New York State Association of REALTORS® A risk management tool for LEGALLINES New York’s REALTORS® SECOND QUARTER 2014 DOS fines broker for illegally collecting additional commission By S. Anthony Gatto, Esq., NYSAR Legal Counsel In the matter of New York State Department HRA on November 22, 2011. The agreement Both Trager and Bond admitted that they of State v Trager and Bond, the Administra- titled, “Broker’s Statement for Fee Payment would not permit Hannah to move into the tive Law Judge heard the issue of whether a by Check,” stated that the brokerage was only apartment until they paid the brokerage broker can collect an additional commission entitled to 50 percent of one month’s rent the difference between what HRA paid and from a tenant that is receiving for a commission and that the what the brokerage normally charges for a public assistance. brokerage agrees that the ten- rental, one full month’s rent. Bond held the New York News ants are not responsible for any apartment key until Hannah made the ad- In this matter, Omega Bond monies in excess of the amount ditional payment. was a licensed salesperson with issued by HRA, which is 50 Trager, LLC (brokerage), a brokerage in New percent of one month’s rent. The brokerage The brokerage tried to justify the additional York, NY whose principal broker was Victor freely signed the agreement. commission charged to Hannah by submitting I. Trager (broker). The brokerage was acting an undated client registration and fee agree- as a dual agent in a rental transaction with The brokerage received a check for 50 ment Hannah signed prior to the brokerage Brenda and Yolonda Hannah, a mother and percent of the monthly rent from HRA signing the “Broker’s Statement for Fee Pay- daughter looking for an apartment to rent. on the same day the “Broker’s Statement ment by Check” from HRA. In the agreement The Hannah’s relied on financial assistance for Fee Payment by Check” was signed. supplied by the brokerage, Hannah agrees to from the New York City Human Resources The very next day, the brokerage received pay one month’s rent as a commission. Administration (HRA), a division of the New a check from the Hannah’s for the same York City Department of Social Services. The amount contrary to the agreement signed The brokerage tried to explain their practice brokerage entered into an agreement with by the brokerage. of charging one month’s rent as a commis- See Commission, page 2 Cooperating broker not entitled to commission from seller By S. Anthony Gatto, Esq., NYSAR Legal Counsel In the matter of Saunders and Associates v. the property on the OREX Exchange. OREX that needed to be met by Saunders. There Morrow et al before the Supreme Court, Suffolk permits members to co-broke the property would need to be a valid contract between County, the question of whether a broker was by procuring a purchaser. OREX states that the parties clearly and directly intended for the procuring cause of the sale and entitled to commissions are not due until title passes to Saunders’ benefit. Furthermore, Saunders a commission from the seller was addressed. a buyer procured by the selling broker and would need to show that the language of the Saunders and Associates (Saunders) brought the commission is collected by the listing purchase contract clearly evidences an intent this action in an attempt to recover commis- broker. Saunders claims that by listing the to permit enforcement by the third party. sions as they believed they were the procuring property on OREX, Elliman co-brokered cause of the sale by introducing the purchaser the deal with all active members of OREX Morrow stated that they never entered into to the property. Morrow made a motion to through the Universal Co-Brokerage Agree- an agreement, met or communicated with dismiss the action alleging Saunders was not ment agreed to by all members of OREX. Saunders at any point during the transac- the procuring cause and as such, would not be Saunders also alleged they were a third-party tion. Furthermore, Morrow stated that at entitled to a commission. beneficiary under the contract of sale and as the closing of the property, they paid the such would be entitled to a commission from full commission as set forth in the Exclusive Morrow was the owner of real property the seller through Elliman. Right to Sell Agreement to Elliman. That under an Exclusive Right to Sell Agreement represented the only commission they were with Prudential Douglas Elliman Real Es- The court discussed the elements required to contractually obligated to pay. tate, dated February 7, 2011. Elliman listed be a third-party beneficiary under a contract See Broker, page 2 PAGE 2 PAGE 3 Court deems broker not the procuring cause in transaction Massachusetts court rules salespeople are independent contractors By S. Anthony Gatto, Esq., NYSAR Legal Counsel In the matter of Khurana v. Coldwell Banker The Appellate Division only addressed purchaser to the property, which, alone, A Massachusetts appellate court has consid- The Superior Court of the Commonwealth salespeople and so the court entered judg- Trevjon Realty (CB Trevjon), a decision the degree of credit given to CB Trevjon’s is insufficient to warrant the payment of ered a potential class action lawsuit brought of Massachusetts, Suffolk, entered judgment ment in favor of the owners. The two statutes made by the District Court of Nassau evidence over that of Khurana by the lower a commission.” against a broker by former salespeople alleg- in favor of the brokerage and denied class were in conflict, since the license law re- County, Fourth District, was appealed before court. The Appellate Division found no ing that they were misclassified as indepen- certification for the lawsuit. The court first quired broker supervision of the salespeople the Appellate Division, Second Department. reason to disturb the lower court’s decision. It is clear from the courts additional anal- dent contractors. considered the differing requirements found yet allowed them to operate as independent The decision dismissed an action by Khura- ysis that merely showing or introducing in the state’s independent contractor classifi- contractors, while the independent contrac- na claiming to be the procuring cause of a The Appellate Division could have stopped the property to the ultimate purchaser is A group of real estate salespeople (salespeo- cation statute and the real estate license laws. tor statute demands that the independent transaction. The Appellate Division agreed there and published the decision, but not deemed to be procuring cause. ple) who were formerly associated with real contractor not be involved in the usual with the lower court and provided an ad- they cited additional legal precedent for a estate brokerages owned by Demetrios Sal- The state’s independent con- business of the entity and also ditional analysis of the case, which clarifies dismissal had the lower court given more Author’s Note: An agency disclosure form poglou and Yuan Huang (collectively, own- tractor statute is designed to be individually established in one of the more frequently asked questions credit to Khurana’s evidence. The court from Khurana would have been helpful to ers) brought a class action lawsuit against protect individuals from being National Case the trade or business for which on the NYSAR Legal Hotline. went on to state that Khurana “premised his at least prove substantive contact with the the owners for allegedly misclassifying the classified as an independent they are providing the service. alleged entitlement to a commission on his purchaser but there is no discussion on that salespeople as independent contractors contractor when they are in fact Since it would be impossible CB Trevjon was the listing broker for a claim that he had introduced the ultimate matter in the decision. instead of employees. Based on this alleged employees. An individual is presumed to for a salesperson to satisfy both statutes, the property that ultimately closed. Khurana misclassification, the salespeople claimed be an employee unless the following factors court found that the real estate license law claims to have shown the property to the Commission continued from page 1 that there were violations of the state’s wage can be demonstrated: the individual is free should control because that statute is specific ultimate purchaser and as such, was entitled payment laws, including minimum wage and from control and direction in connection to the real estate industry, whereas the other to the commission as selling broker. At the sion for rentals compared to two month’s the brokerage liable for failure to supervise, overtime requirements, and other penalties with the service he/she is providing; the statute was more general. trial, CB Trevjon denied that Khurana in- rent, the “typical rate” for a residential unit. collecting an improper fee, failing to provide for the misclassification. service provided is outside the usual course troduced the buyer to the property and that The brokerage claimed that only charging the tenant access to the apartment until of business for the entity; and the individual The court also found it persuasive that it had any obligation to pay a commission. one month’s rent as a commission was be- the illegal fee was collected and knowingly All of the salespeople were involved in the is independently engaged in the trade or the Legislature had recently clarified in A commission agreement was introduced ing done “as a courtesy, and we tried to - try violating the HRA agreement. sale or leasing of apartments while they were profession for the service provided. If an the license laws that salespeople could be into evidence identifying CB Trevjon and to help the needy, which we’re doing out of associated with the brokerage.