Automatic Renewal Clauses in Exclusive Listing Agreements

February 14, 2018 | By Charles Botensten

Q: I am a New York State licensed real estate broker and I am negotiating an exclusive leasing agreement with an owner who would like us to act as the exclusive leasing agent for a portfolio of apartments.  The owner’s form of exclusive leasing agreement contains a provision which provides that that the term of the agreement will automatically renew after the initial term expires.  Is this provision legal?

A: No, The New York State Rules and Regulations that govern the activities of real estate licensees prohibit automatic renewal clauses in exclusive listing agreements.  More specifically, NYCCR §175.15 (the “Regulation”) states: “No real estate broker shall be a party to an exclusive listing contract which shall contain an automatic continuation of the period of such listing beyond the fixed termination date set forth therein.”

Important Tips: The Regulation does not distinguish between commercial and residential property nor does it distinguish between listing agreements for sales transactions and leasing transactions.  Accordingly, regardless of the type or nature of the property, a real estate broker may never enter into an exclusive listing agreement which contains an automatic renewal clause.    A good alternative to an automatic renewal clause could be a provision in the agreement which gives the parties the right, upon expiration, to extend the term of the listing for a certain period of time with appropriate notice.

The Legal Line Question by:
Neil B. Garfinkel
REBNY Broker Counsel

Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP