SPRE Realty, Ltd. v. Dienst, First Department 651671/2013
The Appellate Division, First Department has clarified the test for whether a broker is entitled to a commission in the absence of a written agreement. In SPRE Realty, the plaintiff-broker showed the defendants a two-unit, duplex, condominium apartment at 397 West 12th Street during the summer of 2008. Thereafter, the broker negotiated on the defendants behalf and a contract was prepared. In August 2008, the defendants pulled out of the deal to purchase the two units. Thereafter, in February 2010 the defendants completed a purchase of a duplex apartment comprised of two different condominium units in the same building, albeit at a lower price than contemplated for the units that defendants viewed in 2008. The broker sued and the defendants moved to dismiss.
In a decision authored by Justice Rolando Acosta, the First Department reviewed various formulations of the test of whether a broker, in the absence of a written agreement, was entitled to a commission if the introduction by the broker was the “direct and proximate link” to the consummation of a sale. The court wrote that the “direct and proximate link” standard “requires something beyond a broker’s mere creation of an ‘amicable atmosphere’ or an ‘amicable frame of mind’ that might have led to the ultimate transaction. At the same time, a broker need not negotiate the transactions final terms or be present at the closing.” In its decision, the First Department expressly rejected an “amicable atmosphere” or “amicable frame of mind” standard. Nevertheless, the Court ruled that even under the “direct and proximate link ” standard, the plaintiff broker had stated a cause of action sufficient to survive a motion to dismiss.
The lesson of SPRE Realty is that a broker must allege and prove a “direct and proximate link” between his or her introduction of the purchaser and seller and the consummation of a sale in order to recover a commission in the absence of a written agreement.