Commission Could Be Due for Condemned Property

Question: We have listed our Phoenix warehouse with a local brokerage firm. Since this listing we have been informed by the Arizona Department of Transportation that our warehouse will be condemned for construction of highway improvements, but under condemnation law we are not obligated to pay a commission to our listing broker. To avoid the time and expense of formal condemnation proceedings, however, ADOT wants to purchase our Phoenix warehouse. Our listing broker, however, says that a full commission will be owed to him if ADOT purchases our Phoenix warehouse. Our listing broker did absolutely nothing regarding this ADOT purchase. Will we have to pay a commission to our listing broker?

Answer: Probably not. The Arizona Supreme Court, 120 Ariz. 321, has ruled that a voluntary transfer to the federal Bureau of Reclamation, rather than formal condemnation, of an aqueduct was not a ‘sale’ under a listing agreement and therefore no commission was owed to the listing broker.

But many listing agreements, however, have language that a listing broker has earned a commission if the property is unavailable for sale for any reason during the term of the listing agreement. See Arizona Association of Realtors Exclusive Listing Contract, lines 59-61.

Therefore, your listing broker may be entitled to a commission even though there was not a ‘sale’ of your Phoenix warehouse.