Our Real Estate Attorneys in Los Angeles were recently presented with an issue wherein a broker we represent inquired about the claim for a commission on a “pocket listing” wherein there was no written listing agreement. Under California law, any agreement employing a broker to act in a real estate transaction is subject to the Statute of Frauds. Specifically California Civil Code § 1624(a)(4) reads:
An agreement authorizing or employing an agent, broker, or any other person to purchase or sell real estate, or to lease real estate for a longer period than one year, or to procure, introduce, or find a purchaser or seller of real estate or a lessee or lessor of real estate where the lease is for a longer period than one year, for compensation or a commission.
Thus, the prudent real estate broker should have all of his/her listing agreements in writing signed by the seller, even their “pocket listings.” The law requiring a writing is there to protect property owners against compensation claims from brokers or persons not authorized to act in their real estate transaction (see Rader Co. v. Stone, (1986) 178 Cal. App. 3d 10, 21); and to protect brokers, who after performing brokerage services, are compensated in good faith. (see Seck v. Foulks, (1972) 25 Cal. App. 3d 556, 575.)
Even though outside the realm of a real estate transaction, equitable estoppel or unjust enrichment claims may be used by a party to overcome the writing requirement of the statute of frauds, the Supreme Court of California has held that such theories of recovery (i.e., unjust enrichment, quantum meruit) are not available to licensed real estate brokers in actions to recover a commission pursuant to an oral agreement or “pocket listing.” (See Phillippe v. Shapell Industries, (1987) 43 Cal. 3d 1247, 1260.)
California law requires that all real estate licensees adhere to the statute of frauds requirements in Cal. Civ. Code § 1624(a)(4) and brokers and agents are presumed to know the law once they’ve passed the licensing requirements and obtained licenses.