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Archie Schwartz Co. v. E & D Properties

A-6716-01T2 (N.J. Super. App. Div. 2004) (Unpublished)

BROKERS; COMMISSIONS; LEASES—Where an assignee of a lease is not aware of a brokerage agreement between its assignor and a broker and the lease itself does not explicitly set forth the obligation, the assignee is not liable for the commission.

An agent and a seller entered into an Exclusive Listing Agreement with respect to a property, giving the agent a commission on the gross sales price in the event of a sale, or a percentage of the gross aggregate rentals for the term of a lease. A buyer, not knowing about the agreement, bought the property and subsequently renewed the lease. The agent then approached the buyer for his commission for the lease extension. When rebutted, litigation ensued.

The lease between the seller and the tenant contained only an “oblique reference” to the brokerage agreement. Furthermore, when the buyer requested all “[c]opies of any relevant documentation regarding the payment of real estate commissions,” the seller’s counsel did not send the Exclusive Listing Agreement. The seller claimed he gave the agreement to his attorney with instructions to make sure the buyer was made aware of it.

The lower court found both the seller and the buyer to be liable for payment of the commission. On appeal, the buyer argued that the evidence did not support the lower court’s finding that it implicitly accepted the commission obligation by accepting the lease assignment. The Appellate Division agreed.

The evidence brought at trial showed that neither the seller nor its counsel had disclosed the existence of the brokerage agreement even though the buyer asked for all such agreements.

Furthermore, although the lease contained a brief acknowledgment of the brokerage agreement, there was no disclosure of its terms in the lease. The Court concluded that this indirect reference was not enough to establish the buyer’s intent to assume the obligation to pay the agent’s commission. To be relieved from the duty to pay the commission, the seller had an affirmative duty to inform the buyer of the details of that obligation and to obtain clear evidence of the buyer’s intent to assume it.

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