Daily Development for
Monday, August 10, 1998

by: Patrick A. Randolph, Jr.
Professor of Law
UMKC School of Law
randolphp@umkc.edu

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.

Items in the Daily Development section generally are extracted from the Quarterly Report on Developments in Real Estate Law, published by the ABA Section on Real Property, Probate & Trust Law. Subscriptions to the Quarterly Report are available to Section members only. The cost is nominal. For the last six years, these Reports have been collated, updated, indexed and bound into an Annual Survey of Developments in Real Estate Law, volumes 16, published by the ABA Press. The Annual Survey volumes are available for sale to the public. For the Report or the Survey, contact Maria Tabor at the ABA. (312) 988 or mtabor@staff.abanet.org

Items reported here and in the ABA publications are for general information purposes only and should not be relied upon in the course of representation or in the forming of decisions in legal matters. The same is true of all commentary provided by contributors to the DIRT list. Accuracy of data and opinions expressed are the sole responsibility of the DIRT editor and are in no sense the publication of the ABA.