporary agreements opento a variety of interpretations. ' 7 There-fore, case precedent is not a valid ra-tionale for writing a listing contractin legalese.

Furthermore, the topics that are cov-ered in a listing contract are not com-plicated. Therefore, "too complicatedfor plain English" is also not a validrationale for writing a listing contractin legalese.

Finally, the true terms of art such as"marketable title" and "ready, willingand able" buyer are precise and usefulin writing these contracts, but legalesesuch as "herein" "therein," "hereby"and "hereof" is unnecessary.

Statutory RequirementsThe Licensing Act, MCL 339.2515;

MSA 18.425(2515), requires that "[a]listing agreement entered into betweenthe broker and seller or lessor of prop-erty shall contain language that dis-crimination because of religion, race,color, national origin, age, sex, or mar-ital status on the part of the real-estatebroker, real-estate salesperson, seller,or lessor is prohibited." Note that thestatute requires only that the listingcontract "shall contain language." The

statute does not require that the lan-guage be stated in an exact way, inan exact order, in an exact sentence.Furthermore, the language itself-dis-crimination because of religion, race,etc.-is in plain English. Therefore, thestatute does not require legalese.

MAR Real-Estate FormsThe 12 large- and 17 medium-size

local boards of REALTORS within MAR

(and the respective MLS within eachof these boards) are all big enough todevelop and print their own forms.However, the 22 small boards are not.Therefore, MAR develops and printsreal-estate forms for voluntary use bythe small boards. But it is important torealize that the 22 small boards makeup only 14 percent of the MAR mem-bership. Therefore, any MAR form hasa maximum use of only 14 percentof the total membership. Furthermore,since this use is voluntary, the total useof any MAR form is usually less than10 percent.

MAR Listing-Contract Forms

One of the forms that MAR providesfor the small boards is a listing-contractform (Exclusive Sales Agency Contract,Form B, revised 1986), which is usedby about 5 percent of the MAR mem-bership. This form, like all the otherboard MLS and REALTOR forms, is

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PLAIN LANGUAGE

written in legalese. However, in 1989the MAR Standard Forms Committee,assisted by the Plain English Commit-tee of the State Bar of Michigan, devel-oped a plain-English listing-contractform (Exclusive Right To Sell Contract,

Form G). See Figure 2 for a compar-ison of the commission clauses in the1986 MAR Form B and the 1989 MARPlain English Form G. None of thesmall-board MLSs or real-estate com-panies use this new plain-English form.

But the form proves that a listingcontract can be written in plain Eng-lish. And whether anyone uses this par-ticular listing contract or not, there isnow no practical reason (too complex,case precedent, statute, precision, orcan't be done) why each of the 100 dif-ferent legalese versions of listing con-tracts now used in Michigan cannot bewritten in plain English.

If the rationale is that it takes alot of time to develop a plain-Englishform-use the plain-English form al-ready developed by MAR. If the ration-ale is that there are substantive ob-jections to the MAR form-modify theMAR form and then use that printedmodified form. And if the rationale isthat there are objections to modifyingthe MAR form-eliminate the legalesein the listing-contract form that youare presently using.

ConclusionThe State Bar of Michigan has al-

ways supported the passage of a pro-posed state plain-English bill. However,MAR opposes a bill "on the groundsthat the delicacy and precision of cer-tain terms expressed in a certain orderspell out definitely what is required ofboth parties to a contract."8 Yet noth-ing could be further from the truth ina listing contract. Not only is there nocase precedent for "certain terms ina certain order" in a listing contract,but no two listing contracts in Mich-igan are expressed in the same "cer-tain terms" in the same "certain order."

The sample language used in thecommission clauses of the seven dif-ferent listing contracts used by the 12large boards in Michigan (which rep-resent 65 percent of MAR members)illustrate this point. It may be true thatthe words used in these seven contractsare all about the same. But "about the

George H. Hathaway is a senior real estate at-torney in the Detroit Edison legal departmentand the chair of the Plain English Committeeof the State Bar of Michigan.

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DECEMBER 19911Vll%_rnlUtAF DtMI' JUUKIMAL

PLAIN LANGUAGE

same" is as close to "delicacy and pre-cision of certain terms expressed ina certain order" as Rochester's ownMadonna is to The Madonna.

Sooner or later a state plain-Englishbill will be passed. When that hap-pens, any real-estate agent who stilluses a residential real-estate listing-contract form written in legalese mayrisk paying a fine or losing a com-mission because of the legalese in theform. Therefore, the smart, sensibleplan is to start to use plain-English list-ing contracts now. U

Footnotes1. 1980 U.S. Census estimate.2. MAR does not keep records concerning the

number of real-estate companies that aremembers of MAR. The 3,000 number isMARs estimate.

3. This is a guess because nobody seems toknow anything about non-MAR real-estateagents or companies.

4. The words "contract" and "agreemenC arelegally equivalent. Therefore, some peoplecall the document a listing "contract." Oth-ers call it a listing "agreement." But "con-tract" is a better choice for three reasons.First, the general public recognizes theword contract as a legally binding docu-ment. Therefore, whenever a person signssomething called a "contract," they usuallytake more time to consider it than theynormally would. And if a dispute arises,they should normally be held accountablefor knowing that the document was meantto be legally binding. However, the word"agreement:' although just as legally bindingas the word "contract," sounds more infor-mal and less binding than the word "con-tract." Thus, a person is more apt to signsuch a document and, if a dispute arises,more apt to argue that they were misled intobelieving that the document was somethingless binding than a contract. Second, theword "contract" is one letter, and one syl-lable, shorter than the word "agreement."Finally, for uniformity and simplicity, theone term "contract" is better than the inter-changeable use of two terms.

Theoretically, there are three possibletypes of listing contracts. 1) Open listingcontract, in which any broker, or the sellersthemselves, may find a buyer for the house.The broker who finds the buyer gets thecommission. If the owners find the buyerthemselves, no broker gets the commission.2) Exclusive agency listing contract, in whichonly one broker, or the owners, may find abuyer. The broker gets the commission if he

or she or any other broker finds the buyer.The broker doesn't get a commission if theowners find the buyer. 3) Exclusive right tosell listing contract, in which the one brokergets the commission if the house is soldregardless of whether any other broker oreven the owners themselves find the buyer.As in any legal document, it is the words inthe document and not the title of the doc-ument that determines the type, or legal ef-fect, of the document. And about 99 percentof the residential real-estate listing con-tracts in Michigan are the exclusive-right-to-sell type of listing contracts.

5. Cameron, Michigan Real Estate Forms (As-pen, 1988); Cameron, Michigan Real Prop-erty Law (ICLE, 1985); Deems and Tervo,Michigan Real Estate Sales Transactions(ICLE, 1983); Jossman, Michigan Real Es-tate Formbook (ICLE, 1982); Comment,The Real Estate Listing Contract in Michigan:An Attempt at Contract Certainty, 47 J UrbanL 523 (1969).

6. Cameron, Michigan Real Property Law,supra note 5, p 432.

7. Comment, supra note 5, pp 565-566.8. Detroit Free Press editorial, February 27,

1987, p 8A.

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