Question: I was working with a Realtor to sell my house and he did. We have no formal agreement for a commission, but he wants one. Do I have to pay?
Answer: A listing agreement or contract to pay a commission can be oral or in writing. The drawback to an oral agreement is evidence. Courts will not generally accept that a Realtor is entitled to a commission just because he or she brought a buyer to an owner without some specific evidence of agreement to pay.
It is generally agreed that obligation to pay a commission is based upon a listing contract. Most often the listing obligates the seller to pay a commission if a listing broker produces a ready, willing and able buyer or a closing. Many Realtors have sadly discovered that when they work to bring a buyer to a seller without an agreement to pay commission, the efforts go unrewarded.
On April 16, 2010 Judge James I. Kohn issued his decision in Intercoastal Realty, Inc. v. Tracy and agreed that under the circumstances of that case the selling broker was entitled to a commission even without a listing contract.
In Tracy, the broker specialized in sale of luxury homes. Although the broker was unsuccessful in selling Tracy's home, it did arrange a lease with purchase option. The purchase option included a provision that called for the seller to pay the broker a 6% commission if the tenant exercised the option. Tracy wanted to avoid the commission. He created an LLC and was the initial number. He conveyed the property to the LLC and later transferred the LLC to the tenant. 6% commission would have been $240,000.00, but Tracy did not pay.
The broker sued claiming 1. Breach of Third Party Beneficiary Contract; 2. Breach of Quasi Contract and Unjust Enrichment: 3. Conspiracy to Deprive a Broker of a Commission; 4. Breach of the Duty of Good Faith and Fair Dealing and 5. Violation of Florida's Deceptive and Unfair Trade Practices Act. The court dismissed the claim for breach of third party beneficiary contract finding that the landlord and tenant did not intend to benefit the broker in their contract. It also dismissed the breach of implied covenant of good faith and fair dealing, finding that the broker had to show breach of an express provision of a contract between the broker and owner to also sue for breach of good faith and fair dealing. Good news for the broker was that the court agreed he could seek recovery under quasi contract and unjust enrichment, conspiracy and even for violating Florida's Deceptive and Unfair Trade Practice Act which prohibits Aunfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce.@
Although the owner successfully argued there was no contract to pay a commission, the Court used that argument to create a quasi contract. Under quasi contract and unjust enrichment, a Court can create a "contract" where one does not really exist where 1. Party confers a benefit on another, and the other party had knowledge of the benefit, 2. The other party voluntarily accepts and retains the benefit and 3. Under the circumstances it would be inequitable for the other party to retain the benefit without paying for it.
The conspiracy claim was allowed, as the Court felt it was clear the property owner had made significant efforts to avoid paying the commission. The Court also found that the owner had engaged in unfair and deceptive practices in violation of Florida's Deceptive and Unfair Trade Practices Act, which prohibits "unfair methods of competition, unconscionable acts or practices, and unfair or deceptive acts or practices in the conduct of any trade or commerce."
With the exception of action under Florida's Deceptive and Unfair Trade Practices Act, attorney's fees are not recoverable by the prevailing party. Hence, pursuit of commissions, with the facts similar to the Tracy case, may be practically limited to big dollar claims. Nevertheless, the Tracy case shines a light on possible ways to pursue a commission even when there is no contract between broker and seller.
If the Realtor can prove a claim as in the Tracy case, he may file suit to collect. Litigation can be expensive, even if you win. Before proceeding further, you should discuss your case with an experienced attorney.
By: William G. Morris, Esquire