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Silverman & Kost, P.C. v. Catsimatidis

98-2934 (U.S. Dist. Ct. D. N.J. 1999) (Unpublished)

BROKERS; ATTORNEYS—A law firm acting as a broker with no significant attorney functions is required to have a real estate broker’s license to collect a commission for arranging a mortgage loan.

A New Jersey law firm was engaged in the practice of law and related activities such as real estate and mortgage brokering. It sued a landowner, his real estate and business advisor, and his consulting company to recover a brokerage commission or a finder’s fee for introducing the landowner to a lender willing to issue a $25,000,000 mortgage loan which never closed. The properties were in Florida. The law firm obtained the mortgage commitment letter and the mortgage from a company located in New Jersey. All of the negotiations between the law firm and the mortgage company took place within New Jersey. Instead of closing on the mortgage loan, the landowner sold the properties. Unfortunately for the law firm, the New Jersey Real Estate Brokers and Licensing Act, in relevant part, states that: “[no] person, firm, partnership, association or corporation shall bring or maintain any action in the courts of this State for the collection of compensation for the performance of any of the acts mentioned in this article without alleging and proving that he was a duly licensed real estate broker at the time the alleged cause of action arose.” Accordingly, in order to bring an action for the collection for a commission, the law firm was required to allege that it was a licensed real estate broker. Clearly, the law firm was acting as a “real estate broker” when it negotiated a loan to be secured by a mortgage, even though the properties were in Florida. Because New Jersey’s law and public policy clearly states that failure to be licensed as a real estate broker is per se fatal to any claim for a real estate or mortgage commission, the law firm’s suit failed to state a claim upon which relief could be granted. This was true even though attorneys admitted to practice law are exempted from the licensing requirement of the Act if their real estate and mortgage brokering is incidental and ancillary to an attorney-client relationship. Because the allegations of the complaint established that the law firm was acting as a broker with no significant attorney functions, the attorney exception to the Act did not apply in this case.


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