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Summary judgement and the broker.

Real estate brokers are often forced to resort to litigation in order to receive payment on commissions that their client fails to pay. Summary judgment is a tool that can help the broker obtain his commission without a trial and with minimum time and expense.

Under this procedure, the broker seeks to convince the court by a motion based on affidavits and documents, and without oral testimony, that they have earned their commission: The granting of a summary judgment motion is similar to a finding after trial on the issue of liability. While this motion may be utilized by either party, until recently it was most often used by the defendant, owner or landlord to defeat a broker's right to his earned commission.

The good news for brokers is that the motion for summary judgment is now being used more frequently to determine a broker's entitlement to a commission.

The contract of sale may be a helpful tool to the broker on a motion, but until recently, was under-utilized. This contract, signed by the seller and the purchaser, may be over-looked as a probative document because it neither contains a brokerage agreement, nor is it executed by the broker. The contract, however, typically contains a "brokerage clause" which provides the name of the broker, and often includes representations by the seller and purchaser that each has dealt with no other broker. It frequently includes language that recognizes the broker as having brought the parties together.

Our courts are now beginning to recognize that the brokerage clause may contain important admissions which might help the broker's motion. Moreover, courts are finding with increasing frequency that the admissions contained in the brokerage clause may support a broker's summary judgment motion.

The Appellate Division was recently faced with this issue when a real estate broker brought an action for commission against the seller of a commercial building. During these proceedings, the broker's attorney moved the court to summarily decide that the broker was entitled to a commission. The broker relied on the brokerage clause contained in the contract of sale, which provided: "Purchaser and seller each represent to the other that they have dealt with no broker other then [the "broker"] in connection with this agreement and the transaction contemplated by this agreement... seller shall pay any brokerage commission in accordance with seller's agreement with the Broker."

The Appellate Division found that the language in the contract of sale constituted an admission by the seller that the broker was the procuring cause of the sale. The court went on to give judicial recognition to the general use of the brokerage clause containing such language, and refused to accept the seller's argument that he never believed that the brokerage clause could render him liable for the commission. The court noted that the clause was not ambiguous and refused to consider the seller's evidence that attempted to prove that the broker was not the procuring cause of the sale.

The broker will often bring a lawsuit for his commission on several grounds, including the express or implied contract and/or a quantum meruit theory.

Under the express or implied contract, recovery is sought on the basis that the parties to the lawsuit entered into an actual agreement, or that an agreement should be implied by the facts of the case. A quantum meruit cause of action entitles the broker to the reasonable value of his services, even though no brokerage agreement was ever signed. The broker seeking a commission based on quantum meruit is entitled to receive an award for the reasonable and customary commission paid in the geographical area where the property is located. This proof will require expert testimony as to the reasonable value of the services that the broker performed.

It is noteworthy that the Appellate Division recently found a brokerage clause in a contract of sale that was similar to the one set forth above was an admission that brokerage services were rendered and that the broker was entitled to the reasonable value of his services.

A review of recent cases indicates that the court is sometimes willing to treat the broker as a third party beneficiary under the brokerage provision in the contract of sale between the seller and purchaser, on the theory that buyer and seller contracted for the benefit of the broker.

The foregoing will demonstrate that the contract of sale can be invaluable to the broker when litigating for a commission, regardless of the theory of recovery under which the commission is sought.

(Jay J. Gurfein is the principal of The Law Offices of Jay 1. Gurfein. He is a frequent lecturer at brokerage seminars and was on the faculty of New York University School of Continuing Legal Education. Tracey B. Paer is an associate at the firm.)
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Article Details
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Author:Paer, Tracey B.
Publication:Real Estate Weekly
Geographic Code:1USA
Date:Feb 16, 2000
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