WHEN A PERFECT STORM RAINS ON
YOUR COMMISSION PARADE
PLAIN SPEAKING FROM A LAWYER
One of my clients recently experienced
the following unfortunate series of
events in connection with what should
have been a routine commercial lease
and lease commission collection.
My client represented a large and well-known company seeking to lease land
and an industrial building for its vehicle storage. The tenant selected land
leased by another broker (let’s call that
broker “Listing Broker” or “LB”), and LB
willingly entered into a commission/
registration agreement with my client.
So far, so good.
The commission agreement (and the
lease) contained a contingency for
the tenant obtaining a certificate of
occupancy (“C of O”) following some
relatively modest improvements to the
property, some of which were to be
performed by the landlord (“LL”), others
by the tenant. The lease was executed,
the tenant occupied the property, and at
that point, my client’s 90 day period in
which to record a broker lien began to
run. Still, so far, so good.
LL and tenant had their disagreements
on which party was required to finish
the work required for the C of O, and
the tenant’s temporary C of O expired.
Months passed, lien rights expired,
and LL entered into a contract for the
sale of the property. LL was strangely
silent on the outstanding commission
obligation (yet unpaid) later stating “no
C of O, no commission was due” creating
an unpleasant surprise, post-closing,
for the buyer when both my client and
LB claimed their fees. Other post-clos-
ing issues between LL and buyer (“LL
2”) arose, leading to litigation between
them, and still no C of O was issued. My
client had been named as one of the
brokers due a commission in the lease,
but the lease also contained express
language that the parties to the lease did
not intend to create any rights in others
by their execution of the lease, in effect
eliminating my client’s right to sue LL 2
for the now long overdue commission.
His commission agreement had been
signed by LB, as agent for LL 1.
In addition to the cardinal sin of dozing
through his lien rights, my client:
• Relied on the listing broker to in-
voice LL 1 for the fee;
• Failed to invoice any party for his
• Never asked LB if the fee or any
portion had been paid.
It turned out that LB had received a
partial commission payment, which was
neither disclosed to, nor shared, with my
client. Egg on the faces of both brokers,
no doubt. I am currently working on a
complicated multi-party settlement
agreement (LL 1, LL 2, LB, and my
client) with terms yet to be finalized.
Did I mention that the lease had three
separate options to renew, mentioned in
the commission/registration agreement
with LB, binding on LL 1, not so clearly
binding on LL 2?
Could this perfect storm have been
avoided, thus saving the parade and the
commission? Of course, by:
• Timely recording of a Notice of Lien;
• Invoicing LL 1 at lease execution;
• Tracking the issue of the long
awaited and finally issued C of O.
While I am preparing my petition to
intervene into the current pending litigation for my client, and yet hoping to
settle present and future commission
claims in the process, I can’t help but
wonder, what if my client had asked
me to record his lien? The lien would
have put both LL 1 and LL 2 on notice
of the obligation and probably “smoked
out” the partial payment received by the
listing broker. Let’s say the other shoe
hasn’t dropped on that issue, and stay
tuned to see how and when my client
finally gets paid.