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APPELLATE DIVISION AFFIRMS REAL ESTATE BROKERS COMMISSION

Statute of Frauds Does Not Apply to Agreements to Pay Mortgage Broker Commissions In a real estate transaction case involving a 3.5 percent commission between a real estate broker and purchaser to be paid by the purchaser, the New Jersey Superior Court, Appellate Division, affirmed a jury verdict in favor of the broker in Gebroe-Hammer Associates, Inc. v. David Sebbag, et al., No. A-3225-04T2 (App. Div. 2006).

Purchaser had orally agreed to this arrangement, but never signed the agreement. The parties' arguments center on two sections of the Statute of Frauds that address real estate brokers' commissions. The first section provides that a broker who acts as agent "for the transfer of an interest in real estate" is not entitled to a commission without a written agreement. This subsection (b) excludes sales of mortgages stating that "the interest of a mortgagee or lienor is not an interest in real estate." N.J.S.A. 25:1-16(b).

Subsection (d) of the same statute provides an exception, allowing oral agreements under certain limited circumstances: A broker who acts pursuant to an oral agreement is entitled to a commission only if: (1) within five days after making the oral agreement and before the transfer or sale, the broker serves the principal with a written notice which states that its terms are those of the prior oral agreement including the rate or amount of commission to be paid; and (2) before the principal serves the broker with a written rejection of the oral agreement, the broker either effects the transfer or sale, or, in good faith, enters negotiations with a prospective party who later effects the transfer or sale. N.J.S.A. 25:1-16(d).

The court concluded that these sections were intended to be read together, since (d) is an exception to (b). Although subsection (b) states that the exclusion for mortgage sales is an exception to "this subsection," this does not mean that the requirements of subsection (d) apply to commissions on sales of mortgages. Subsection (d) was written only to permit a limited exception to the writing requirement created by subsection (b), and not to create a new and separate requirement applicable to brokers' commissions not covered by subsection (b).