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Wednesday, February 27, 2013

Does the Department of State hear Brokerage Commission Claims?

Generally no.

Real Property Law 442-e(5) provides the Secretary of State with the power to enforce the provisions of Real Property Law Article 12-A, which is the statute applicable to Real Estate Agents in the State of New York. Section 442-e is the basis under which the Department of State hears Administrative Complaints.

With respect to commission disputes, Section 442-e(3) provides as follows:

Penalty recoverable by person aggrieved. In case the offender shall 
have received any sum of money as commission, compensation or profit by 
or in consequence of his violation of any provision of this article, he shall 
also be liable to a penalty of not less than the amount of the sum of money 
received by him as such commission, compensation or profit and not more 
than four times the sum so received by him, as may be determined by the 
court, which penalty may be sued for and recovered by any person aggrieved 
and for his use and benefit, in any court of competent jurisdiction.

Therefore, it appears that commission disputes could be heard by the Department of State, at first glance. Yet, the Courts have also spoken on this issue in Matter of Gouiran v. Department of State of State of N.Y., at 82 AD2d 832. 

In this case, the Appellate Division adopted the Dissent from Partridge v. Lomenzo when it states: "it is ”improper for the Secretary of State to interfere with pending civil actions relative to brokerage claims and such actions ought to be left to judicial determination "“. 

Consequently, while commission can be addressed by the Department of State, it should not serve as the primary basis for the complaint, but instead for violations of license law, whereas the Courts or arbitration are the best forum for commission disputes. 

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