As with any agreement, it is preferable that they have all the essential conditions, including the parties, purpose, obligations, duration of the agreement, commission allocations, including cost payments, payment to the broker and how the broker must distribute payments to each of the agents, and what happens if one of the agents leaves the broker. The above list is illustrative, but not exhaustive for all topics that need to be covered depending on the nature of the agreement and the relationship between the parties. While at KW, Sanowicz met Joseph Lam, who was interested in selling his home in Los Angeles. Sanowicz presented Mr. Lam Bacal with the understanding and oral agreement that he would participate in any possible commission. The couple also ran a California association of real estate agents® (C.A.R.) Fee agreement form for this purpose. However, the agreement was not signed by a licensed broker. Bacal raised several objections, including that the agreement was unenforceable and violated Section 10137 of the California Business and Professions Code. The court of first instance agreed with Bacal`s defense, stating that “a licensed real estate seller cannot enter into contracts in his own name or accept compensation from a person other than the broker under which he is licensed.” The decision was appealed.

After one of broker A`s buyers purchased a property through broker B, broker A demanded a commission. When Broker B refused to pay a commission, Broker A filed a lawsuit for violation of the verbal referral agreement. What I found interesting about this case and important to all of us was why the dispute existed and how it could have been avoided. How many of us have made a verbal agreement with a friend or colleague who thinks we don`t need a written agreement because our friendship is so strong and would never deteriorate to the point where we can`t resolve differences? Since human nature is as it is, what other explanations or rationalizations (e.g., B, time, money, etc.) were offered to justify not obtaining a written agreement prior to the closing of the transaction? Is it just the optimism and enthusiasm around the company that led us to believe that everything would go well? Bacal then left KW and joined Sotheby`s International Realty, Inc. At Sotheby`s, Bacal successfully sold Mr. Lam`s estate and earned Bacal a significant commission that he did not share with Sanowicz. Sanowicz learned of the sale and filed a lawsuit for his share of the commission. So what could go wrong if two property sellers agree to share a commission? That was the issue before the California Court of Appeals in Sanowicz v. Bacal. There, two real estate sellers, Hillel Sanowicz (“Sanowicz”) and Ben Bacal (“Bacal”), allegedly entered into a commission-sharing agreement.

One of the best ways to overcome this optimism and enthusiasm is to make a written agreement between the parties at the beginning of a relationship or before entering into a transaction. This rule applies not only to our personal transactions, commission contracts between agents, but also to the clients we represent who buy real estate together (for example. B parents and children, co-investors or joint ventures and persons who are not married). The particular circumstance of this case, which the court found to be establishing a viable agreement, was the possibility that the brokers were aware of the agreement and had accepted it. For example, if Sotheby`s had received the commission and transferred Sanowicz`s stake to KW and KW had subsequently passed that portion to Sanowicz, the transaction would have been in compliance with the Code. In Sanowicz v. Bacal, the Court of Appeal, the plaintiff allowed him to amend his complaint in order to make this allegation. The Court of Appeal overturned the decision of the Court of First Instance on the basis of a very precise interpretation of the law. Article 10137 of the Business and Professions Code prohibits (1) a broker from sharing his commission with a person who does not hold a licence, (2) an agent who accepts remuneration from any person other than the broker under which he holds a licence, (3) an agent who receives part of a commission “except through the broker under whom he holds a licence at the time of obtaining of the permit”.

However, § 10137 did not completely prevent the two real estate sellers from agreeing on commissions. .