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Broker Beware: Get Your Commission Agreements in Writing

April 17, 2017
Minnesota Lawyer - Sponsored Blog
Author: Phil Kaplan

You are a commercial real estate broker. A potential client asks you to find a space in town for him to lease or buy. You want his business and he seems trustworthy, so you do not ask him to sign a formal commission agreement.

You just shake his hand and thank him for the opportunity. For several months, you hustle to find a space for your new client. You show him dozens of buildings. You exchange emails with him and talk to him on the phone multiple times per week. But one day, your client goes silent. He stops returning your messages. You do not understand what happened until you hear through the grapevine that your client decided to buy one of the buildings you showed him – without telling you. When you demand that he pay you a commission, he refuses. He exploited your hard work but he will not compensate you for it. What do you do?

While you have a sympathetic story, your legal options are limited because you did not get your commission agreement in writing. Minn. Stat. § 82.85, sub. 2, prohibits a licensed real estate broker from filing a lawsuit “for any commission, fee or other compensation with respect to the purchase, sale, or other disposition or conveyance of real property, or with respect to the negotiation or attempt to negotiate any sale, lease or other disposition or conveyance of real property unless there is a written agreement” with the broker. Id. (emphasis added). See also Minn. Stat. § 82.66 (requiring seller’s listing agent contracts and residential buyer’s broker contracts to be in writing).

Except in the rare case where the broker has provided services and the client has already started paying commissions pursuant to an oral agreement, see Rosenberg v. Heritage Renovations, LLC, 685 N.W.2d 320, 325-26 (Minn. 2004), an unwritten agreement to pay commissions to a real estate broker is unenforceable.  Read more.