NY real estate commission law is an important legislation in the state's property market. Stakeholders in the real estate industry need to understand the provisions of this law and how it affects their activities.

Should a Real Estate Broker Be Licensed in the State of New York?

A real estate broker that wants to operate in New York must be licensed with the state.

Can a Real Estate Agent or Salesperson Sue for a Real Estate Commission?

Except in situations where the real estate broker assigns the real estate agent or salesperson the commission, the real estate agent or salesperson is not eligible to claim a real estate commission.

What Is the Appropriate Remedy for Real Estate Commission Motions?

The appropriate remedy used in real estate commission motions is the summary judgment. In summary judgment, the suing party has to provide legally sufficient proof of entitlement.

When Is an Employment Contract Established?

An employment contract comes into effect when a property owner lists his/her building with the broker, and the latter goes about to find suitable buyers or tenants based on the owner's conditions. According to New York Law, if the service of a real estate broker is used without any agreement that limits the earning of a commission, the broker shall be entitled to a commission when he provides a lessee who is capable and ready to sign a lease agreement on the terms of the lessor. This provision can be applied to sales and lease transactions.

When Can a Broker Earn a Commission?

A broker can only earn a commission if he arranged a successful transaction. He can't earn a commission by simply introducing the prospects or showing them the property.

Is a Written Commission Agreement Required?

A written commission agreement is not required, but it is encouraged. Licensed real estate brokers and salespersons are exempted from having written commission agreements under General Obligations Law section 5-701 (10).

How Can an Employment Contract Be Established?

A contract agreement can be established in the following circumstances:

  • Where an agreement does not exist, the establishment of an employment contract is achieved by evidence proving the broker's labor or acceptance of the broker's efforts towards the transaction. Regardless of the existence or absence of an agreement between the broker and the principal, the broker is entitled to some compensation if the principal benefits from the services of the real estate broker in situations where it's not justifiable to deny him payment.
  • The parties to a lease cannot assume that the broker is working for free, and they already understand that the broker is entitled to some relief by accepting his services. The broker has accomplished his task when he procures a lessee for the lessor, and both parties agree and sign a lease agreement. Thus, the broker is entitled to a commission.
  • Where a commission agreement has been signed between the principal and the broker as compensation for the latter's services, the broker can claim summary judgment for a commission as a third-party beneficiary of the lease or contract.

How Can Real Estate Broker Commission Contract Be Implied?

The circumstances surrounding the transaction will determine whether a real estate broker commission will be implied. If an express commission agreement already exists, then the contract cannot be implied.

A broker cannot rely on the principle of ratification to claim commission simply because a seller accepted the result of an unsolicited service. Before a contract can be implied to allow the broker to claim compensation, the broker must have provided his services in such a way that the beneficiary understands that the services were being performed on their behalf.

Are You Entitled to a Reasonable Commission?

The seller is not obliged to compensate the broker if he voluntarily produced a buyer. The seller must understand that the real estate broker is working on their behalf in return for compensation. Also, the seller must have shown that he accepts the services of the broker.

If the agreement between the parties does not specify the amount to be paid as commission, the broker will receive fair and reasonable compensation for his labor. If a contract was not signed, the broker is entitled to a reasonable amount of compensation worth his effort for setting up the deal.

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