Broker Not Entitled to Commission for Introducing Purchaser to Seller When Initial Negotiations Failed and Broker Uninvolved in Subsequent Negotiations

On October 13, 2020, Justice Masley of the New York County Commercial Division issued a decision in Picken v. RN Realty, LLC, 2020 NY Slip Op. 33370(U), holding that a broker that introduced the purchaser to the seller was not entitled to a commission when the initial negotiations failed and the broker was uninvolved in the subsequent negotiations, explaining:

A broker must be the procuring cause of the transaction, meaning that there must be a direct and proximate link, as distinguished from one that is indirect and remote, between the introduction by the broker and the consummation of the transaction. This standard requires something beyond a broker's mere creation of an amicable atmosphere or an amicable frame of mind that might have led to the ultimate transaction. At the same time, a broker need not negotiate the transaction's final terms or be present at the closing.

It is undisputed that Picken was involved in the early meetings in 2011 between RN and Centuar. It is also undisputed that negotiations between RN and Centuar resulted in Centuar submitting a letter of intent to purchase the premises in December 2011. It is also undisputed that this offer did not result in a sale at that time on the terms presented. Rather, the evidence shows that RN entertained other offers such as the one from Bauhouse. It is also undisputed that about one and half years after the submission of this letter of intent, in July 2013, WC 28, an entity created by Centuar, purchased the premises. Thus, the question is whether there is a direct and proximate link between Picken's involvement with the Centuar negotiations and the ultimate sale of the premises to WC 28.

Where negotiations are unproductive and the parties in good faith withdraw, a subsequent renewal of negotiations does not entitle the broker to a commission as the broker was not the procuring cause of the transaction.

Here, the Centuar deal that plaintiffs were working on was terminated when RN did not accept Centuar's offer of $25 million. Plaintiffs was not involved and played no role in the 2013 negotiations between WC 28 and RN. In fact, Picken's own testimony supports that he had no role in the transaction as he learned about the sale in an industry paper. There is no evidence that Picken was the catalyst that brought about the final transaction between these parties.

Further, there is no evidence that RN's rejection of the 2011 offer was in bad faith to deprive plaintiffs of a commission, especially in light of the fact that the premises sold for more than the original offer of $25 million. Thus, as a matter of law, RN is entitled to summary judgment on the breach of implied contract claim as it related to the WC 28 sale.

(Internal quotations and citations omitted).

We frequently litigate disputes over the purchase and sale of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.