Buyer’s Broker Earned Its Commission

A buyer’s broker earned its commission where it substantially complied with the statute prescribing the requisites of an enforceable broker contract and it would have been inequitable to deny the commission. The Connecticut Appellate Court upheld the trial court’s award of the commission in NRT New England, LLC v. Jones, to be officially released on February 9, 2016.

Defendant entered into an exclusive agency agreement with plaintiff. The agreement provided that plaintiff earned a 2.5% commission if defendant purchased a home within a certain geographic area during the term of the agreement regardless of whose efforts resulted in the purchase. Plaintiff agreed to seek its compensation from the seller “whenever feasible.” Upon plaintiff’s inquiry, defendant denied that he had any arrangement with any other broker.

During the term of the agreement, defendant notified plaintiff that he had purchased a home within the agreement’s geographic area — through a different broker with whom he also had an exclusive agency agreement. Plaintiff placed a broker’s lien on the property for a dollar amount that represented a 2.5% commission on the purchase price. Plaintiff commenced an action to foreclose the broker’s lien and for breach of contract.

The trial court found for plaintiff on its breach of contract claim concluding that plaintiff’s agreement with defendant substantially complied with CGS § 20-325a and that it would have been inequitable to deny plaintiff the commission. The trial court also rejected defendant’s contention that plaintiff should be denied a recovery for failing to seek compensation from the seller’s broker because it would not have been feasible for plaintiff to do so.

Defendant appealed. The Appellate Court affirmed.

Arguments on Appeal

Defendant argued that (i) the agreement did not comply with § 20-325a and it would not be inequitable to deny plaintiff a recovery; (ii) it was feasible for plaintiff to have sought compensation from seller’s broker.

Defendant also argued that the trial court improperly awarded plaintiff (i) a 2.5% commission when the seller’s listing provided only a 2% commission; (ii) a commission on the full purchase price when defendant acquired only a 50% interest in the property (his fiancee got the other 50%).

Appellate Court’s Conclusions

Section 20-325a(b) sets forth seven requirements for an enforceable broker’s contract. The first requirement is that the contract be in writing. The sixth requirement is that the contract contain a specified notice of the broker’s statutory lien rights. The statute recites the specified notice in all caps but the statute does not explicitly require the provision to be capitalized in the contract. Plaintiff’s contract contained the notice but it wasn’t capitalized. Plaintiff’s notice also misidentified the subsection of the statute relating to broker’s lien rights. Defendant argued that, because of these two deficiencies, plaintiff did not substantially comply with § 20-325a(b) and therefore did not have an enforceable contract.

The Appellate Court noted that the statute itself provides a safe harbor. More specifically, section 20-325a(d) allows a broker to recover a commission if the agreement is in writing, substantially complies with the other six requirements and “it would be inequitable to deny [a] recovery ….” The agreement substantially complied with the statute notwithstanding the failure to capitalize the broker’s lien notice because the legislature did not require capitalization for this notice as it had for other notices. Moreover, finding the notice non-compliant because of the subsection misidentification amounted to denying a recovery due to a scrivener’s — a result the court deemed too harsh.

As to the equitable considerations, the court noted that plaintiff’s agent had performed hundreds of hours of services for defendant and defendant had lied in failing to disclose his other broker. Under those circumstances, it would be inequitable to deny plaintiff a commission. The court rejected defendant’s contention that the equities favored him because plaintiff had nothing to do with the property he purchased. The court observed that defendant agreed to pay plaintiff a 2.5% commission regardless of whose efforts led to the purchase. “However unjust this result [awarding plaintiff a commission] may seem to the defendant in hindsight, we cannot say it is inequitable because it is precisely what he agreed to.”

Turning to feasibility of seeking compensation from the seller’s broker, the court agreed with plaintiff that it would have been futile because plaintiff had nothing to do with defendant’s purchase of the property. Since “[t]he law does not require an act which would be a mere futility”, plaintiff had no obligation to ask the seller’s broker to pay plaintiff a commission.

The Appellate Court declined to consider defendant’s other two arguments regarding calculation of the commission because defendant inadequately briefed them. They were conclusory without any legal citation.

Impact

The broker’s lien notice does not have to be capitalized even though it’s capitalized in the statute, at least where the substantial compliance safe harbor is in play. Capitalization may be an open question where the safe harbor provision is not in play.

About the Photo

I searched photos for “double dealing” because that’s how I viewed defendant’s two brokerage contracts. I don’t know how the photo depicts double dealing but I liked it, so I used it.