Daily Development for
Monday, August 10, 1998
by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
BROKERS; LEASING BROKERS; COMMISSION: Although landlord refuses to consent to sublease of property to prospective sublessee, broker who introduces the sublessee to tenant/sublessor has a right to a commission if the proposed sublessee otherwise met the tenant/sublessor's financial terms.
Sagegroup Associates, Inc. v. Dominion Textile (USA), Inc., 665 N.Y.S.2d 407 (App. Div. 1997).
Broker, acting under an oral agreement, brought a sublessee to the tenant who was able to meet the financial terms required by the tenant. The landlord, however, refused to consent to the sublease, and the tenant refused to pay the broker. The lower court granted summary judgment for the tenant on the grounds that the sublessee did not meet the "able" prong of New York's "ready, willing and able" test for a commission agreement where the parties have not otherwise stated their understandings.
On appeal: held: reversed and remanded.
The appeals court held that the concept of "able" did not encompass "approved by the landlord," at least as a matter of law. The case was remanded to the trial court for further clarification of the parties' understanding of the meaning of their oral agreement.
Note: The court upheld the dismissal of tortious interference claims against the landlord.
Comment 1: The editor would venture a guess that the prevailing view of parties in the marketplace in New York is that there would be no commission where the sublease fails for reasons other than the sublessor's failure to cooperate. All the parties, theoretically, would have access to the lease and should be aware that landlords typically control subletting. Perhaps expert witnesses on remand will clarify this issue.
Comment 2: Obviously, there's an important practice tip here. The commission agreement, even oral, should take into account the fact that the consent of a third party is necessary to make the transaction go.
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