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NYC-based boutique law firm Pardalis & Nohavicka brings the latest legal updates from the world of real estate to PropertyShark. Pardalis & Nohavicka handles an eclectic array of matters, representing individuals and business owners in civil litigation, criminal cases and business transactions, currently litigating and representing clients in New Jersey, Pennsylvania, Massachusetts, California, Greece, and the United Kingdom.

Joseph D. Nohavicka, Partner, Pardalis & Nohavicka, LLP.

Real estate brokers serve as vital players in real estate transactions. These transactions involve the purchase and sale of residential and commercial properties. It is important that the broker be properly paid in order to facilitate the transaction. In this article we will discuss how the real estate broker is routinely paid in the form of a commission as a percentage based on the proceeds generated from the real estate sale. Brokers in New York need to be aware of state legal requirements in order to collect their commission.

Under New York State Law, a real estate broker is entitled to recover a commission as long as (1) the broker is duly licensed, (2) there was a contract, express or implied, with the party responsible for paying the commission, and (3) the broker was the procuring cause of the transaction. While in most cases, the broker cannot get paid unless he or she satisfies the requirements above, there are circumstances when a commission can still be earned even if all of the above elements are not satisfied.

A recent case decided in August of 2018 and titled Gluck & Co. Realtors, LLC v. Burger King Corp[1] sheds light on this issue. This case discussed how a broker could be paid even if he or she was not directly involved as a party in the negotiations. In Gluck, a real estate broker was hired to facilitate a lease for a franchisee of Burger King. The broker was about to close the deal when the franchisee fired the broker.

Subsequently, another franchisee of Burger King secured the space. The broker demanded the fee, but Burger King refused to pay, stating that it had hired another broker. Thereafter the broker sued for his real estate commission. The court found that although there was no written agreement or contract between the parties, an implied agreement or contract was created by the actions of the parties and Burger King was ordered to pay the commission.

In this case, although the broker was not directly involved in the negotiations leading up to the completion of the deal between the second Burger King franchisee, he created an amicable atmosphere in which negotiations proceeded and generated a chain of circumstances that led to the transaction. In other words, the broker’s work led directly to a chain of factual events that helped the parties to close the deal.

The court noted that even assuming that there was no contract, express or implied, between the parties, the broker would be entitled to recover for her services in order to avoid the defendant’s unjust enrichment. Unjust enrichment means that it would be unfair because Burger King would be wrongfully holding back funds to which the broker was entitled. Under New York State law, the broker established that she performed services in good faith, that the parties accepted the services, and therefore she was entitled to her commission. The result was that the broker won $55,810.

A broker has to establish “procuring cause” in order to collect the commission. This means that he or she “must establish a chain of circumstances” or events that lead to the sale in order to be entitled to the broker’s fee. This standard was established in the Second Department Appellate Division’s opinion in Talk of the Town Realty v. Geneve [2]. In Talk of the Town Realty, the broker was awarded a judgement as the court found that triable issues of fact demonstrated that the broker satisfied the procuring cause standard because he did enough work by setting up a chain of events that closed the real estate deal, thus making him entitled to the commission.

Jacqueline Weiss, Extern, New York State Office of The Attorney General

Courts generally take these cases seriously and grant trials when triable issues are found to exist in the broker commission arena.  Every broker would be best advised to retain an experienced real estate litigation attorney to ensure that their pleadings are sufficiently prepared for court. In addition, their counsel should be prepared to deal with the challenges of New York State Law in litigation.

 

For more insight on evaluating your rights to a broker’s commission under New York State law, read our FAQ.

About

Expert insight and analysis was provided by Joseph D. Nohavicka, Partner, Pardalis & Nohavicka, LLP and Jacqueline Weiss.  Jaqueline Weiss is a former law clerk with Pardalis & Nohavicka, currently externing with New York State Office of The Attorney General. 

With more than 25 years experience, Joe Nohavicka’s areas of practice range widely and include: employment law, insurance, ethics, criminal and  general appellate, and trial litigation.  He is also a prolific legal commentator with multiple  publications in the prestigious New York Law Journal and the New York  State Bar Journal.

[1] Gluck & Co. Realtors, LLC v. Burger King Corp., 164 A.D.3d 562, 83 N.Y.S.3d 518, 519 (N.Y. App. Div. 2018)

[2] Talk of the Town Realty v. Geneve 109 A.D. 3d 981 N.Y.S. 2d 550(2013).

Eliza Theiss

Eliza Theiss

Eliza Theiss is a senior writer reporting real estate trends in the US. Her work has been cited by CBS News, Curbed, The Los Angeles Times, and Forbes among others. With an academic background in journalism, Eliza has been covering real estate since 2012. Before joining PropertyShark, Eliza was an associate editor at Multi-Housing News and Commercial Property Executive. Eliza also writes for CommercialEdge. Reach her at [email protected]