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Strategic Alliance Realty, Inc. v. Alexander Charles Realty, L.L.C.

A-5366-01T5 (N.J. Super. App. Div. 2003) (Unpublished)

BROKERS; COMMISSIONS—Even though seemingly covered by a general provision in a brokerage commission agreement, an uncontemplated conveyance by way of a long term ground lease might not be commissionable as if it were a lease and to determine what commission is payable may require looking outside of the agreement.

A broker sued a property owner for commissions due and payable on a thirty year ground lease. The broker claimed that, pursuant to the listing agreement, the broker was entitled to a lump sum payment equal to five percent of the aggregate total rent payable over the term of the lease. The owner claimed that the listing agreement did not contemplate a long term ground lease for the property, and if the broker’s analysis was applied, the commissions to be paid would be far greater than the commission for a standard term lease or sale of the building. The broker claimed that the agreement was clear on its face, that the owner could not offer parol evidence to refute the terms of the listing agreement, and that it was entitled to summary judgment. The lower court agreed with the broker. The Appellate Division reversed, noting that, while parol evidence may not be admitted to alter the clear terms of a written contact, it may be used to “illuminate the meaning of a written contract.” The Court rejected the lower court’s finding that the contract was clear and unambiguous. It noted that, while the listing agreement provided for a commission for the lease or sale of the building, it did not address the issue of a long term ground lease for the property where the building would be demolished. It also noted that the lower court incorrectly dismissed expert testimony that industry practice dictated that long term ground leases were treated as sales for commission purposes and that the typical commission was an agreed percentage on the first ten years of the aggregate rent with a substantial discount on the remainder of the lease term. The Court also reversed the lower court’s ruling that the expert reports were only “net” opinions unsupported by facts of record. It noted that the expert witnesses were competent to testify as to industry custom with respect to commission agreements for long term ground leases. Their testimony was admissible, but the fact finder was responsible to determine how much weight to give to the opinions.

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