Broker loses commission battle with seller

Law of the Land

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Jun. 23, 2010

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Law of the Land

Tara-Nicholle Nelson
Inman News

Deer Run Properties LLC listed a number of condominiums for sale with a real estate broker in September 2005. The listing agreement gave the listing broker the exclusive agency to attempt to sell the property for 12 months, at a 10 percent commission.

The broker listed the property on a local multiple listing service (MLS), offering a 5 percent commission as compensation to cooperating brokers/MLS members who cooperated by being the procuring cause of a sale.

Several months later, some prospective buyers contracted with Deer Run directly to purchase several of the condo units. Keys to the Lake Lodgings Co., the buyers' broker, recorded a broker's lien notice against the units and notified Deer Run of the lien. Deer Run sued to remove the lien notice, and Keys counterclaimed on grounds that Keys was the procuring cause of the sale and, thus, was entitled to a commission.

The trial court ruled in favor of seller Deer Run on its motion for summary judgment. Keys appealed to the Missouri Court of Appeals.

On appeal, the trial court's ruling against the buyers' broker, Keys to the Lake Lodging Co., was upheld. The court referenced "well-established" Missouri law for the proposition that for a seller to be liable to a buyer's broker for a sales commission, the broker must establish both that he or she was the procuring cause of the sale and had an employment relationship with the seller.

The Court of Appeals found several similar opinions in identical cases in similar jurisdictions, which found that the jilted buyer broker's only valid claim for compensation lay with the listing agent, who had offered the cooperating broker's commission via the MLS, not with the seller -- regardless of the fact that the seller was aware of the listing broker's MLS offer of subagency.

Based on these cases, Missouri law and the basic contract law principle of privity, the Court of Appeals explained, even if it was true that Keys accepted the listing broker's offer of subagency as set forth in the MLS listing of the properties by virtue of being the procuring cause of the sale, Keys' contract and claim for compensation was against the listing broker -- and not Deer Run, the seller.

Because there was no contractual privity, or relationship, between Deer Run and Keys, Keys had no valid claim against Deer Run and the trial court's ruling dismissing Keys' case was upheld.

Tara-Nicholle Nelson is author of "The Savvy Woman's Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Tara is also the Consumer Ambassador and Educator for real estate listings search site Trulia.com. Ask her a real estate question online or visit her website, www.rethinkrealestate.com.

Contact Tara-Nicholle Nelson:
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