Dual Agency Still Entitles Broker to Her Commission

A real estate broker’s dealings have led to an interesting decision by New York’s highest court – the New York Court of Appeals – in a case entitled Douglas Elliman v. Tretter, 2012 NY Slip Op. 07846 (New York Court of Appeals 2012). A seller had refused to pay a commission to Douglas Elliman over the actions of a broker associated with Douglas Elliman.

A broker named Barbara Lockwood is affiliated with Douglas Elliman and presumably all of her brokerage dealings are performed under the umbrella of Douglas Elliman. The Tretters retained Elliman to sell their apartment in Manhattan and Lockwood had the listing. She had an open house and took photographs to advertise the sale. Lockwood quickly found a buyer for 1.5 million dollars and the offer was accepted by the Tretters. While showing the subject apartment Lockwood met a prospective purchaser. That prospective purchaser was shown several other apartments by Lockwood. The original offer for the subject apartment fell through and Lockwood presented her new client to the Tretters and an offer was made and accepted at 1.4 million dollars.

The Tretters refused to pay the broker commission because Lockwood represented the buyer and seller and had not made this dual agency known. Douglas Elliman sued the Tretters for its commission. Summary judgment motions were made and the trial court found that there were questions of fact presented in respect of Lockwood’s dual agency. The Appellate Division modified this decision (with one justice dissenting) and ruled that there was no obligation to disclose the dual agency because Lockwood (Douglas Elliman) would only be paid by the Tretters.

The Court of Appeals unanimously affirmed. In affirming the Court of Appeals noted that Lockwood had not signed an agreement in which she agreed not to show prospective purchasers other apartments and further noted that Lockwood had listed herself as the only broker on the term sheet while accepting compensation only from the Tretters. The Court of Appeals accordingly ruled that Douglas Elliman was entitled to its fee.

One can understand why the Tretters would be angry. If Lockwood was showing the prospective purchasers other apartments – and in effect competing with the Tretters’ apartment – this activity could reduce the price paid by the purchaser. This would be against the interest of the very sellers who had given Lockwood the listing. What is more, Lockwood did not disclose that she represented both parties.

The Court of Appeals emphasized that Lockwood was being paid only by the seller. It appears that Lockwood just barely walked the line of what would have been appropriate. Brokers would be well-advised to disclose their relationships – especially if the broker is to be paid by both sides of a transaction.