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Lanard & Axilbund, Inc. v. Whitesell Enterprises

A-2140-97T2 (N.J. Super. App. Div. 1998) (Unpublished)

BROKERS; COMMISSIONS—The buyer of a landlord’s building is not an affiliate of its seller and commissions based upon leases made by affiliates can not be charged against such a buyer.

A real estate broker procured a tenant for office space. By letter agreement, the building owner agreed to pay a 6% commission on the monthly rent. Three years later, the tenant relocated to a nearby office building owned by the same developer. Two years after that, the developer, through a series of transactions, sold the second building and yet a third building to a new owner. Finally, the tenant moved to the third building. Thereafter, a successor to the original real estate broker claimed a commission on the new lease for the third building. Its theories against the new owner were breach of contract, unjust enrichment, and equitable lien. The lower court found for the new owner and dismissed the broker’s complaint on a summary judgment motion.

The brokerage agreement stated that the commission would be based on rentals collected “during all periods of the tenant’s occupancy which include options, renewals, extensions and expansions.” Therefore, the issue presented was whether the relocation to the third building constituted an “expansion” under the commission agreement. In making its analysis, the lower court, with the ratification of the Appellate Division, found that the tenant’s move to the third location with a larger capacity, a new lease, and with a new landlord which was not an affiliate of the prior landlord, did not constitute an “expansion” of the prior lease. In addition, the letter agreement, by its own terms, was limited in application to the then-existing lease. Apparently, the transaction took the form of a termination of the prior lease and the execution of a new lease for the third building. There was a provision in the original commission agreement that entitled the broker to a commission if the underlying lease was terminated (instead of being modified), and the tenant leased space controlled by the original landlord or an affiliate. Unfortunately for the broker, the Court found that the new owner was not an affiliate of the original landlord and the resulting lease was not a modification of the prior lease. For that reason, the Court found no contractual relationship between the broker and the new owner. Consequently, the broker was not entitled to a commission based upon the tenant’s lease in the third building.


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