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Recovering Your Broker’s Commission – Some Basic Law

February 2014 Publication and Email Blast To Select Itkowitz PLLC Clients -- Subscribe to Our Mailing List

When am I entitled to recover a broker’s commission?

In order to make out a claim for breach of a real estate brokerage agreement and recover a commission, a broker must introduce evidence:

(1) demonstrating that he or she is licensed,
(2) tending to show the existence of a commission agreement, and
(3) establishing that he or she has procured a ready, willing, and able purchaser at the price and terms specified by the seller. 

Real Estate Dept. Store, Inc. v. Lawlet Corp., 28 N.Y.2d 36 (1971); Talk of the Town Realty v Geneve, 109 AD3d 981, 985 (2d Dept. 2013). 

In the absence of an agreement to the contrary, a broker will be deemed to have earned a commission when it produces a buyer who is ready, willing, and able to purchase upon the seller's terms.  Bendell v. De Dominicis, 251 N.Y. 305 (1929); Sutton & Edwards, Inc. v 68-60 Austin St. Realty Corp., 70 AD3d 810, 811 (2d Dept. 2010).

To prevail on a cause of action to recover a commission, the broker is required to prove that he or she was “the procuring cause of the sale.”  In order to establish that a broker was the procuring cause of a transaction, the broker must establish that there was a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation.  However, a broker does not automatically make out a case for commissions simply because he or she initially called the property to the attention of the ultimate purchaser.  Where the broker is not involved in the negotiations leading up to the completion of the deal, the broker must establish that he or she created an amicable atmosphere in which negotiations proceeded or that he or she generated a chain of circumstances that proximately led to the sale.  Talk of the Town Realty v Geneve, 109 AD3d 981, 982 (2d Dept. 2013)

Does there have to be a closing in order for me to have earned a broker’s commission?

Where, however, the principal is responsible for the failure of an event on which the broker's entitlement to a commission is conditioned, the principal is not relieved of liability for the commission by reason of the failure of the condition.  See Lane Real Estate Dept. Store, Inc. v. Lawlet Corp., 28 N.Y.2d 36, 42-43 (1971); Dagar Group, Ltd. v S. Hills Mall, LLC, 12 AD3d 552, 554-55 (2d Dept. 2004)

Courts have held that a commission is due to a broker upon the production of a buyer that is ready, willing, and able even where the explicit terms of the brokerage agreement make the commission contingent upon a sale occurring.  See A.J. Clarke Real Estate Corp. v. Meyers, 27 A.D.3d 230, 230 (1st Dept. 2006); Norma Reynolds Realty, Inc. v. Wilczewski, 160 A.D.2d 787, 788 (2nd Dept. 1990) (“We disagree with the Supreme Court that the language of the contract “[i]n the event of a sale” means the passage of title at a closing. “[I]t is a well-settled rule in this State that in the absence of an agreement to the contrary, a real estate broker will be deemed to have earned his commission when he produces a buyer who is ready, willing and able to purchase at the terms set by the seller.”); Wisenberger v. Mayers, 281 AD 171 (1st Dept. 1952), (“Where a broker has failed to procure a customer prepared to buy at the price specified by the seller and no sale has occurred, the broker, in order to recover his commission, must prove that the seller agreed to the proposed transaction which the broker arranged. Furthermore, although the parties have orally agreed upon a sale, the broker cannot recover commissions from the seller if the prospective customer later recedes from its previous willingness to buy. In this case the broker concededly did not produce a purchaser agreeable to the sellers' designated price and terms.”)

Can a Listing Agreement be changed orally?

Also note that terms of the listing agreement cannot be changed orally if the listing agreement prohibits oral changes.  If you have a clause in your broker’s contract that requires changes be made in writing, the evidence is barred by the Statute of Frauds and parol evidence rule.  Williams Real Estate  Co. v. Ann Taylor, Inc., 251 AD2d 230 (1st Dept. 1998); Timeless realty Corp. c. Connecticut Diversified Holdings, LLC, 11 Misc.3d 1078(A) (Sup. Ct. Kings Cty 2006).  

My Exclusive Listing Agreement ended, and then shortly thereafter, the Seller sold to a party I did not introduce them to, is there any hope that I can recover a broker’s fee?

This is a typical Exclusive Listing Agreement clause:

[Seller agrees to pay Broker] a commission of 3.88% of the sales price in the event that the property or any portion thereof is sold or exchanged by [the Seller] or by any other broker or person during the term of [the Agreement] or to any one with whom [the Seller] …has had negotiations with during the term of [this Agreement].

In these cases, we check the New York City Department of Finance website to see when the deed transfer occurred, and to whom.  If the deed was transferred to a corporation or an LLC, next we check on the New York State Secretary of State website to see when that entity was formed.  If you think you can prove that a broker for or representative of the purchasing entities began their negotiations before the exclusive ended, you might have a good claim.  

In a recent case we suspected we had a good claim because: the exclusive ended on February 28, 2013; the sale was for a Nine Million Dollar church, which is a specialty site requiring the approval of the New York State Attorney General (Religious Corporations Law (“RCL”) § 12(1)); and the closing happened in July of that same year.  It is highly possible that such a deal would have taken more than five months from negotiations through closing.   

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