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Clarifying Entitlement to Finder's Fees in New York Real Estate Transactions

Posted on 08 May 2015

New York courts have recently decided a series of cases that are making plain when a property finder is - or is not - entitled to collect a finder's fee.  Although the basic rules are clear: finder's-fee agreements need to be in writing and signed by the buyer,[1] disputes concerning entitlement to finder’s fees are commonplace.

In the past year, New York Courts have contextualized the limitations on entitlement to these fees.  For example, at the New York Supreme Court, Justice Kornreich clarified that "all services rendered in connection with the facilitation of a real estate sale are subject to the statute of frauds”[2].  In that case, the finder characterized its actions as providing a “broad array of services to help defendants purchase the Property.  Such services ran the gamut from collecting due diligence, valuing the property, procuring legal services, and interfacing with the seller”.  Ultimately, however, the breach of contract claim was dismissed because the "services were rendered in connection to [the] defendants' purchase of the property and no signed, written agreement exists.”

In her most recent decision on this topic, Multi Capital Group LLC v. Karasick, the Supreme Court Judge denied a claim to a $2 million finder’s fee because, even assuming an agreement was in place, the finder failed to establish causation.  In this case, the finder needs to establish that “the final deal which was carried through flowed directly from the introduction.  He must establish a continuing connection between the finder’s service and the ultimate transaction."[3]  In Multi Capital Group, no finder's fee was due even though the supposed finder introduced the buyer to the property they ultimately purchased.  The introduction preceded the ultimate transaction by four years and that ultimate transaction was "brought to [the buyers] in a manner wholly uncaused by anything reasonably attributable to [the supposed finder].  The question is causation."  Accordingly, because the finder did not facilitate the actual transaction, it was not entitled to a fee.

Given the current pace of transactions in the New York real estate market, claims that test the parameters of finder’s fee entitlement are expected to continue.  Mishcon de Reya lawyers are well versed in these issues and can advise both buyers and finders in these disputes.


 

[1] N.Y. General Obligations Law 5-701(a)(10)

[2] Penncolab LLC v. 118 East 59th Street Realty, Index No. 653806/2013

[3] Index No. 652598/2011.