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This is a complicated scenario, but I will do my best to condense it yet still have it be comprehensible.
I am the owner of the commercial property. In 2006 I was approached by a local real estate broker who informed me that he had someone who may be interested in leasing my building. I informed him that we would be willing to entertain an offer, but a current tenant has a leasehold interest in the property. The broker informed us that they would be willing to pay the tenant for that leasehold interest. After discussing the matter with the current lessee who had been developing the space for a business, they agreed to entertain an offer to be bought out of their lease by the interested party.
The Broker then brought two individuals to see the property the following day. They expressed a strong interest and negotiations ensued. The following day the broker requested that we sign a listing agreement with him. He presented us with the listing agreement, which he had NOT signed. The listing was for a period of three months. The section for procuring cause protection period was not filled in. He had filled in the name of his brokerage and the address and contact information. He asked that we look it over and sign it and fax or mail it back to him. After we made several changes to the document, both additional terms written in by hand, and other terms crossed out, each with my initials nex to the change, we faxed the UNSIGNED contract back to him with the request that he counter-sign if he agreed with the changes and fax or mail it back to us so that we could sign it. He did not comply and ignored requests to address this issue.
Negotiations began between the parties where it became apparent to us, the owners, that the broker was NOT acting as OUR agent, but instead appeared to be working for the prospective tenant. This is demonstrated by offers and counteroffers being written on his company letterhead and in conversations. We confronted the broker with this conflict where he appeared to be acting as a dual agent without our consent. His response was that in deals this small he does not represent either side, but instead acts only as a `facilitator'. We were not comfortable with this answer, regardless of the size of the deal, which, in fact, was in excess of 1 million in rents over the term of the lease. All of these communications and conversations were memorialized in a hand written business diary.
Negotiations continued for several days where it became apparent that the broker was causing confusion and miscommunications. Direct talks between us and the prospective tenant began. The broker continued to cause problems between the parties and this was addressed in a phone conversation between us. The broker's response was that even though I had an Ivy League education, I knew nothing about real estate. In addition to the fact that I do have an Ivy League education, I also have a real estate salesperson's license. That aside, the conversation ended with the broker saying `Have a nice life' and hanging up the phone.
Negotiations continued directly between us and the prospective tenant for several months. The broker was not involved. Terms were agreed to between us, the current tenant and the prospective tenant. The current tenant was paid for their rights to a lease, and the prospective tenant signed a new lease with us. The lease was signed about 6 weeks after the Listing END date. This, the listing that was never signed or countersigned.
However, before occupancy was taken by the tenant, a contractor caused a fire and the building was destroyed. Tenant exercised it's option in the lease to quit. Security deposit was returned to the tenant. We never collected any rents from the tenant.
Now, over 5 years later, broker sends us a bill for the commission that he feels entitled to. He then proceeds to file a civil action against us that we are in the process of answering. After doing a significant amount of research, we feel that the broker is not entitled to a commission for the following reasons:
1) Broker failed to disclose and get written consent to be acting as a dual agent (tenant disclosed at prior deposition that broker was their broker, but without any written agreement).
2) Neither broker nor owner actually signed the contract- Broker only filled in the form with the name of his agency but did not sign in the space for signature below. Owner only filled in the form with the name of the corporation that owns the property and the address.
3) Deal was negotiated almost in total directly between the parties, without the aid of the broker.
4) It was our understanding that, even aside from the contract not being signed, that the relationship between owner and broker was terminated after the final phone conversation where the broker insulted me and proceeded to hang up the phone.
Those are the top four reasons why we believe he is not entitled a commission. The list could be longer given the space in this forum. Just looking for some impartial opinions and this is the perfect place to find them! Thanks for making it this far. Looking forward to hearing back.
Sounds like you have a good case. Even if the broker could argue procuring cause, there is no commission agreement to make a claim against such as there is in the MLS. I assume you have an attorney that is dealing with the civil action? Your attorney is your best source of advice.
Like he and his attorney know what the time allowed to file is i years. mnay staes its five years.The question is did he do work he was not compensated which is what will be decided in the suit.
This is a complicated scenario, but I will do my best to condense it yet still have it be comprehensible.
I am the owner of the commercial property. In 2006 I was approached by a local real estate broker who informed me that he had someone who may be interested in leasing my building. I informed him that we would be willing to entertain an offer, but a current tenant has a leasehold interest in the property. The broker informed us that they would be willing to pay the tenant for that leasehold interest. After discussing the matter with the current lessee who had been developing the space for a business, they agreed to entertain an offer to be bought out of their lease by the interested party.
The Broker then brought two individuals to see the property the following day. They expressed a strong interest and negotiations ensued. The following day the broker requested that we sign a listing agreement with him. He presented us with the listing agreement, which he had NOT signed. The listing was for a period of three months. The section for procuring cause protection period was not filled in. He had filled in the name of his brokerage and the address and contact information. He asked that we look it over and sign it and fax or mail it back to him. After we made several changes to the document, both additional terms written in by hand, and other terms crossed out, each with my initials nex to the change, we faxed the UNSIGNED contract back to him with the request that he counter-sign if he agreed with the changes and fax or mail it back to us so that we could sign it. He did not comply and ignored requests to address this issue.
Negotiations began between the parties where it became apparent to us, the owners, that the broker was NOT acting as OUR agent, but instead appeared to be working for the prospective tenant. This is demonstrated by offers and counteroffers being written on his company letterhead and in conversations. We confronted the broker with this conflict where he appeared to be acting as a dual agent without our consent. His response was that in deals this small he does not represent either side, but instead acts only as a `facilitator'. We were not comfortable with this answer, regardless of the size of the deal, which, in fact, was in excess of 1 million in rents over the term of the lease. All of these communications and conversations were memorialized in a hand written business diary.
Negotiations continued for several days where it became apparent that the broker was causing confusion and miscommunications. Direct talks between us and the prospective tenant began. The broker continued to cause problems between the parties and this was addressed in a phone conversation between us. The broker's response was that even though I had an Ivy League education, I knew nothing about real estate. In addition to the fact that I do have an Ivy League education, I also have a real estate salesperson's license. That aside, the conversation ended with the broker saying `Have a nice life' and hanging up the phone.
Negotiations continued directly between us and the prospective tenant for several months. The broker was not involved. Terms were agreed to between us, the current tenant and the prospective tenant. The current tenant was paid for their rights to a lease, and the prospective tenant signed a new lease with us. The lease was signed about 6 weeks after the Listing END date. This, the listing that was never signed or countersigned.
However, before occupancy was taken by the tenant, a contractor caused a fire and the building was destroyed. Tenant exercised it's option in the lease to quit. Security deposit was returned to the tenant. We never collected any rents from the tenant.
Now, over 5 years later, broker sends us a bill for the commission that he feels entitled to. He then proceeds to file a civil action against us that we are in the process of answering. After doing a significant amount of research, we feel that the broker is not entitled to a commission for the following reasons:
1) Broker failed to disclose and get written consent to be acting as a dual agent (tenant disclosed at prior deposition that broker was their broker, but without any written agreement).
2) Neither broker nor owner actually signed the contract- Broker only filled in the form with the name of his agency but did not sign in the space for signature below. Owner only filled in the form with the name of the corporation that owns the property and the address.
3) Deal was negotiated almost in total directly between the parties, without the aid of the broker.
4) It was our understanding that, even aside from the contract not being signed, that the relationship between owner and broker was terminated after the final phone conversation where the broker insulted me and proceeded to hang up the phone.
Those are the top four reasons why we believe he is not entitled a commission. The list could be longer given the space in this forum. Just looking for some impartial opinions and this is the perfect place to find them! Thanks for making it this far. Looking forward to hearing back.
There are several items in this story that give me pause;
First, you say that early in the negotiation it became apparent to you that, "the broker was NOT acting as OUR agent, but instead appeared to be working for the prospective tenant." Why would you have expected anything other than that? The broker came to you and said that he had a client who might be interested in yrou property. Was there something in that exchange that led you to believe that he would be working on yoru behalf?
Second, you say that the broker was working as an undisclosed dual agent. What basis do you have for that thought? As you clearly stated, he was working in a manner that made it obvious he was working for the prospective tenant, and not you. Again, did he ever say or write anything to suggest he would be working on your behlaf as well as the potential tenant's?
Third, why does the broker feel he is entitled to any form of compensation if thee was no agreement to such and if he was not involved in the negotiation? Was there a phone call or e-mail exchange that he may have interpreted to mean that he would be compensated? Perhaps the tenant had signed an agreement with him saying that he would be compensated with funds from the transaction? (Not that YOU would have to honor such an agreement, but it might shed light on his expectation of compensation.) Is it possible he thinks you waited until after the expiration in a deliberate attempt to avoid paying hi his fee?
There are several items in this story that give me pause;
First, you say that early in the negotiation it became apparent to you that, "the broker was NOT acting as OUR agent, but instead appeared to be working for the prospective tenant." Why would you have expected anything other than that? The broker came to you and said that he had a client who might be interested in yrou property. Was there something in that exchange that led you to believe that he would be working on yoru behalf?
Second, you say that the broker was working as an undisclosed dual agent. What basis do you have for that thought? As you clearly stated, he was working in a manner that made it obvious he was working for the prospective tenant, and not you. Again, did he ever say or write anything to suggest he would be working on your behlaf as well as the potential tenant's?
Third, why does the broker feel he is entitled to any form of compensation if thee was no agreement to such and if he was not involved in the negotiation? Was there a phone call or e-mail exchange that he may have interpreted to mean that he would be compensated? Perhaps the tenant had signed an agreement with him saying that he would be compensated with funds from the transaction? (Not that YOU would have to honor such an agreement, but it might shed light on his expectation of compensation.) Is it possible he thinks you waited until after the expiration in a deliberate attempt to avoid paying hi his fee?
Last, why did he wait 5 years?
What made us believe that the broker was now to be representing us was the fact that he had presented us with a listing agreement that stated such. Negotiations between us and the prospective tenant were happening simultaneoulsy. Several amendments were made to the listing agreement. each of which was initialed by me, the owner. I wrote in the name of my company that owns the building and the address. I did not sign the contract. The contract was faxed back to the broker with instructions that he was to counter-initial the changes and sign the contract before sending it back for us to sign if he agreed to the new terms.
Although these changes to the contract were important, the ultimate amount payable to broker was not a point of negotiation. It was a percentage of the total rents, as is typical, but we amended the contract to include that the commission would only be payable from the rents and the security deposit and over a period of time in installments.
During the next several days the broker made no further inquiries and negotiations continued between us and the prospective tenant. Initially the broker did provide some assistence with negotiations, but it soon became apparent that he was not negotiating with only our best interest in mind. We were operating under the assumption at this point that the listing agreement, with it's amendments, would be agreed upon by the broker. Either way, it shows that the broker was at least intending to be OUR agent with the contract that he presented. Besides, as I'm sure it is in almost every state, during negotiations, a broker must have a written and signed agreement with someone, whether buyer, seller, lessor, or lessee, to not be in violation of a statute. We now know that he had no agreement with the prospective tenant, but that they simply referred to him as 'their' broker. He had shown them other properties, in fact. This alone is a statutory violation. All of this came to light during depositions and at trial when the tenant sued us after the fire, which was caused by a contractor.
So, when it became apparent that the broker was also in fact representing the tenants, we inquired as to whom he should be representing in this deal. Without a written disclosure of dual agency in this state, signed by both parties, it is a per se statutory violation. His response, memorialized in a hand written business diary, along with every other relevant happening during the deal, was that he did not represent anybody in a deal this small, and was instead simply a `fascilitator'. As mentioned before, this was not acceptable to us and we stated this firmly.
During the next couple of weeks the broker was involved in the negotiations and it became apparent that he was causing more harm than good with miscommunications. Since we were at this point communicating directly with the prospective tenant, and the broker was bouncing around in between, the potential for problems was obvious.
This issue was discussed with the broker and we requested that he not involve himself further with the negotiations. He did not fully comply and continued to cause problems with an already very problematic negotiation. Another phone conversation occured and it was at this point that the broker made the rude and unprofessional comments listed in the original posting above. He ended the conversation with 'have a nice life'. Nothing more of the broker was heard.
We continued to negotiate the terms of the lease with the prospective tenant for two more months. In addition, the terms of the key money agreement between the current tenant and the prospective tenant are also underway. Also in discussions was the contents of a punch list of items that we, the owners, would be responsible for before they took occupancy. This was to include a new heating system, removing the commercial kitchen, etc.
In all, we spent 4 months and approximately 11k in attorney's fees to come to terms that they were comfortable with. Their attorney was always willing to find an issue in the lease or key money agreement, or they prospective tenants were always willing the change their minds about something. New language in, old language out, additions, subtractions, all very time consuming and frustrating. In any case, while all of this may seem like extra info, it will come in later with regard to this new lawsuit for a commission.
Lastly, why did the broker wait 5 years to commence an action for a commission he feels he is owed? Well, aside from the fact that he is personal friends with and represented by the attorney that the prospective tenants fired for incompetance after working with them for a few days in the early stages of the negotiations, we have no idea why he would wait 5 years. The only explanation is that we finally, after a five year legal battle with the contractor (insert contractor's insurance company here) we finally succeeded in winning a jury award at trial. We had to spend over 300k to get to that point, but that is for another discussion about whether a third party should be owed a duty of care by another party's insurance company. In our state we are owed no such duty and the insurance company can intentionally bleed you for years even when they have zero justification for a denial of payment to a damaged party. In fact, it was only the day before trial actually began that they even admitted that the contractor cause the fire.
Oh, and did I mention that this same %^$#% attorney, the one who was fired by the prospective tenants, was the same one that represented the tenants through a 4 year long litigation against us to force us, the owners of the property to pay them back for key money that they paid to one of our tenants for the rights to a lease. The lawfirm that actually represented the prospective tenants in the crafting of the key money agreement and lease terms refused to take the case, saying it was not a legitimate or viable claim. In other words, they were out of luck until they spoke with their original pond scum attorney who was an expert in throwing lies and garbage legal arguments at the wall to see what sticks. That action has cost us over 350k in attorney's fees to defend. Yes, the courts are great at disposing of garbage before it costs anyone real money!
In light of all of this and the fact that we lost everything in the fire (we lived in the second and third floor apartment and were in the process of closing on our new house to make vacant the building for the new tenant) I think the broker deserves something, but it's not a commission. Sorry for the rant. Just looking for some fresh, impartial opinions on the matter before we fully commit to defend this.
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