Have you been asked by a real estate salesperson (i.e. Broke-Er) to sign an exclusive listing agreement (“ELA”)?
Read this first because you need to know what you’re getting yourself into.
- An ELA stops you from using anyone else to sell your practice. It also forces you to pay the Broke-Er a BIG commission when they sell (e.g. 10% of the sale price – yes, you read that right, 10%).
- An ELA locks you into paying the Broke-Er their 10% commission if they sell your practice for a set period of time. How long? It’s based on how long the Agreement goes (e.g. typically 1 year).
- An ELA forces you to have to pay the 10% commission even if the Broke-Er could NOT sell your practice! That’s right. If the term of the ELA is over and they couldn’t sell your practice BUT YOU end up selling it yourself, then you could be still on the hook. That’s because there’s a “Holdover Period” that applies and it’s usually anywhere FROM 6 months to 18 months AFTER the listing agreement is over. Don’t believe me, read these court cases! Poor dentist!
- In exchange for their commissions (which on a 2 million dollar sale would, at 10%, be a $200,000 plus HST commission), the real estate salespeople will prepare an appraisal and run an open house and do some marketing to try to find you a buyer.
- The usual Exclusive Listing Agreement talks ON AND ON about how the real estate agent gets paid:
- They want their 10% commissions if the practice is sold during the term.
- They want their 10% commissions if the practice is sold after the term if negotiations took place during the term.
- They want their 10% commissions if the practice is sold after the term if the buyer was introduced/found during the term (whether or not the Broke-Er agent found the buyer or made such an introduction!).
- They want their 10% commissions if you do a share sale or asset sale.
- They want their 10% commissions if there’s a willing buyer who is ready and able to do a deal, and REGARDLESS of whether the deal actually happens (P.S. I’m not even sure how this one is legal since it looks like it’s an agreement to agree and the dentist is being forced into the big unknown of accepting an offer even if it is not a good offer or the seller changes their mind or doesn’t want to sell on the terms offered).
- They want to take the deposit from the buyer (even though it should be going into the selling lawyer’s trust account).
- They take 50% of any deposit that the buyer loses (This rarely happens because deals are “conditional”; and if a non-refundable deposit is given, it should go to the seller since we don’t consider that to be anyone else’s money).
- Lastly, you STILL need a lawyer throughout the process to help you with your lease matters, employment matters, corporate matters, and do all the legal work for the actual purchase/sale transaction!
ELAs have been, unfortunately, standard in the industry for decades. And we’ve witnessed more real estate agents try to get into the Broke-Er game over the past few years to try to grab money from dentists when they sell their practice.
Is there a Better Option?
ABSOLUTELY !!! We at DMC LLP are Canada’s largest boutique-only dental law firm. We help prepare, market and sell your dental practice and you DON’T have to sign any exclusivity. On top of that, our pricing INCLUDES both finding the buyer (e.g. marketing, running the open house, negotiating the deal) AND doing the legal work.
We can market the sale of your practice – confidentially and discretely – to thousands of Ontario dentists who’ve signed confidentiality agreements with us to purchase practices. We run open houses, do eBlasts and hit the phones to talk to buyers. We get involved EARLY on to help prepare your practice for sale (clean up your lease, put team members on contract, make sure your corporation is ready to be sold so you can claim the capital gains exemption, etc.). We also represent buyers on other transactions (where we are not already representing the selling dentist) so we know what they’re looking for or will make a big issue out so we can remedy those things with the seller’s practice before it becomes an issue in a transaction.
We draft and negotiate the legal paperwork (letters of intent, purchase and sale agreements, associate agreements, lease transfers, etc.) so that your interests and rights are represented properly (do you want a real estate agent doing this???!!!) and risks are mitigated.
Do you need a real estate agent as part of that equation? No. Have questions? Give us a shout. You can contact the author at 647.680.9530. We’ll get back to you the same day for a no-obligation free consult.
If you want to know what incentivizes us to help you achieve your goals on your sale (which could be the highest price or a very fast closing or finding a certain purchaser to sell to) then here they are:
- First, we have an idea of what your practice should be selling for based on about 50 metrics (that’s a 1-2 hour-long complimentary phone call with myself or my law partner, David Mayzel). So it’s not like we don’t have a sense already of what the buyers are prepared to pay.
- Second, what we’re really looking for is DENTISTS telling dentists about how great we are and how our model of doing everything in-house (lease, employment law matters, corporate/purification work, marketing, selling, associate agreements, advising throughout, etc.) is the best approach.
- Third, we encourage our selling dentists that, if they’re happy after the sale and achieved their minimum price, then they can participate or donate towards our dental charity outreach program.
