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In Kaplon-Belo Associates, Inc. v. Farrelly, the Appellate Division of the Supreme Court of New York addressed a broker’s claim against a lessor for a commission under a brokerage agreement. The court held that a default on a lease by the tenant produced by the real estate broker did not affect the broker’s right to recover commission.
Kaplon-Belo Associates, Inc. (Broker) contracted with Farrelly (Lessor) to lease rental property and Broker found a tenant for Farrelly. Shortly after the lease began, the tenant defaulted. Broker then sued Farrelly to recover the commission. After a non-jury trial, the trial court found in favor of Broker in the amount of $48,200.
The Appellate Division of the Supreme Court of New York refuted Lessor’s contention that Broker was not entitled to its full commission because it violated its fiduciary duty by producing a tenant financially unable to meet the terms of the lease. The court noted that it “is well settled that absent an agreement to the contrary, a real estate broker earns his commission when he produces a party who is ready, willing and able to purchase or lease on the terms set by the seller[/]lessor.” (quoting Holzer v. Robbins, 141 A.D.2d 505, 529 N.Y.S.2d 130 (1988)). The court also noted that because Farrelly “negotiated and subsequently entered into a lease with the tenant produced by [Broker], the subsequent default by the tenant shortly after the lease was entered into does not affect the broker’s right to recover a commission pursuant to the brokerage agreement.” (citing Sauerhoff-Kessler Realty Corp. v. Roma Shopping Plaza, 201 A.D.2d 477, 607 N.Y.S.2d 404 (1994); Agency, Broad & Cornelia St. v. Lavigne, 97 A.D.2d 934, 470 N.Y.S.2d 729 (1983)).
The Appellate Division of the Supreme Court of New York also found that the trial court correctly determined that Farelly was personally liable for Broker’s commission under the brokerage agreement. The court stated that “an agent for an undisclosed or unidentified principal is individually liable on a contract signed by the agent without disclosing his agency.” (citing Rennert-Diana & Co v. Costarino, 128 A.D.2d 691, 513 N.Y.S.2d 190 (1987)).
Kaplon-Belo Associates, Inc. v. Farrelly, 221 A.D.2d 321, 633 N.Y.S.2d 522 (N.Y. App. Div. 1995).