Broker’s Lien Enforced by Buyer’s Rep

This happened in March, 2016.  Good to know that Buyer Representation means something to both buyers, and buyer representatives!

A Connecticut appellate court has considered whether a buyer’s representative could collect a commission from a client when the client violated the exclusive representation agreement and bought a property while working with another licensee.

Christopher G.L. Jones (“Buyer”) met with a salesperson (“Buyer’s Representative”) of NRT New England, LLC (“Brokerage”) to find a property for him and his fiancée.  During the initial meeting, the Buyer indicated that he was not working with any other real estate professionals.

After reviewing the types of properties the Buyer was interested in, the Buyer signed an exclusive buyer’s representation agreement with the Brokerage that ran from January to June 2011. The Buyer agreed to pay the Brokerage a commission if the Buyer purchased a property during the time of representation.  In the agreement, the Buyer also acknowledged that he was not working with any other real estate professionals.

The Buyer’s Representative began searching for the type of properties that the Buyer was seeking.  She devoted several months to this search and the evidence showed that she had spent hundreds of hours investigating various properties.

In May 2011, the Buyer told the Buyer’s Representative that he was purchasing a property that he learned about from another brokerage, H. Pearce Real Estate (“H. Pearce”).  The Buyer’s Representative later learned that the Buyer had also entered into an exclusive representation agreement with H. Pearce.  Neither real estate brokerage knew of the other’s agreement.

Following the close of the Buyer’s purchase, the Brokerage placed a broker’s lien on the property for the amount of commission it would have received from the transaction.  The Brokerage then filed a lawsuit against the Buyer seeking to foreclose the broker’s lien and also alleged breach of contract.  The court ruled the Buyer had breached the contract and awarded the Brokerage the commission amount.  The Buyer appealed this ruling.

The Appellate Court of Connecticut affirmed the ruling of the trial court.  The Buyer made two arguments on appeal.  First, he argued that the Brokerage had not strictly complied with the statutory terms of the state’s broker lien law.  Second, he argued that the Brokerage had not sought compensation from his property purchase, which he believed the representation agreement required.

The court determined that the Brokerage had substantially complied with the broker lien law and so rejected the Buyer’s first argument.  The Buyer argued that the Brokerage had failed to use capital letters in describing its lien rights in the representation agreement and also the agreement cited an erroneous statutory subsection. Due to these errors, the Buyer argued the Brokerage could not enforce its lien rights.  The court rejected this argument, finding that capital letters were not required (no such requirement existed in the statute and the legislature did require this in other statutes but not here) and the citing of the wrong subsection should not deny the Brokerage a commission.  Thus, the Brokerage had substantially complied with the broker lien law.

Next, the court ruled that the Broker did not have to seek compensation from the Buyer’s purchase when it would have been a futile effort.  The representation agreement provided that the Brokerage would “whenever feasible, seek compensation from the [s]eller or [s]eller’s agent” and then goes on to state that compensation may not always be available.  The Brokerage had performed no services related to the Buyer’s purchase transaction and so was not entitled to compensation, and the court agreed that the law does not require a party to perform an act “which would be a mere futility.”  Therefore, the court affirmed the trial court’s award to the Brokerage.

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About Susy Hurlbert

Eastern Connecticut Association of REALTORS Chief Executive Officer
This entry was posted in Home Buying Process. Bookmark the permalink.

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