Yacht brokers in California must comply with the provisions of the California Yacht and Ship Brokers Act, which is enforced by the Department of Boating and Waterways. Under this law, a broker must obtain a signed authorization from a boat owner before the broker can represent the owner in the sale of the boat.
This signed authorization is a listing agreement.Listing agreements are classified under two broad categories: “Open” agreements and “Exclusive” (sometimes referred to as “Central”) agreements.
An open listing agreement allows the owner to list the boat with more than one broker or to market the boat without a broker, and the agreement does not require an expiration date. Conversely, under an exclusive listing agreement, the boat is marketed exclusively by the broker with whom the agreement is made — and, under California law, the agreement must include an expiration date.
Open and exclusive listing agreements both spell out the broker’s duties in general terms, and they both provide for a commission to be paid to the broker upon the sale of the vessel. Both agreements also typically call for a commission to be paid to the broker if the boat is sold to someone who was introduced to the boat by the broker, even if the boat was eventually sold through a different broker.
Also, an exclusive agreement will invariably require a commission to be paid to the broker if the boat is sold to anyone during the term of the agreement, regardless of who introduced the owner to the buyer, or whether the broker was involved at all in the transaction. This is where our reader may find himself in some hot water.
As noted above, the broker’s duties under a listing agreement are described in very general terms, and as such it is extremely difficult to establish that a boat was not “properly marketed” or that the broker otherwise failed to meet his or her obligations under the agreement.
Therefore, assuming that our reader has an exclusive listing agreement with his current broker, the sale of his boat through a different broker will likely require him to pay a full commission to both brokers.
Our reader is primarily concerned with his own legal options, but the relationship between the two brokers should also be examined. If the new broker was aware that the boat was the subject of an exclusive listing agreement, and if he intentionally persuaded our reader to breach the listing agreement with the first broker, then the new broker may be liable to the first broker for interfering with the existing contract. This would not let our reader off the hook, but it would give the first broker another litigation target if the boat owner is unwilling or unable to pay the second commission.
If the new broker in this case really has a legitimate buyer who is interested in making an offer on our reader’s boat, the proper approach would be for the new broker to enter into a cooperative brokerage agreement (often referred to as a “co-op”), which provides for the commission to be split between the two brokerages. These agreements are used in one form or another throughout the country, and they allow for the sale of the boat through a second broker without affecting the owner’s listing agreement with the first broker.