U2&3 Brokers and Third Parties Flashcards
What is a RE Broker?
A person or entity that provides RE services for another for a fee or compensation RPL 440(1)
3 Flavors of Brokers who must be licensed are?
broker: a person licensed to act independently in a RE brokerage business
salesperson: a person employed by a broker to act in a RE brokerage business
Assoc. Broker: a broker employed by a broker
all three MUST be licensed
Grounds for Revoking Brokers License
violate brokerage law, material misrep in application, fraudulent practices, dishonest/misleading advertisement, untrustworthiness, felony conviction, failure to pay child support
Failure to obtain License consequences
misdemeanor punishable by up to one year in jail
brokerage commission is not recovered in court (Panarello)
aggrieved person may recover up to 4times the commission paid (Handy)
Compensation for Unlicensed Persons (Finders)
Can collect finders fees under certain circumstances:
cannot collect $ as a finders fee if the nature of the transaction is real estate [as oppose to a business transaction] (Review this with Wein-)
Is fee-splitting ok? (btw broker and finder)
NO. fee splitting is prohibited. a licensed broker may not share his fee with an unlicensed person.
Agency Law and Brokers
Disclosed P: if the agent is authorized and the P is disclosed, the P is bound and the agent is not liable
- A “managing agent”: is an accordance title with widely variable powers fixed by the principle in each case (so the mere title of “managing agent” does not mean hes authorized)
P can be liable for agent’s unauthorized acts: when there is a tort or discrimination by the agent, even if the agent was expressly told not to discriminate
When is a Brokers commission Earned and Payable?
Three (4) part test: when
1. the broker produces a ready, willing and able buyer on terms acceptable to the seller.
- The broker is the procuring cause. [brought a meeting of the minds]
- Broker was employed by the principal
(4. the broker was licensed)
- Ready, willing, and able buyer on terms acceptable to the seller.
Able: financial ability.
if the sale is conditioned on the buyer getting approved for a mortgage, and the buyer doesn’t get approved- he is not able.
if the sale is in cash, it can be implied that the buyer has the financial ability
buyer’s counteroffer means that he is a not ready willing and able buyer
buyer must be afforded a rble oppurtunity to sign the seller’s k to determine whether he is ready willing and able
- Broker is procuring clause/meeting of the minds
there must be a meeting of the minds btw the buyer and seller on ALL ESSENTIAL terms.
- method of payment
- amount of commission
- access to property b4 closing
referring parties to each other does not entitle broker to a commission
simply informing the buyer you found a property for sale doesn’t entitle you to commission
if the broker abandons the transaction and the deal gets done he doesnt get a commission
KEY: what was the chain of the events from the parties meeting and the execution of the sale- broker must be the proximate cause.
- Employed by the principal
the broker must have a agreement with the seller or buyer. for a seller that is commonly a listing
- must have a meeting of the minds between the seller and broker- merely discussing the sale of property with the owner is not a hiring
- Absent an agreement in writing- a broker can get paid via an implied agreement to get commission if the broker is licensed, was the procuring cause, and the owner accepted the benefits of the broker’s services.
- you can imply a hiring and the mere fact that you are hired by one party does not mean the other party cant pay your commission
When is the broker’s commission earned?
once the three part test is met- commission is due even if the transaction doesn’t close or even if a k of sale doesn’t get executed.
if the buyer defaults- the broker still gets paid because he met all requirements
- so use a preclusive agmt “commission shall be earned by and payable to the broker upon the closing of title unless the seller willfully defaults”
- Broker is licensed
broker licensure is an essential element of a broker’s cause of action for commission
must be a licensed broker on the date the CoA arose- but cts interpret this to require licensure at the time services are rendered
finders fee and quantum meriut
to get a finders fee you must have a special k to act merely as a finder and not as a broker
where broker services are indistinguishable from those provided under a brokerage agreement, the broker is not entitled to a finders fee. broker must have a separate k to act solely as a finder
quantum meruit is available in RE services when there is a finding that the principal will be unjustly enriched if the broker isn’t paid.
- must be based on an implied contract
Listing property with a broker- 3 types
- Open listing: a non exclusive contract to employ a broker to sell or lease the property for a fee…multiple brokers may be given open listing, buyer can sell on his own and not pay broker
- exclusive right to sell: no matter who sells the property, the broker will get paid. Broker is entitled to commission even if the owner sells it himself.
- exclusive agency: the named broker is the only broker engaged to sell the property. the owner may sell directly without paying a commission to the broker.
