The importance of holdover clause

QUESTION: Sir John, I am a licensed real estate broker. A landowner signed up a broker listing agreement with me at 5% commission. The agreement expires in 1 year. Will I be entitled to the commission if the sale is consummated after the listing agreement expires?

ANSWER: Yes, if there is a HOLDOVER CLAUSE in the listing agreement. The clause is usually written in the manner below:

"This Listing Brokerage Contract expires after one year from the date of issuance. Should the sale be consummated after the expiration of this contract, the broker is still entitled to the commission provided the buyer or the buyer's representative is registered as a sales lead in writing to the attention and information of the seller on or before the expiration date of this Listing Brokerage Contract."

HOLDOVER CLAUSE- A provision in a listing agreement which entitles the broker to commission even when the sale was closed after the period of the authority provided that the buyer was registered by him with the seller and with whom he has negotiated during the period of his authority.

Holdover Clause may also be applied in lease contracts wherein this provision determines what happens when the tenant remains beyond the expiration of the lease. Example: after the expiration of lease, the landlord serves an eviction notice to the tenant, but the tenant was given an option to remain provided that the tenant will pay a certain amount per period based on the predetermined holdover clause of the lease contract.

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