Blog

Real estate brokers and agents play a vital role in facilitating property transactions, connecting buyers with sellers and tenants with landlords. Their compensation for these services typically comes in the form of commissions – a percentage of the sale price or rent. In New York’s high-value real estate market, particularly within NYC, these commissions can be substantial, making disputes over entitlement and payment unfortunately common. Resolving these conflicts requires a clear understanding of New York law and the contractual agreements involved. Figeroux & Associates, located at 26 Court Street, Suite 701, Brooklyn, NY 11242, provides expert legal representation in navigating these often complex commercial disputes. Contact the firm at 855-768-8845 or visit www.askthelawyer.us for assistance. This analysis examines the common types of real estate broker commission disputes and the governing legal principles in NYS and NYC as of April 14, 2025.   

The Listing Agreement: Defining the Broker’s Engagement

The foundation of most commission disputes between a broker and a property owner (seller or landlord) is the listing agreement. This legally binding contract outlines the terms under which the broker is hired to market the property. Key provisions include:   

• Commission Rate/Amount: How the commission is calculated (e.g., percentage, flat fee).
• Conditions for Earning Commission: Specifies when the commission is deemed earned.
• Duration: The timeframe during which the agreement is effective.
• Type of Listing: Whether it’s an exclusive right to sell/rent (broker gets paid if property sells/rents during term, regardless of who finds the buyer/tenant), exclusive agency (broker gets paid unless owner finds buyer/tenant themselves), or open listing (only the broker who procures the buyer/tenant gets paid).

Under New York Real Property Law (RPL) § 442-d, a broker or salesperson cannot bring a lawsuit to recover a commission unless they plead and prove they were duly licensed at the time the services were rendered and the cause of action arose.   

Broker vs. Seller/Landlord: When is a Commission Earned?

A primary source of conflict is disagreement over whether the broker actually earned the commission according to the listing agreement and New York law.

• The “Ready, Willing, and Able” Standard: The long-standing general rule in New York, established in cases like Lane – Real Estate Dept. Store, Inc. v. Lawlet Corp. (28 N.Y.2d 36, 1971), is that a broker earns their commission when they procure a buyer or tenant who is “ready, willing, and able” to purchase or lease the property on the terms set forth by the seller or landlord. “Able” typically refers to financial ability.   
• Agreement vs. Default Rule: Crucially, this is the default rule. The listing agreement can, and often does, modify this. Many sophisticated sellers/landlords insist on clauses stating the commission is due and payable only “if, as, and when title closes” or the lease commences. If such language exists, the broker’s right to a commission is contingent upon the deal actually being consummated.
• Common Disputes: 
  • Seller/Landlord Refusal: If the listing agreement follows the default “ready, willing, and able” standard, and the broker produces such a party, the seller/landlord is generally liable for the commission even if they subsequently back out of the deal or cannot convey clear title (unless the broker knew of the defect).
  • Buyer/Tenant Qualification: Disputes over whether the procured party was truly financially “able” or agreed to all essential terms set by the principal.
  • Contract Terms: Disagreements about whether the offer procured matched the terms specified in the listing agreement.
  • Listing Expiration: Conflicts regarding whether the deal was procured during the listing term or any applicable “tail” or protection period defined in the agreement.
  • Broker Misconduct: Sellers/landlords may refuse payment alleging the broker breached fiduciary duties (e.g., undisclosed dual agency, failure to convey offers).

Broker vs. Broker: Determining the “Procuring Cause”

In complex NYC deals, multiple brokers may interact with the same buyer or tenant. When a transaction closes, disputes can arise over which broker is entitled to the commission (or a share of it). The legal standard used to resolve these inter-broker conflicts is “procuring cause.”   

• Definition: The procuring cause is generally the broker whose efforts set in motion an uninterrupted chain of events that directly led to the consummation of the transaction. It’s not necessarily the first broker who showed the property or the one who submitted the final paperwork.   
• Key Factors: Courts and arbitration panels look at the entire course of events, including: 
  • Who first introduced the specific property to the ultimate buyer/tenant?
  • Who conducted negotiations and brought the parties to agreement on essential terms?
  • Was there a break in negotiations or abandonment by one broker, followed by successful efforts by another?
  • Did the initial broker’s efforts contribute significantly and proximately to the final deal?
  • What do any co-brokerage agreements stipulate?
• NYC Complexity: High property values mean substantial commissions, intensifying disputes. The fast pace and involvement of multiple agents require careful analysis of the specific facts to determine who truly procured the deal. Merely creating an “amicable atmosphere” is generally not enough; a “direct and proximate link” is required.
• Resolution: Disputes between members of the Real Estate Board of New York (REBNY) are often subject to mandatory arbitration according to REBNY rules. Non-member disputes or those opting out of arbitration proceed to court litigation.   

The Evolving Landscape: Impact of National Settlements (NAR)

Recent national settlements involving the National Association of Realtors (NAR) concerning commission practices are influencing the industry nationwide, including New York, as of April 2025. While the specific implementation may vary locally (NYC’s REBNY RLS operates differently than many NAR-affiliated MLSs), the core principles are impacting NY practice:

• Decoupling & Transparency: The primary shift involves removing mandatory offers of buyer-broker compensation from listings displayed on MLS/RLS systems. Commissions remain negotiable, but the listing agreement will focus on the seller’s payment to the listing broker. Payment for the buyer’s broker becomes a separate negotiation.
• Written Buyer Agreements: There is now a strong emphasis (required by NAR settlement rules and reflected in REBNY’s 2025 Universal Co-Brokerage Agreement changes) on using written agreements between buyers/tenants and their brokers. These agreements must clearly state the scope of services and the amount or method of calculating the broker’s compensation, specifying that commissions are negotiable and not set by law.   
• Potential Disputes: This shift may lead to fewer traditional procuring cause disputes between listing and buyer brokers tied to MLS offers. However, new disputes may arise concerning: 
  • The terms and enforceability of buyer/tenant representation agreements.
  • Negotiations where buyers ask sellers (outside the listing system) to cover buyer-broker fees as a concession.
  • Claims regarding transparency and disclosure of compensation arrangements.

Legal Recourse and the Need for Counsel

Commission disputes are typically pursued as breach of contract actions, governed by a six-year statute of limitations in New York (CPLR § 213(2)). As noted earlier, RPL § 442-d requires the broker to be licensed to maintain such an action.   

Given the significant sums often involved and the nuances of contract law, the “ready, willing, and able” standard, procuring cause analysis, and the evolving commission landscape, legal representation is highly advisable. Figeroux & Associates provides crucial assistance by:

• Drafting and reviewing clear, protective listing agreements and buyer/tenant representation agreements.
• Analyzing the facts to determine if a commission was earned or who the procuring cause was.
• Negotiating settlements between parties.
• Representing brokers or principals in arbitration or court litigation.

Conclusion

Real estate broker commission disputes are a common feature of the New York real estate market, driven by contractual disagreements and questions about performance and entitlement. Whether the conflict is between a broker and their client over whether a commission was earned under the listing agreement, or between cooperating brokers arguing over procuring cause, resolution depends on the specific contract terms and a careful application of New York law. The landscape is also adapting to national pressures for greater transparency in commission structures. In this complex and high-stakes environment, the guidance of experienced legal counsel, like the team at Figeroux & Associates (855-768-8845 | www.askthelawyer.us), is invaluable for brokers seeking earned compensation and for principals ensuring they pay only what is rightfully due.