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Commercial real estate is big business in the Big Apple. And, like many business matters, contracts largely govern the way commercial real estate is done in Manhattan. This means that the resolution of a real estate brokerage commission dispute will very likely depend on the language of the contract that the broker and the seller enter into. This is why it is important to pay attention to the details of a real estate brokerage contract.
How might this play out in real life? Let’s say that a seller and a broker enter into an agreement in which the seller agrees that the broker will have the sole and exclusive right to represent the seller in the sale of property during a certain timeframe. Let’s also say that during this timeframe the seller becomes dissatisfied with the broker and signs an agreement with another broker, and the property then is sold. Because of the existence of the first agreement, it may be the case that the seller will still owe a sales commission to the first broker.
Another issue that can come up is how much of a commission the broker should get upon an event, such as a sale, that triggers the earning of the commission. Very often, this amount will be spelled out in the contract. But what if it isn’t? This might happen if the broker and seller use a form contract that is not tailored to their specific relationship.
In this case, the New York courts might determine that the broker is entitled to a commission that is fair and reasonable. This could be defined as the customary rate in the community at the time the services are rendered. This standard could obviously trigger a contract dispute as each party presents evidence of what the customary rate is. This might be a good argument in favor of explicitly stating what the commission will be in the contract.
