When selling real property in New York, you might use a broker to assist you in locating a buyer. As a broker's commission can reduce your proceeds from the sale of a property, it is always a good idea to have a written contract with the broker to avoid any misunderstandings. Even if you have such a contract, litigation may still arise depending on each side's interpretation of the agreement.
The Case of the Pseudonymous Buyer
An ongoing New York case offers one example of how a broker and a seller may find themselves in conflict. The seller in this case signed an “exclusive right-to-sell” agreement with a broker. This is a common type of agreement whereby the broker has the sole right to earn a commission by representing the seller. Even if the seller locates a buyer without the broker's assistance, the seller must still pay a broker's commission unless the contract expressly provides otherwise.
Here, the agreement provided the broker would receive a 5% commission if a buyer was located within one year. The only exception was that the seller could enter into a contract with a certain named individual. That individual chose not to purchase the property, and no other buyer was located within the one-year period.
The seller and broker subsequently extended their agreement for an additional year. Similar to the original agreement, the extension provided that the seller would not owe a commission if he sold the property to a certain named individual. This was a different individual than the original contract. He was described as “a private party identified as James Walker.”
About a month after signing the extension, the seller agreed to sell the property to a man who was not named James Walker. The seller alleged, however, this man was in fact “James Walker,” who wanted to use a pseudonym for “personal reasons.” The seller claimed the broker knew this to be the case, and on that basis refused to pay a commission. The broker responded by filing a lawsuit in Suffolk County Supreme Court.
The case remains pending. Last year, the Supreme Court denied the broker's motion for summary judgment. The Appellate Division, Second Department, upheld that decision in a September 2 order. The broker argued it was entitled to summary judgment because the buyer was not an actual person named James Walker. But as the Second Department explained, the use of the qualifying phrase “a private party identified as James Walker,” could be reasonably interpreted to mean the buyer identified by the seller. The Supreme Court will have to make that determination at a later date.
Real Estate Requires Real Legal AdviceWhile this case may present an unusual situation, it does illustrate the type of common problems which can arise when using a broker to help sell a property. A “right-to-sell” agreement is just one component of a sale that requires the assistance of an experienced New York real estate attorney. The attorneys at Waldhauser & Nisar, LLP, can help you with many types of real estate matters.