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Real Estate Transactions
CUNY School of Law
Zorn, Stephen A.

Real Estate Transactions, Prof Zorn, Fall 2014
Mortgage, Landlord tenant, Buyer-seller
Outline of Class # 2, August 28, 2014
Broker Licensing and Regulation
NY Real Property Law §§
440-a: License required for real estate brokers and salespersons
 441-c: Revocation and suspension of licenses
 442, Splitting commissions
442-f: Saving clause
Kamper v. Department of State (broker discipline)
Types of Listing Agreements
Non-Exclusive Listing: the real estate agent receives a commission only if he sells the property or home.
Exclusive Agency Listing: the seller's broker will receive a commission from the seller, regardless of who brings the buyer into the purchase.
Exclusive Right to Sell: Formal agreement under which a real estate agent has the sole right to sell a specified property, usually within three months. During this period the seller cannot list the property with any other agent and (unlike in exclusive listing) must pay the agent's commission even if he or she (and not the agent) finds a buyer. Also called exclusive right to sell.
Net Listing: A listing based on the net price the seller will receive if the property is sold. Under a net listing the broker can offer the property for sale at the highest price obtainable to increase the commission. This type of listing is illegal in many states.
Express Realty v. Zinn, 39 Misc. 2d 733 (Dist. Ct. Nassau Co. 1963) (upholding NYCRR ban on net listings) (not assigned)
Antitrust Limitations on Brokers
Long Island Board of Realtors (1972) (consent decree re restrictive practices)
Guadugno (1976) (reasonable restrictions by local MLS)
Lawyers: Conflict of Interest, Malpractice Liability
NYRPC Rule 1.7: Conflict of Interest: Current Clients.
a lawyer shall not represent a client if a  reasonable lawyer would conclude that either:
(1)   involve the lawyer in representing differing  interests;
(2)   significant risk that the lawyer’s professional judgment on  behalf of a client will be adversely affected by the lawyer’s own financial, business,  property or other personal interests.
(3)   a lawyer may represent a client if:
(1)   reasonably believes will be able to provide  competent and diligent representation to each affected client;
(2)   the representation is not prohibited by law;
(3)   does not involve the assertion of a claim by one client against another client represented by the lawyer in the same litigation or  other proceeding before a tribunal; and
(4)   each affected client gives informed consent, confirmed in writing.
Lanza (N.J. 1974) (dual representation/bounced check)
LoGalbo (1990) (standard for attorney malpractice)
Bua (2012) (minimal standard)
Crossland Savings (1988) (liability to third parties)
Meador v. Albanese Law Office, 2010 WL 3807163 (NDNY 2010) (claims for breach of fiduciary duty and legal malpractice) (not assigned)
Outline for September 2, 2014
Broker’s Entitlement to a Commission
A.    Blackman DeStefano Real Estate, Inc. v. Smith“[A] real estate broker earns its commission when it produces a buyer who is ready, willing and able to purchase the subject property under the terms offered by the seller.”
1.      What does “produce” mean?
2.      How does one know the buyer us “ready, willing and able”?
In Blackman, buyer dropped out because of mental condition that prevented her from moving out of existing home.
Rule: (1) purchaser's agoraphobia, which prevented her from moving out of her existing home, did not render performance of sale agreement impossible; (2) broker was entitled to commission even though sale fell through; and (3) defaulting purchasers could not be required to indemnify vendors for broker's commission.
B.     Hecht v. Meller. Property burned down between execution of contract and closing. Buyer exercised statutory option not to proceed and recovered down payment. Broker sued for commission.
Rule: The court held that at the juncture that a real estate broker produced an acceptable buyer he fully performed his part of the agreement with the vendor and his right to a brokerage commission became enforceable.
C.     Ladd v. Coldwell Banker. Deal fell apart after contract was executed, but before closing, when buyer insisted on a mortgage that gave him the right to prepay. Contract provided merely that the mortgage would contain the “usual” clauses in Clinton Co.; in default of a “usual” rule permitting prepayment, the common-law default rule is that a mortgage cannot be prepaid. Disagreement over mortgage arose after buyer signed the contract. Raises issue of timing: when is the buyer “ready, willing and able”?
Rule: broker was entitled to commission, since purchaser, at time of entering into contract, was ready, willing and able to go through with purchase according to its terms.
D.    “Middleman” v. “Broker,” Knauss v. Gottfried Krueger Brewing Co.. How much is a middleman who merely introduced buyer and seller, but did not participate in negotiations, entitled to, in absence of a listing agreement?
Rule: Where a broker is employed merely to introduce a purchaser to the seller, without taking any part in the negotiations in consummation of the sale, his right to commissions promised him by the seller is not affected by the fact that, without the latter's knowledge, he was also receiving pay from the purchaser.
E.     Business Consulting Services, Inc. v. Wicks. Sale concluded during “extension” period after broker listing agreement terminated. Rule: A broker seeking to recover under an extension clause must establish some casual connection between the broker's efforts and the eventual sale.
F.      Tristram’s Landing, Inc. v. Wait. Adopts New Jersey’s Ellsworth rule that commission is payable only on closing, absent some wrongful act of the seller:
“When a broker is engaged by an owner of property to find a purchaser for it, the broker earns his commission when (a) he produces a purchaser ready, willing and able to buy on the terms fixed by the owner, (b) the purchaser enters into a binding contract with the owner to do so, and (c) the purchaser completes the transaction by closing the title in accordance with the provisions of the contract.”….
[But], “if the failure of completion of the contract results from the wrongful act or interference of the seller, the broker’s claim is valid and must be paid.”
Query: what if buyer can’t get financing? Was buyer “ready, willing and able” when contract was signed?
Broker’s Duties to Buyer

York. (a) court order directing specific performance by buyer = possession for purposes of G.O.L. § 5-1311; and (b) vandalism to property can be cause of material destruction.
4.      Onondage Savings Bank . Wagner. Vandalism not enough to be material destruction, but justifies an abatement of purchase price.
5.      U.S. Bank N.A. v. Cedeno. Example of “contract may provide otherwise” element in § 5-1311; buyers bound by auction sale conditions that said purchaser assumed risk of loss from date of auction.
Statute of Frauds
A.    General Obligations Law § 5-703 (enacted 1963).
1.      Interest in real property, other than a lease for a term of not more than a year, can be transferred only by a writing subscribed by transferor or agent, or by will or by operation of law.
2.      Writing must specify the consideration.
3.      Statute of Frauds applies to co-op apartments. Panetta v. Kelly, because the co-op proprietary lease is an interest in property, even though shares are personal property.
B.     Essential Terms.
1.      Rosenfeld v. Zerneck. Email exchange was sufficient to satisfy writing requirement, but lacked agreement on (a) amount of contract deposit and (b) how to treat existing commercial lease encumbering property.
2.      Tamir v. Greenberg. “Memorandum evidencing a contract must state the entire agreement with such certainty that the substance thereof will appear from the writing alone. It must designate the parties, identify and describe the subject matter, and state all of the essential terms of a complete agreement.”
3.      First American Commercial Bancorp, Inc. v. Saatchi & Saatchi Rowland, Inc. Use of “approximate” in description does not make contract too uncertain to be enforced.
4.      Kursh v. Verderame. Failure to establish closing date not fatal. Common-law default rule is closing within a reasonable time.
5.      Gotham Food Group Enterprises, Inc. v. Principal Mutual Life Ins. Co. In a commercial lease, amount of rent is an essential term.
6.      Atai v. Dogwood Realty of N.Y., Inc. Omission of collateral terms, most of which are addressed in standard-form contracts, does not vitiate written agreement.
7.      Marder’s Nurseries, Inc. v. Hopping. Price term providing for appraisal is OK; provides definite mechanism for determining the price.
8.      Cobble Hill Nursing Home, Inc. v. The Henry & Warren Corp. Price to be determined by N.Y. Dep’t of Health according to their appraisal procedures. But see Teuful v. Teuful, 79 A.D. 3d 851 (2d Dep’t 2010) (“fair market value,” under procedure “to be agreed” doesn’t satisfy statute.)