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Archie Schwartz Company v. Eden Wood Realty

A-2108-04T2 (N.J. Super. App. Div. 2006) (Unpublished)

BROKERS; COMMISSIONS — Where a brokerage commission agreement calls for payment upon the “execution of a new lease or execution of a renewal option,” the broker is not entitled to payment upon commencement of a month-to-month tenancy following the expiration of the lease or upon an automatic lease renewal, because neither requires an “execution” by the tenant.

A commercial landlord utilized a broker to find a tenant. The landlord and broker had a written commission agreement which provided for an extra commission if the lease was extended or renewed. At the conclusion of the lease’s term, the tenant did not vacate the premises. The broker sued, claiming the tenant had exercised its lease renewal option, thereby triggering the landlord’s duty to pay the extra commission in one lump sum. The landlord and broker reached a settlement and the broker voluntarily dismissed the suit. The settlement agreement provided for the payment of the extra commission in installments and acknowledged that the commission agreement entitled the broker to a lump sum commission payment in the event the tenant either exercised its renewal option or executed a new lease. A few months later, the broker filed another suit claiming the landlord breached the terms of the settlement by failing to pay the agreed-upon commission when due. This second complaint included the allegations from the first complaint that, because the lease had been renewed, the broker was entitled to the additional commission. In effect, the broker sued for one lump sum payment of the extra commission. The landlord argued that all claims pertaining to the broker’s commission had been resolved by the earlier settlement. The lower court agreed, and the second suit was dismissed. The broker appealed.

The settlement agreement specifically referenced execution of a new lease or execution of a renewal option as triggering events before the broker would be entitled the extra commission in one lump sum payment. Because neither the commencement of a month-to-month tenancy following the expiration of a lease nor an automatic lease renewal would require an “execution” by the tenant, and because the tenant did not “execute” a new lease, there could be no triggering event that would entitle the broker to a lump sum commission payment. Consequently, dismissal of the second suit was affirmed.

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