Statute of Frauds Trumps Statute for Friends and Broker Loses $925,000 Commission

February 8, 2017Article

To create an enforceable obligation to pay a commission, real estate brokers must put the agreement in writing. One Los Angeles broker learned this lesson the hard way by losing out on a $925,000 commission on his friends’ purchase of a Bel Air estate.

In Westside Estate Agency Inc. v. James Randall et. al., the Second District Court of Appeals upheld the dismissal of a broker’s suit against his former client over the commission from the client’s home purchase. (211 Cal.Rptr.3d 119 (Cal. Ct. App. 2016)). The Westside broker agreed to help his long-time friends, the Randalls, find a home in Los Angeles. He located a $65 million estate in Bel Air that included an offer by the seller to pay a “cooperating broker’s fee” of 2% of the purchase price. The broker disagreed with the Randalls over whether he would apply the cooperating broker’s fee to the purchase price. Nonetheless, on behalf of the Randalls, he made an offer for $42 million. The broker exchanged numerous counter-offers with the sellers, culminating in a $45 million offer that he worked all night with the sellers to finalize. Come morning, however, the Randalls instructed the broker to cancel that offer because they were “turned off by the property.”

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