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Rennert Diana & Co., Inc. v. Hillside Industrial Center Realty Co.

A-3515-00T1 (N.J. Super. App. Div. 2002) (Unpublished)

BROKERS— Absent an agreement to the contrary, a real estate broker is entitled to commissions for lease renewals and extensions even where the lease terms change dramatically from lease to lease.

Over the course of about eight years, a tenant who had originally leased industrial space for one year stayed at the industrial park. After the first year, another one year lease was signed. The new lease contained different provisions, the rent was changed and the space was increased. Additional leases were signed and at various times the tenant held over on a month-to-month basis. Along the way, the terms of the original lease were modified, the tenant rented various amounts of space, and there were consent judgments each establishing a month-to-month tenancy. A real estate broker claimed that it had introduced the tenant to its landlord. The introduction was made before real estate commissions became subject to the Statute of Frauds in 1996. Therefore, an oral agreement between a broker and a property owner would have been effective before 1996 even though “no commission could be earned without a signed writing or written notice” after the beginning of 1996. A jury found that the parties had agreed to a commission arrangement when the tenant first occupied its premises and awarded real estate commissions to the broker. On appeal, the property owner contended that the lower court “charged them ‘out of the case’ by instructing the jury that the broker’s commission was not limited to the express terms of the lease, but instead continued through ‘any extensions, renewals, even though not made on the exact terms of the original lease.’” Its argument was that the lower court should have instructed the jury that the broker’s “right to a commission terminated upon expiration or termination of the underlying lease.” In doing so, the owner attempted to rely on two cases. The Court rejected the first case as inapplicable because, in that case, the “commission agreement was limited by the lease agreement.” The second case was rejected because the lease itself provided that a commission was due “so long as said Lessee is a tenant under this lease, or any renewal thereof, of any new lease contracted within one year from the expiration hereof.” That limitation did not apply to the tenancy before the Court. “Commissions are earned not because the terms of a later lease match the terms of the original lease, but because [a broker] had produced a tenant having the valuable potential of staying beyond the original term, either as a tenant or as the purchaser of the property.” Further, “[i]f the landlord and broker agree to pay a commission when a tenant renews, extends or takes additional space, the right to the commission does not terminate because the same tenant executes a new lease, with an increased rental for additional space. ... In addition, where the broker and landlord have agreed to pay a commission for the tenant’s extension of the lease, should the tenant hold-over without extending the lease, the broker is entitled to a commission for the additional time the tenant remains.” While the right to a commission is dependent upon the parties’ agreement, “courts will not allow the landowner to ‘reap the fruits of the broker’s labor and then deny [the broker its] just reward.’” Here, the Appellate Division pointed out that the jury resolved the issue as to the exact terms of the oral agreement between the parties and that once the jury reached a conclusion as to the terms of that agreement, the lower court’s instructions that “unless otherwise agreed to between the landlord and the broker, as long as the relationship of the landlord and the tenant is maintained, any extensions, renewals, even though not made on the exact terms of the original lease, [mean that] the broker is still entitled to his commission.”

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