What is the maximum length of time for a listing agreement?

This law prohibits: 1) exclusive listing agreements on residential 1 to 4 properties lasting longer than 24 months from the date the agreement was made; 2) renewing an exclusive listing agreement on the above-mentioned type for longer than 12 months from the date the renewal was made; 3) automatic extensions on of exclusive listings on any type of residential property and 4) recording or filing an exclusive listing agreement for residential property of any duration.

The 24-month prohibition applies to exclusive listings on residential one to four properties, condos and manufactured homes.

Other prohibitions will apply to exclusive listings on any type of residential property even where the property is improved with more than four units. It also deems any licensed real estate professional who violates these prohibitions as having violated that person's licensing laws.

• It is unlawful for an exclusive listing agreement regarding residential one to four property to last longer than 24 months from the date the agreement was made, or to renew such a listing for longer than 12 months from the date the renewal was made. 
• It is unlawful to renew automatically any renewal an exclusive residential listing agreement including listings on residential 5+ property.
• A renewal of any exclusive residential listing shall be in writing and be dated and signed by all parties to the agreement.  

It is unlawful with regard to an exclusive listing agreement for residential to:

• Present for recording or filing an exclusive listing agreement of any duration or
• Enforce or attempt to enforce an exclusive listing agreement that is made, or that is presented for recording or filing with a county recorder, in violation of this law.

An exclusive listing agreement that is made, or that is presented for recording or filing with a county recorder, in violation of this law is void and unenforceable. A homeowner who entered into any such agreement may retain any consideration received thereunder.

(2)A violation of this section constitutes a violation under Section 1770.

(3)Any person licensed pursuant to Division 4 (commencing with Section 10000) of the Business and Professions Code who violates any provision of this section shall be deemed to have violated that person’s licensing law.

Exclusions

The prohibition against listing agreements lasting longer than 24 months does not apply to exclusive listing agreements entered into between a real estate broker and a corporation, limited liability company, or partnership.

Question: Are current exclusive listing agreements that extend beyond two years enforceable? Unclear. California courts adhere to the general interpretive principal that laws are presumed to not act retroactively absent explicit legislative indication to the contrary. Courts must still consider the law’s underlying purpose which can be understood generally or as applied to specific cases. (McHugh v Protective Life Ins. Co. (2021)). For this law in particular, the underlying purpose was to thwart some highly abusive predatory practices involving extremely long exclusive listing agreements (See background below). Nonetheless, this law contains no clearly stated intention in favor of retroactive application.

The more complex question is exactly what it means for a law to act retroactively in regard to existing contracts. The Supreme Court of California recently weighed in on this question. In McHugh v Protective Life Ins. Co. (2021) it stated that the key to determining whether a law is retroactive is whether it works a substantial change in the contracting parties’ rights or obligations. Thus, finding an existing listing agreement unenforceable would have a clear retroactive effect.

So, a highly speculative answer is that if an agent were to attempt to enforce a clearly predatory and abusive listing agreement then a judge might disregard the presumption against retroactive application and find the agreement unenforceable. On the other hand, if the agent was providing real estate services in a reasonable and customary way, then the listing would likely be upheld as enforceable on the basis that the law is presumed to not apply retroactively.

Question: Is an exclusive listing enforceable when the initial listing period is less than two years but includes a reservation period that goes beyond the two-year period? A: Most likely the agreement would be enforceable. The prohibition in this law is against exclusive listing agreements that last longer than 24 months. Arguably, even if the reservation period straddles the 24-month period then the exclusive listing period has not lasted longer than 24 months, since there is no exclusive agency or agency of any kind during the reservation period.

Background: Recently, a predatory practice of offering homeowners cash up front to enter into 40-year exclusive right to list agreements has stirred federal and state regulatory agencies to investigate and file lawsuits. Unsuspecting and cash strapped homeowners—predominantly seniors, those with limited cognitive capacity, those who speak English as a second language— are the victims of aggressive and abusive telemarketing tactics. They are offered a check that could be from $300 to $5,000 in exchange for entering into a 40-year exclusive listing agreement. Homeowners are told that there wouldn't be any requirements on their end to sell the home but are not made aware of the other contractual obligations. The penalty to cancel the contract or use a different real estate agency is a certain percentage of the value of the home. A lien is also placed on the home, which is a clause homeowners might not be fully aware of until they try to close a sale on their home. MV Realty, which has practices in 33 states including California, is the main culprit in these predatory practices and has been the subject of lawsuits and investigations in Georgia, Florida, Massachusetts, North Carolina, Maryland, as well as the focus of Federal lawmakers' call for the Federal Trade Commission and Consumer Financial Protection Bureau's investigation. California law does not regulate right to list agreements, as the standard practice for real estate agents are typically limited to less than a year, do not carry penalties, and do not place liens on the property.