Does a real estate brokerage firm's due diligence reports entitle them to a commission when they are not the procuring cause?

A brokerage commission is generally due when a real estate broker procures a ready, willing and able purchaser for a transaction. Nonetheless, it is often the case that real estate brokerages work very hard to procure a purchaser just to have their work-product utilized by a competitor to procure the purchaser and earn the commission. This is the situation that the NYS Court of Appeals recently faced when deciding Malone v. Ralph Rieder, which can be read here.

The issue presented to the Court was if the procuring brokerage was unjustly enriched at the expense of the due diligence brokerage and hence, did the procuring brokerage owe the due diligence brokerage a portion of their commissions? 

The Court answered the question with a striking NO. The rationale says the Court is that there was no business relationship or connection between the 2 brokerage companies. Therefore, the relationship between the 2 brokerage companies was too attenuated to justify the claim and the case was dismissed. 

The lesson here is that one needn't be concerned about the acts of unknown parties and one can protect oneself by acting as a good-faith purchaser for value. To illustrate, here, the defendant purchased the due diligence reports from the seller and therefore was an innocent party and consequently not liable for unjust enrichment to the due diligence brokerage.

Real estate brokers should take comfort in the Court's decision because they needn't probe the underlying relationships between the businesses with whom they contract and other entities tangentially involved but with whom they have no direct connection.

The Court did state however that the claims against the first procured purchaser who did not proceed with the transaction and the seller remain pending - so this remains as the best route for the due diligence brokerage to obtain recourse for its loss. 

E-Recording at the County Clerk - Proposed Regulation

For all of you who are as happy as we are about E-Recording coming to your local County Clerk's Office in September of this year, you should take some time to read the Proposed Regulations that will govern the process by clicking here.

Stay tuned for the proposal to be filed in the State Register in order to make your comments and to help shape this important Regulation.

The Origin of the name Lieb at Law, P.C...

Andrew Lieb, reveals how he came up with the name "Lieb at Law, P.C." as featured in CEO Blog Nation answering the question:  " HOW DID YOU COME UP WITH YOUR BUSINESS NAME?"

We Chose Something Catchy, Unique & Ethical

I operate a law firm in NY and names for firms in my State cannot be fictitious under ethics rules. Yet, who can remember all of the partners name for a firm? The list is often 3 pages long and says very little to the consumers except that each partner is self-important. So, I decided that we needed something catchy and unique, that said what type of business we are to the consumer, but that also complied with the restrictive ethics rules. Lieb at Law, P.C. is just that and has been approved by an ethics committee opinion letter and all of our clients. Why did you start your business? In my family you only have 1  choice of professions so I became an attorney. Yet, I am very entrepreneurial and wanted to carve my own niche. Therefore, I started a teaching law firm where we are a licensed school in our State with our attorneys serving as the school’s instructors. Just like a teaching hospital, my firm is on the cutting-edge of developments in our field because we teach the topics that we practice in a free educational setting for both attorneys and real estate agents. Our philosophy is that if every student passes on 1 lesson and educates 10 people in their community we have really achieved positive change for society and reduced unnecessary litigation.

Click Here to learn how other Entrepreneurs came up with their business name.