Brokers beware: EVERY AGREEMENT MUST BE IN WRITING..
Make sure your brokerage and co-brokerage agreements are always in writing. It may sound simple, but the litigation team at Starr Associates LLP was compelled to defend this issue for a client in New York Supreme Court when a purported “co-broker/finder” claimed he was entitled to 1/2 our client’s brokerage commission based on an alleged oral agreement.
Although the evidence provided by plaintiff during discovery was paltry, the court permitted the case to proceed to a jury trial, based on the claim by plaintiff that a gratuity offered by our client as a “thank you” once the deal was consummated, as is common in the industry, was really an effort to pay the co-broker less than the ½ commission orally agreed-upon. Our client wholly denied that any oral agreement was ever discussed and alleged that the “thank you” payment was a simple gift. Plaintiff provided no proof of such oral agreement, other than his own testimony.
After jury selection and a three day trial, where our firm questioned the validity and existence of the alleged oral commission agreement on cross examination of the plaintiff, a unanimous verdict was returned in favor of our client. The jury found there was not enough evidence to support plaintiff’s claim of an oral co-brokerage agreement.
It is important to note that, during the trial there was much debate as to whether the “procuring cause” standard should be applied to co-brokers as it is applied to brokers in general. While the judge ultimately decided not to instruct the jury that plaintiff was required to prove its case based on the procuring cause standard, it is open for future litigation as to whether a co-broker must also show he or she is the procuring cause of the transaction or if any alleged interaction, no matter how peripheral, is enough to state a claim for an oral co-brokerage agreement. Thus, brokers open themselves up to a factual dispute and potential litigation if their commission agreements, no matter how big or small, are not memorialized in writing. Protect yourself.
Please call us at Starr Associates LLP if you need any assistance in preparing, reviewing or memorializing your commission agreement or if you are involved in a brokerage dispute.