Deal structure

When a novation agreement needs an agent's permission

A novation agreement usually requires an agent's permission if that agent has an active listing agreement or buyer representation agreement with the seller. Ignoring his or her involvement can lead to legal complications or commission disputes.

October 28, 2026 · 4 min read

What a novation agreement entails

A novation agreement is a contract where a new party replaces an original party in an existing contract, with the consent of all parties involved. In real estate, this often means you, the investor, step into the seller's shoes to sell the property to an end buyer, usually for a higher price.

Unlike an assignment, a novation actually creates a new contract, extinguishing the old one. This structure allows you to market the property as if you own it, often getting a better price than a traditional assignment.

The key is the agreement of all parties. If the seller already has an agent involved, that agent becomes a party whose consent is typically needed for the novation to be valid and undisputed.

Understanding agent involvement

Most sellers who are working with an agent have signed a listing agreement. This is a legally binding contract that grants the agent the exclusive right to sell the property for a specified period and earn a commission.

If you approach a seller who is already under a listing agreement, any deal you structure, including a novation, could be seen as interfering with that agent's contract. The agent still has a claim to his or her commission.

Even if the seller claims the agent isn't doing anything, the listing agreement remains in force. You cannot simply bypass it without potential repercussions.

The role of a listing agreement

A listing agreement typically states that the agent is owed a commission if the property sells during the term of the agreement, regardless of who finds the buyer. This includes situations where an investor enters into a novation with the seller.

For a novation to proceed smoothly and ethically when an agent is involved, you generally need to address the agent's commission. This usually means securing the agent's permission and agreeing on how his or her commission will be paid as part of the new transaction.

Ignoring the listing agreement can lead to the agent filing a lien against the property or pursuing legal action against the seller and potentially against you. This can severely complicate or kill your deal.

How to approach the agent

If you discover a seller is working with an agent, your best course of action is to communicate transparently. Ask the seller to inform his or her agent about your interest in a novation agreement. Or, if the seller agrees, you can directly reach out to the agent.

Explain the novation structure and how it benefits everyone. The agent might be open to it, especially if the property has been sitting on the market, and your novation offers a path to a quicker sale and a commission.

Negotiate the agent's commission as part of the novation. It might be a reduced fee or a flat fee, but addressing it upfront is crucial. Get any agreements with the agent in writing to avoid future disputes.

Proceeding without agent permission (and the risks)

Proceeding with a novation without acknowledging an active listing agreement and getting the agent's permission carries significant risks. The agent can still demand his or her commission, which could come out of the seller's proceeds, or even from your profit.

Furthermore, legal action from the agent could tie up the property, delay closing, or even nullify the novation. This kind of dispute can damage your reputation as an investor and make future deals harder to secure.

Always perform thorough due diligence to determine if an agent is involved, even if the seller doesn't initially mention it. Public records or a simple online search for the property can sometimes reveal a listing.

Not legal advice disclaimer

The information provided here is for general informational purposes only and does not constitute legal advice. Real estate laws and agent agreements are complex and vary significantly by state and local jurisdiction.

You should always consult with a qualified legal professional for advice regarding your specific circumstances, especially when dealing with novation agreements and properties with existing agent representation.

Ensuring compliance with all contractual and legal obligations is critical to the success and legality of your real estate transactions.

Questions people ask

Does the agent always get a commission in a novation?

If the seller has an active listing agreement, the agent generally has a claim to a commission, even if you arrange a novation. This usually needs to be negotiated and agreed upon as part of the new deal structure.

What if the seller tells me the agent isn't involved anymore?

Always verify. A verbal statement from the seller does not nullify a written listing agreement. The agreement's terms dictate its expiration or termination, not just a seller's word. Ask for documentation or contact the agent directly with the seller's permission.

Can I use a novation if the house is already listed?

You can, but you must involve the listing agent. You will need his or her permission and an agreement on how his or her commission will be handled within the novation. Bypassing the agent is risky.