Attorney for Real Estate Brokers in New York, NY

Real estate brokers for buyers or sellers of real estate property in New York generally use attorneys to review the contracts and other closing documents. Although having an attorney to review these documents is not required under law, most real estate brokers recommend attorneys in these transactions because of the large amount of investment required in a real estate purchase or sale. Real estate brokers may also need the services of an attorney in several disputes regarding commission or the performance of their work that may require legal representation.

What Attorneys Do in Real Estate Transactions

Real estate brokers in New York are not permitted to draft legal documents or give legal advice since this may be considered an unauthorized practice of law. For this reason, attorneys are retained by buyers and sellers in real estate transactions, usually after the buyer has made and the seller has accepted the offer. Real estate brokers may refer the services of an attorney who they have previously worked with, in case the buyer or seller is not familiar with any real estate attorney.

The buyer’s offer to purchase is usually a one-page form that the real estate broker prepares. It contains the basic terms of the transaction such as the purchase price and its inclusions. After a satisfactory home inspection, both the buyer and seller then retain their respective attorneys to prepare the first draft of the sale contract, negotiate the terms, finalize the contract, order a title report for the property, and review closing documents. The attorney also advises and explains the documents that are being signed, which includes the deed, transfer tax returns, and mortgage documents.

Real Estate Broker Issues

Aside from real estate transactions, real estate brokers may encounter legal issues that may require legal representation. Examples of these issues are:

Disputes over Commission

Disputes may arise between brokers and their clients or between co-brokers regarding the agreed commission split. In this case, legal representation may be needed to negotiate and resolve the dispute.

Dual agency disputes

When a broker represents both buyer and seller in the transaction, a dispute may arise, even if the parties have previously agreed on the dual agency. This usually happens when one party feels that the broker has breached his fiduciary duties by reason of the dual agency.

Procuring cause disputes

When multiple brokers claim to be the cause of the sale or different brokers claim the buyer as their contact, there can be disputes regarding the broker who should be entitled to the commission.

The Broker's License and the Department of State

Real estate brokers in New York are licensed and regulated by the Department of State's Division of Licensing Services. Brokers must complete required pre-licensing education, pass the state examination, gain experience under a broker license (for those seeking an associate broker or full broker designation), and comply with continuing education requirements. The Division has the authority to investigate complaints, suspend or revoke licenses, and impose fines for violations. Common complaints include misrepresentation, undisclosed conflicts of interest, mishandling of escrow funds, and breach of fiduciary duty. We represent brokers in disciplinary proceedings before the Department of State, including initial investigative responses, formal hearings, and appeals.

Listing Agreements and Buyer's Brokerage Agreements

The listing agreement (or buyer's brokerage agreement) is the contract that defines the broker's relationship with the client. Critical provisions include:

• Term. The duration of the listing or representation period.
• Commission. The amount or percentage, who pays, and how it is split among co-brokers.
• Exclusivity. Whether the listing is exclusive right to sell, exclusive agency, or open. Each has different consequences for who is owed commission.
• Protection period. The tail period after expiration during which the broker is still owed a commission if the property sells to a buyer the broker procured during the term.
• Cancellation. The conditions under which either party can terminate.
• Disclosure obligations. The agency disclosure form required under New York Real Property Law Section 443.

Many disputes arise from poorly drafted or ambiguous listing agreements. We draft and review listing agreements to make sure they reflect the broker's actual arrangement with the client.

Fiduciary Duty and Agency Disclosure

Real estate brokers owe their clients fiduciary duties of loyalty, confidentiality, obedience to lawful instructions, reasonable care, full disclosure, and accounting. New York requires that brokers provide each client (and customer) with a written disclosure of their agency relationship — Form DOS-1736 in residential transactions — explaining whether the broker represents the buyer, the seller, both, or neither. Failure to provide the disclosure in a timely manner can result in commission forfeiture and disciplinary action. We help brokers understand and comply with the disclosure rules and we defend brokers when compliance is challenged.

Procuring Cause Disputes

When more than one broker has been involved with a buyer, disputes arise over which broker is the "procuring cause" of the sale and therefore entitled to the commission. The procuring cause analysis is fact-intensive. Courts look at which broker first introduced the buyer to the property, which broker maintained an unbroken chain of communication, whether the original broker abandoned the buyer, and whether the second broker had legitimate reasons to step in. Many MLS systems and trade associations provide arbitration procedures for procuring cause disputes, which can be faster and cheaper than court litigation. We handle procuring cause disputes in both arbitration and court.

Co-Broker and Commission-Split Disputes

Commission disputes also arise between cooperating brokers. The listing broker and the buyer's broker typically split the seller-paid commission, but the split percentage, the conditions for payment, and the handling of escrow funds can all generate disputes. The 2024 changes to the residential brokerage commission rules following the National Association of Realtors settlement have added new layers of complexity, including new requirements for buyer brokerage agreements and disclosures about who pays what. We advise brokers on the new landscape and resolve commission disputes that arise from it.

Antitrust Issues After the NAR Settlement

The 2024 settlement between the National Association of Realtors and class action plaintiffs in the Sitzer/Burnett case fundamentally changed how residential real estate commissions are negotiated and disclosed. Buyer's brokers must now have written agreements with their clients before showing homes. Sellers no longer offer compensation to buyer brokers through the MLS. Listing agreements and buyer brokerage agreements must spell out compensation clearly. The new rules continue to be tested in litigation and through state regulatory follow-up. We help brokers comply with the new framework and respond to continued litigation.

Dual Agency and Designated Agency

When a single broker or brokerage represents both buyer and seller, the arrangement is called dual agency. New York permits dual agency with informed written consent. The broker must disclose the dual agency, explain its implications, and obtain signed acknowledgment from both sides. The challenge is that a dual agent cannot fully advocate for either side; the agent must remain neutral on negotiation matters. Designated agency, in which different agents within the same brokerage represent different sides of the transaction, can address some of the conflict issues but does not eliminate them. We advise brokers on disclosure best practices and defend dual agency claims when they arise.

Misrepresentation and Disclosure Claims

Brokers face claims when buyers feel they were misled about property conditions, neighborhood factors, or other transaction issues. New York's Property Condition Disclosure Act requires sellers (not brokers) to complete a property condition disclosure statement or pay a $500 credit at closing. But brokers can still face claims for misrepresentation of facts they themselves stated, for failure to disclose facts they actually knew, and for misrepresentation of facts they should have known. The "as is" clause in most contracts does not protect against fraud or intentional misrepresentation. We defend brokers in misrepresentation claims and help structure marketing and disclosure practices that reduce future exposure.

Errors and Omissions Insurance

Real estate broker errors and omissions (E&O) insurance is a standard cost of doing business in New York. The policy covers professional negligence claims, including misrepresentation, missed deadlines, and failure to disclose. E&O policies have important exclusions — intentional misconduct, fraud, criminal acts, and claims involving the broker's own real estate transactions are commonly excluded. When a claim arises, prompt notice to the carrier and careful coordination with defense counsel are essential. We handle the interplay between E&O carriers and defendant brokers in claim defense.

Brokerage Operations and Independent Contractor Issues

Most real estate brokers operate through brokerage firms with the agents classified as independent contractors. The classification has significant tax, employment law, and liability implications. New York and federal law have continued to test the boundaries of independent contractor classification, with increasing scrutiny in some industries. Properly drafted independent contractor agreements, training programs, and brokerage policies help maintain the classification and protect both the brokerage and its agents.

Litigation Against Clients for Unpaid Commissions

When a broker has earned a commission but the client refuses to pay — for example, the seller closes outside the listing arrangement, the buyer terminates the buyer brokerage agreement without cause, or one party attempts to substitute a different transaction structure to avoid commission — the broker can sue. New York courts enforce broker commission agreements that meet statutory requirements. We have recovered commissions for brokers in cases ranging from straightforward residential listings to multi-million-dollar commercial deals.

Call Our Office

Despite the expertise of a real estate broker in real estate transactions, these brokers may still need the services of an attorney in disputes they may face in the course of the performance of their services. Having an experienced real estate attorney to represent the broker's interests is important in achieving a successful outcome of the matter. Should you need assistance, we at the Law Offices of Albert Goodwin are here for you. We have offices in New York, NY, Brooklyn, NY and Queens, NY. You can call us at 212-233-1233 or send us an email at [email protected].