REAL ESTATE BROKERS AND DISCRIMINATION

As you know, Governor Andrew M. Cuomo on August 3 signed legislation (S6874-A/ A8903-A) explicitly granting the Department of State the authority to discipline real estate professionals found to have violated provisions of the state Human Rights Law by revoking or suspending their license.

Paragraph (a) of subdivision 1 of section 441-c of the Real Property Law is amended  to read as follows (the language in BOLD is new):

"(a) The department of state may revoke the license of a real estate broker or salesman or suspend the same, for such period as the department may deem proper, or in lieu thereof may impose a fine not exceeding one thousand dollars payable to the department of state, or a reprimand upon conviction of the licensee of a violation of any provision of this article, or for a material misstatement in the application for such license, or if such licensee has been guilty of fraud or fraudulent practices, or for dishonest or misleading advertising, or has demonstrated untrustworthiness or incompetency to act as a real estate broker or salesman, or for a violation of article fifteen of the executive law committed in his or her capacity as a real estate broker or salesman, as the case may be. In the case of a real estate broker engaged in the business of a tenant relocator, untrustworthiness or incompetency shall include engaging in any course of conduct including, but not limited to, the interruption or discontinuance of essential building service, that interferes with or disturbs the peace, comfort, repose and quiet enjoyment of a tenant."

ATTEMPT TO AVOID BROKER'S COMMISSION FAILS

Inbar Grp. Inc. v. St. Mark's World Inc., NYLJ January 07, 2020, Date filed: 2019-12-05, Court: Supreme Court, New York, Judge: Justice David Cohen, Case Number: 653565/2016:

"Plaintiff’s motion is granted in part and defendants’ cross-motion to amend is granted. The portion of the cross-motion seeking dismissal of the claims against Michael Morgan personally is denied. The following facts are not in dispute. On March 19, 2014, St Mark’s World, Inc. (“SMW”) entered into a listing agreement with Inbar Group, Inc. (“Inbar”). The listing agreement provided that SMW granted Inbar the exclusive right to sell, lease, exchange, merge or contract to sell the real property, stock, and assets of SMW, including equipment, trademarks, trade names, and other inventory. In consideration, Inbar was to receive an 8 percent commission based on the purchase price, or $80,000, whichever was higher. If SMW made a sale without the permission of Inbar, a commission would be immediately due and payable to Inbar. Moreover, if a deposit or down payment was forfeited by a prospective buyer, the amount would be split in half between the parties. The agreement was signed by Jay Inbar for plaintiff as broker, and by SMW as the seller, with Michael Morgan signing as principle. The listing agreement was originally signed for a 6-month period but was extended through December 10, 2015. The extension was signed by Michael Morgan as seller. On July 10, 2014, plaintiff alleges that it procured Habib Noor as a prospective buyer of SMW. A $100,000 deposit was put down by Noor; however, the deal fell through and the $100,000 was forfeited. The Amended Complaint alleges that in June 2015, Defendant Hartman on behalf of defendant Flex Employee Services, LLC (“Flex”) entered into a non-disclosure agreement relating to a purchase of SMW stock.

After the expiration of the extension to the listing agreement, in April of 2016, St. Marks World Acquisition, LLC (“SMWA”) was formed by Hartman and entered into a stock purchase agreement (“SPA”) with Morgan for the purchase of his SMW stock. Morgan sold 80 percent of his shares in SMW to SMWA. Morgan retained a 20 percent interest in SMW and remained its president. A separate services agreement was entered into between Morgan, in his individual capacity, and SMW for his salary as a consultant at SMW. There was no commission paid to plaintiff as a result of the SPA between Morgan, SMWA, and SMW, nor for the services agreement. Plaintiff commenced this action for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment/quantum meruit and other causes of action. Following the exchange of some, but not all discovery, this motion and cross motion followed. In support, plaintiff submits the listing agreement with signature pages, the SPA and the affidavit of its president, Jay Inbar. In opposition and support of the cross-motion, defendants SMW and Michael Morgan submit the affidavit of Morgan and supporting documents.¹

Summary judgment is a drastic remedy that should not be granted where there exists a triable issue of fact (Integrated Logistics Consultants v. Fidata Corp., 131 AD2d 338 [1st Dept 1987]; Ratner v. Elovitz, 198 AD2d 184 [1st Dept 1993]). The moving party must establish a prima facie case showing that it is entitled to judgment as a matter of law (Alvarez v. Prospect Hosp., 68 NY2d 320 [1986]). This burden is a heavy one, and all facts must be viewed in a light most favorable to the non-moving party (Jennack Estate Appraisers and Auctioneers, Inc. v. Rabizadeh, 22 NY3d 470 [2013]). The proponent of a summary judgment motion makes a prima facie showing of entitlement to judgment as a matter of law, by tendering sufficient evidence to eliminate any material issues of fact from the case (Winegrad v. New York Univ. Med. Ctr., 64 NY2d 851 [1985]). After the moving party has demonstrated its prima facie entitlement to summary judgment, the party opposing the motion must demonstrate by admissible evidence the existence of a factual issue requiring a trial (Jacobsen v. New York City Health and Hospitals Corp., 22 NY3d 824 [2014]; Zuckerman v. City of New York, 49 NY2d 557 [1980]).

Plaintiff’s motion seeking summary judgment is granted on liability as against Michael Morgan and denied as to SMW. Section 1 of the listing agreement granted plaintiff the “exclusive right to sell, lease, exchange, merge or contract to sell the real property, stock and/or the assets of the above described business (“the business”).” Thus, the agreement permitted both the assets of the SMW to be sold and also permitted the sale of the SMW stock. Although Morgan argues that the listing agreement was between SMW and plaintiff and not him (and points to the fact that SMW is called the seller), Morgan’s argument is belied by the fact that the agreement clearly contemplated the sale of the SMW stock held by the owner of such stock, which could only be sold by Michael Morgan, as the sole owner of all SMW stock. Even if it could be said that the initial agreement was only with SMW, there is no disputing that Morgan was also contemplated as a seller in the extension which was signed on June 19, 2015 by Morgan as seller. The affidavit of Morgan does not raise an issue of material issue of fact that necessitate the denials. The extension to the listing agreement was clear, precise, and complete, and Morgan signed as seller.

The agreement also states in Section 7 that “Seller agrees to pay the full comission set forth in this Agreement to the Broker in the event the property described herein is, within two years after the termination of this Agreement, sold, traded or otherwise conveyed to anyone referred to Seller by Broker or with whom Seller had negotiations during the term of this Agreement.” Plaintiff has established, and SMW and Morgan do not dispute, that Hartman was introduced to SMW and Morgan for the purposes of exploring this transaction. The fact that Hartman formed a new entity for purposes of entering into this transaction does not remove him from being “anyone referred to Seller by Broker or with whom Seller had negotiations during the term of this Agreement.”

As Morgan is a seller that sold to someone covered by the listing agreement, summary judgment is appropriate. However, Morgan’s claim of not being paid the whole amount and that there is a dispute as to the value of the services agreement entered into in connection with the sale of the SMW stock to SMWA, precludes a grant of summary judgment beyond a finding of liability against Morgan. Further, as summary judgment is granted based upon a finding that there is no genuine dispute that Morgan was the seller, summary judgment would be inappropriate against SMW or on the unjust enrichment claim against Morgan and SMW. For the same reasons, Morgan cross-motion to dismiss the Amended Complaint against him personally is denied."

BROKER COMMISSION ON COMMERCIAL LEASE

Gluck & Co. Realtors, LLC v Burger King Corp., 2018 NY Slip Op 05668, Decided on August 8, 2018, Appellate Division, Second Department:

"The plaintiff commenced this action to recover a real estate brokerage commission, alleging that it performed brokerage services for the defendants Roger Budhu and RLRC, LLC (hereinafter RLRC), to facilitate the lease of the subject property, owned by RLRC, to a franchisee of the defendant Burger King Corporation (hereinafter Burger King). At a nonjury trial, the plaintiff's president testified that she was negotiating the terms of a lease with a broker for Burger King, which had to approve the location before the subject property could be leased to a franchisee, when Budhu, the principal of RLRC, terminated the plaintiff's services upon being asked to sign a commission agreement. RLRC subsequently entered into a lease with the defendant Hillside Foods, Inc. (hereinafter Hillside), a Burger King franchisee. Budhu asserted that the lease was negotiated by a broker other than the plaintiff.

After the trial, the Supreme Court determined that the plaintiff was entitled to recover a commission from Budhu and RLRC, and a judgment was entered in favor of the plaintiff and against Budhu and RLRC in the total sum of $55,810.08. Budhu and RLRC appeal.

The Supreme Court's determination that the plaintiff was entitled to recover a commission from Budhu and RLRC was warranted by the facts (see Northern Westchester Professional Park Assoc. v Town of Bedford, 60 NY2d 492, 499). A real estate broker is entitled to recover a commission upon establishing that it (1) is duly licensed, (2) had a contract, express or implied, with the party to be charged with paying the commission, and (3) was the procuring cause of the transaction (see Zere Real Estate Servs., Inc. v Parr Gen. Contr. Co., Inc., 102 AD3d 770, 773; Sutton & Edwards, Inc. v 68-60 Austin St. Realty Corp., 70 AD3d 810; Hentze-Dor Real Estate, Inc. v D'Allessio, 40 AD3d 813). There is no dispute that the plaintiff is a licensed brokerage firm. [*2]Although Budhu and RLRC contend that the plaintiff cannot recover a commission because one of its employees, who is not a licensed broker pursuant to Real Property Law § 442-d, performed brokerage services, the credible evidence established that this employee did not act as a broker.

The plaintiff established that it had an implied contract to provide brokerage services for Budhu and RLRC. The plaintiff also established that it was the procuring cause of the transaction. In order to establish that it was the procuring cause of a transaction, a "broker must establish that there was a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation" (Douglas Elliman, LLC v Silver, 136 AD3d 658, 660 [internal quotation marks omitted]; see Talk of the Town Realty v Geneve, 109 AD3d 981; Zere Real Estate Servs., Inc. v Parr Gen. Contr. Co., Inc., 102 AD3d at 773). While the plaintiff was not involved in the negotiations leading up to the completion of the deal between RLRC and Hillside, it established that it created an amicable atmosphere in which negotiations proceeded, and that it generated a chain of circumstances that proximately led to the transaction (see Saunders Ventures, Inc. v Catcove Group, Inc., 151 AD3d 991, 994; Hentze-Dor Real Estate, Inc. v D'Allessio, 40 AD3d at 816). Even if the plaintiff were not the procuring cause of the transaction, it would still be entitled to recover a commission, as the evidence established that Budhu and RLRC terminated the plaintiff's activities in bad faith and as a mere last-minute device to escape the payment of the commission (see Saunders Ventures, Inc. v Catcove Group, Inc., 151 AD3d at 994-995; Friedland Realty v Piazza, 273 AD2d 351).

Moreover, even assuming that there was no contract, express or implied, between the parties, the plaintiff would be entitled to recover for its services in quantum meruit in order to avoid the unjust enrichment of Budhu and RLRC (see Curtis Props. Corp. v Greif Cos., 212 AD2d 259, 266). The plaintiff established that it performed services in good faith, that Budhu and RLRC accepted the services, that it expected to be compensated therefor, and the reasonable value of the services (see Zere Real Estate Servs., Inc. v Parr Gen. Contr. Co., Inc., 102 AD3d at 772; Tesser v Allboro Equip. Co., 73 AD3d 1023, 1026)."

CONTRACTS - COUNTEROFFER NOT REJECTED

Gator Hillside Vil., LLC v Schuckman Realty, Inc., 2018 NY Slip Op 01178, Decided on February 21, 2018, Appellate Division, Second Department:

"The plaintiff is the owner of a shopping center in Smithtown, which had commercial space for lease. The defendant is a real estate brokerage firm. One of its agents, Ari Malul, sent the plaintiff a letter of intent on behalf of a client, proposing to begin negotiations on a 10-year lease agreement. The initial proposal included an obligation by the plaintiff to pay the defendant a brokerage fee based on a certain rate. Negotiations ensued between Malul and James Goldsmith, the president of the plaintiff. During the negotiations, Goldsmith made it clear that the plaintiff would not pay the brokerage fee demanded by the defendant. In an email to Malul dated October 30, 2011, Goldsmith made a take-it-or-leave-it counteroffer in which the plaintiff would pay the defendant a commission of five percent of the rent for the first five years of the lease agreement if [*2]it wanted to move forward on the deal. Malul did not object to or reject the offer, but instead indicated that he would speak to his client regarding a good faith deposit. Subsequently, the lease agreement was entered into between the plaintiff and the client, with no further discussions of the brokerage fee. The defendant then demanded from the plaintiff a brokerage fee based on the rate set forth in its initial letter of intent. The plaintiff refused to pay that amount, and eventually commenced this action seeking a judgment declaring the amount of the brokerage commission due. The defendant served an answer with counterclaims seeking payment of the brokerage fee. The plaintiff moved for summary judgment on the complaint and, in effect, dismissing the counterclaims. The Supreme Court granted the motion and entered a judgment declaring that the brokerage commission due to the defendant is five percent of the rent for the first five years of the lease agreement, equaling $24,650, and dismissed the defendant's counterclaims. The defendant appeals.

"[T]he existence of a binding contract is not dependent on the subjective intent of [the parties]" (Brown Bros. Elec. Contrs. v Beam Constr. Corp., 41 NY2d 397, 399; see Civilized People, Inc. v Milk St. Café, Inc., 129 AD3d 761, 762; Minelli Constr. Co., Inc. v Volmar Constr., Inc., 82 AD3d 720, 721). "In determining whether the parties entered into a contractual agreement and what were its terms, it is necessary to look, rather, to the objective manifestations of the intent of the parties as gathered by their expressed words and deeds" (Brown Bros. Elec. Contrs. v Beam Constr. Corp., 41 NY2d at 399; see Civilized People, Inc. v Milk St. Café, Inc., 129 AD3d at 762; Minelli Constr. Co., Inc. v Volmar Constr., Inc., 82 AD3d at 721). "That means, simply, that the manifestation of a party's intention rather than the actual or real intention is ordinarily controlling" (Mencher v Weiss, 306 NY 1, 7; see Hotchkiss v National City Bank of N.Y., 200 F 287, 293 [SD NY], affd 201 F 664 [2d Cir], affd 231 US 50).

Here, the plaintiff established, prima facie, its entitlement to a judgment declaring that the brokerage commission due was five percent of the rent for the first five years of the lease agreement by submitting evidence that the defendant did not reject the counteroffer, but instead proceeded to have its client enter into the lease agreement. "While mere silence, when not misleading, cannot be construed as acceptance, a counteroffer may be accepted by conduct" (Daimon v Fridman, 5 AD3d 426, 427 [citation omitted]; see McIntosh v Niederhoffer, Cross & Zeckhauser, 106 AD2d 774, 775; John William Costello Assocs. v Standard Metals Corp., 99 AD2d 227, 231; cf. Matter of Albrecht Chem. Co. [Anderson Trading Corp.], 298 NY 437, 440). The defendant's conduct of moving forward with the lease agreement upon receiving the plaintiff's counteroffer established that the objective manifestation of the parties' intent was an agreement to the brokerage rate set forth in the counteroffer (see Brown Bros. Elec. Contrs. v Beam Constr. Corp., 41 NY2d at 399; Civilized People, Inc. v Milk St. Café, Inc., 129 AD3d at 762; Minelli Constr. Co., Inc. v Volmar Constr., Inc., 82 AD3d at 721). In opposition, the defendant failed to raise a triable issue of fact."

A BROKER IS ENTITLED TO A COMMISSION WHEN.....

REBENWURZEL v. SWIECA, 2016 NY Slip Op 50068 - NY: Supreme Court 2016:

"It is well established that "[i]If negotiations between parties brought together by a broker are unproductive and the parties, in good faith, withdraw and abandon the proposed purchase and sale, a subsequent renewal of negotiations, followed by a sale at a lesser price, does not entitle the broker to a commission as the broker was not the procuring cause of the sale" (11 NY Jur 2d, Brokers § 166; see also Leipham, Inc. v Grosodonia, 21 AD2d 847, 847 [4th Dept 1964]). "In the absence of fraud or bad faith on the part of the sellers, the broker is not entitled to [a] commission on a sale negotiated after the term of [its] employment, even though the sale is negotiated with a buyer introduced to the seller by the broker" (Bashant v Spinella, 67 AD2d 1100, 1100 [4th Dept 1979]).

A real estate broker who initially called the property to the attention of the ultimate purchaser "does not automatically and without more make out a case for commissions simply because [it] initially called the property to the attention of the ultimate purchaser" (Hentze-Dor Real Estate, Inc., 40 AD3d at 815, quoting Greene v Hellman, 51 NY2d 197, 205-206 [1980]). "Indeed, there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the bare introduction and the consummation'" (Hentze-Dor Real Estate, Inc., 40 AD3d at 816 [internal quotation marks omitted]; see also SPRE Realty, Ltd. v Dienst, 119 AD3d 93, 98 [1st Dept 2014]).

It is true that "in order to qualify for a commission, a broker need not have been involved in the ensuing negotiations or in the completion of the sale (Hentze-Dor Real Estate, Inc., 40 AD3d at 816; see also Buck v Cimino, 243 AD2d 681, 684 [2d Dept 1997]). However, where, as here, "the broker is not involved in the negotiations leading up to the completion of the deal, the broker must establish that [it] created an amicable atmosphere in which negotiations proceeded or that [it] generated a chain of circumstances that proximately led to the sale'" (Hentze-Dor Real Estate, Inc., 40 AD3d at 816, quoting Dagar Group v Hannaford Bros. Co., 295 AD2d 554, 555 [2d Dept 2002]; see also Friedland Realty v Piazza, 273 AD2d 351, 351 [2d Dept 2000])."

ETHICS - ATTORNEY AS BROKER AND ATTORNEY

Can an attorney serve as lawyer and broker in same real estate transaction? According to New York State Bar Association Committee on Professional Ethics Opinion 1117 (4/4/17), a lawyer who receives a broker’s commission in a real estate transaction may not also serve as the lawyer for the buyers, even if the buyers are long-time clients and friends and have requested both kinds of services and even if the legal services are provided pro bono.

"Such personal interest conflicts are generally present when a lawyer provides brokerage services as well as legal services in the same real estate transaction. We have opined on numerous occasions that a lawyer may not act as an attorney on behalf of any party to a real estate transaction in which the lawyer is also acting as a broker. See, e.g. N.Y. State 1013 ¶ 1 (2014); N.Y. State 933 ¶ 7 (2012); N.Y. State 919 ¶ 3 (2012). In N.Y. State 753 (2002), we explained our reasoning:

The rationale for these opinions is that a lawyer should not have a personal stake in the advice rendered, and a broker who is paid only if the transaction closes cannot be fully independent in advising the client as a lawyer.

See also N.Y. State 1015 (2014) (quoting N.Y. State 753 and citing later opinions)."

NEW LAW FOR REAL ESTATE BROKERS AND SALESMEN

Paragraph (a) of subdivision 3 of section 441 of the Real Property Law is now amended, in the hope of promoting consumer protection, by requiring real estate licensees to, upon the licensee’s initial renewal, have two hours of instruction particularly relating to the law of agency. Thereafter, such license renewal would require at least one hour of instruction in the law of agency, providing real estate professionals with continuing education to help ensure a full understanding by the consumer of the roles agency relationships play in real estate transactions.

 " (a) No renewal license shall be issued any licensee under this article for any license period commencing November first, nineteen hundred ninety-five unless such licensee shall have within the two year period immediately preceding such renewal attended at least twenty-two and one-half hours which shall include at least three hours of instruction pertaining to fair housing and/or discrimination in the sale or rental of real property or an interest in real property, AT LEAST ONE HOUR OF INSTRUCTION PERTAINING TO THE LAW OF AGENCY EXCEPT IN THE CASE OF THE INITIAL TWO-YEAR LICENSING TERM FOR REAL ESTATE SALESPERSONS, TWO HOURS OF AGENCY RELATED INSTRUCTION MUST BE COMPLETED, and successfully completed a continuing education real estate course or courses approved by the secretary of state as to method, content and supervision, which approval may be withdrawn if in the opinion of the secretary of state such course or courses are not being conducted properly as to method, content and supervision. For those individuals licensed pursuant to subdivision six of section four hundred forty-two-g of this article, in the individual's initial license term, at least eleven hours of the required twenty-two and one-half hours of continuing education shall be completed during the first year of the term. Of those eleven hours, three hours shall pertain to applicable New York state statutes and regulations governing the practice of real estate brokers and salespersons. To establish compliance with the continuing education requirements imposed by this section, licensees shall provide an affidavit, in a form acceptable to the department of state, establishing the nature of the continuing education

EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted."