How can I avoid commission conflicts?
Whether a broker is working on a residential or a commercial deal, be it a lease or a sale, at the end of the day, the broker is compensated by a commission.
Some commission structures are simple and straightforward. Others, such as continuing commissions on a commercial lease, can be more complicated. But one thing they all have in common – they must be properly written and executed in order to be enforceable. Failure to do so can result in costly disputes. Especially on large, commercial deals where, if a party can cut the broker out of the deal, they will often try.
Brokers need to know what to watch out for … and how to protect themselves:
- Who is the signatory? Is it really the proper party? For example, if you represent a seller and the property is owned in a trust, make sure it’s the trustee that is signing your listing agreement. Otherwise, the seller could try to avoid the commission.
- What is the commission based on when the parties agree to credits or other offsets? If you represent a commercial landlord and the landlord agrees to give the tenant a buildout allowance of $50,000, does your brokerage agreement spell out if and/or how that affects the commission basis?
- Is the broker really the “procuring cause” broker? You’ve been working on a major commercial deal for months, but there is no exclusive listing agreement and there have been multiple brokers involved. Before you let the deal get away, make sure you dot your “i’s” and cross your “t’s,” so it gets properly memorialized.
- What is an acceptable form of writing? It’s unwise to think you’re in the clear because you have a list of texts back and forth between you and another broker or between you and your client … those texts might not be enforceable. Be cautious with emails, as well.
At Erwin Law, we have litigated a wide range of commission disputes, and enforced innumerable commission agreements. We know what it takes to protect your hard earned compensation. If you are looking for a trusted partner to rely on, visit us at https://erwinlawfirm.com or call us at (773) 525-0153.