Real estate brokers sometimes find themselves fighting with a purchaser for whom they have done some work in finding a property, but who attempts to escape payment of the commission once a sale finally goes through. A recent decision in a case out of Manhattan attempted to provide some clarification as to when a broker would be entitled to a fee in such a situation. In the case, a broker sued for her commission, and before answering the complaint, the clients asked that the case be dismissed in its initial stages pre-discovery.
The case involved a broker who claimed to have performed a significant amount of work in trying to find an apartment for a Manhattan couple. The broker showed them several residences and introduced them to a condominium development that was under construction. The buyers expressed an interest in the condominium. The broker brought them to meet the developer; negotiated with the developer on behalf of the buyers; sent a deal sheet to the developer based on the negotiated terms, after which a contract was exchanged; and sought and found an architect capable of executing the buyers’ design plans. After all this effort, the buyers abandoned the deal. Eighteen months later, the buyers purchased another apartment in the same building.
Generally, when suing to recover an unpaid commission, the broker must demonstrate, among other things, that she was the “procuring cause” of the sale, meaning that there was a direct and proximate connection between the introduction of the buyer to the seller and the ultimate consummation of the transaction. Simply calling the property to the attention of the buyer is not enough. On the other hand, it is not required that the broker be involved in the final negotiations or be present at the closing.
For many years, courts have used the term “amicable” when evaluating whether a broker would be entitled to a fee even if she did not participate in the negotiations that ultimately led to the transaction. A broker could be considered the “procuring cause” of the transaction if she “created an amicable atmosphere in which negotiations went forward,” or if she “brought the parties together in an amicable frame of mind, with an attitude toward each other and toward the transaction in hand which permits their working out the terms of their agreement.”
The recent Manhattan decision sought to distance itself from this focus on “amicability,” finding the term to be too imprecise. It instead redirected the focus on whether there was a “direct and proximate link” between the introduction and the consummation. In our opinion, this terminology is also somewhat amorphous. In any event, a case-by-case analysis is required to determine if the standard has been met.
In the case of the Manhattan couple, the court decided that the case should proceed upon its initial stage. Given the efforts the broker alleged to have expended, the court found that there might have been a “direct and proximate link” between the introduction of the buyers to the developer and the buyers’ ultimate purchase of the second apartment. Thus, it permitted the case to go forward.
Each case will present its own set of facts, but the more effort that is expended by the broker, the easier it will be for her to show that she was the procuring cause of the transaction.