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Conditions Precedent in Brokerage Agreements

BY Stewart E. Sterk
December 27, 2004

In the absence of language to the contrary, a real estate broker in New York becomes entitled to a commission when the broker produces a purchaser who is ready, willing, and able to consummate the sale. That is, if the seller changes its mind, or proves unable to deliver title, the seller remains liable for the broker's commission. Dispute about whether broker has procured a ready, willing, and able buyer has generated considerable litigation, but those disputes are not the subject of this article. Instead, this article focuses on the import of “language to the contrary” — language that purports to alter the common law obligation of the seller to the broker.

The Dagar Case

Consider the problem that recently confronted the Second Department in Dagar Group, Ltd v. South Hills Mall, LLC (NY Law Journal, 11/30/04, p. 29, col. 2). The landlord entered into a brokerage agreement with a termination date of Dec. 31, 2000. The agreement required the broker to provide the landlord with a list of prospective tenants it had solicited within 30 days of the termination date, and the broker would become entitled to a commission if a lease for space in landlord's shopping mall was “signed and delivered” within 1 year of the landlord's receipt of the list. The broker sent the lists to the landlord by letters dated Jan. 19 and Jan. 26 of 2001. One of the firms on the list ultimately executed a lease on March 1, 2002 – more than 13 months after the landlord received the list from the broker. The landlord refused to pay the commission, and the broker sued.

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