FAQ: Securing Your Broker’s Commission

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.

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. Every broker should consider the following questions in evaluating their potential rights to a broker’s commission under New York State law:

Q: When is a real estate broker entitled to a commission?

A: New York case law clearly establishes that three elements are required to enable the broker to recover a real estate commission. These elements require that the real estate broker (1) be a duly licensed broker, (2) enter into an implied or express contract with the party to be charged with paying the commission, (3) that the broker be the procuring cause of the transaction.

Q: What does it mean for a broker to be duly licensed?

A: A broker is duly licensed when they possess a real estate license or are otherwise certified to work as a real estate broker in New York State.

Q: When does a broker have a contract – express or implied – with the party to be charged with paying the commission?

A: A broker who has an existing right under a real estate contract to a commission may recover that commission as a party to an existing, express contract or agreement.

Q: What is an implied contract?

A: An implied contract is an agreement created by the actions of the parties involved. In this regard, the broker could establish a claim to commission based on the services that he or she provided to the vendor or franchisee. These services might involve participating in direct negotiations for the sale of the real estate, or listing the property for sale. The court would then have to decide if the broker could present sufficient evidence to support her claim for a commission based on an implied contract.

Q: When a broker does not have either an implied or express contract with the party charged with paying the commission, can he or she still recover their commission?

A:Yes, a real estate broker can still recover under the contract theory of quantum meruit, for the reasonable value of their services if they can prove that the seller or other party was unjustly enriched and implicitly accepted their services based upon the broker’s performance. A good example of this is  Gluck & Co. Realtors, LLC v. Burger King Corp.

Q: What does a broker have to prove in court to show that he or she is the procuring cause of the real estate transaction?

A: This is a tricky question that is often fact-specific to each individual real estate transaction. New York cases make it clear that “to establish that a broker was the procuring cause of a transaction, the broker must establish that there is a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation.” See Douglas Elliman, LLC v Silver. [1]In this case, the court still found that while the broker was not involved in the negotiations leading up to the sale, he did enough work to generate a “chain of circumstances” that lead to the sale.

Q: What should I expect to encounter in court if I am a broker filing for real estate commissions?

A: The result may rarely be clear cut, but the courts generally try to protect the plaintiffs’ interests when factually plausible complaints are filed. This means that most litigants can easily withstand motions for summary judgment to deny their relief if they can raise genuine issues of act to show that the broker was indeed in fact the “procuring cause of the sale” in addition to being a licensed broker who generally entered into an express or implied contract for his brokerage commission.

For example, in Talk of the Town Realty v. Geneve,[2] the court denied the vendor’s motion for summary judgment to dismiss the plaintiff’s motion for broker commissions in finding that genuine issues of material fact existed as to whether the broker generated a “chain of circumstances” that ultimately lead to the sale.

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] See Douglas Elliman, LLC v Silver, 136 A.D.3d 658, 24 N.Y.S.3d 207 (N.Y. App. Div.), leave to appeal dismissed, 27 N.Y.3d 1015, 52 N.E.3d 239 (2016).

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