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Dwayne B.
Dwayne B., Attorney
Category: Legal
Satisfied Customers: 33235
Experience:  Began practicing law in 1992
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Does a broker have the authority to take 50% commission for

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Does a broker have the authority to take 50% commission for himself as a co-listing agent, the "split" owed to the brokerage and then an additional $40,000 to be paid to the brokerage to make up for a mistake made by the co-listing agent?
By way of background, a real estate agent who works as an independent contractor for a brokerage brought a 16 million dollar listing to the brokerage. The agent agreed to co-list with the broker because of the size of the listing. One year later, the agent sold the property but made a $40,000 error when negotiating the commission that was in favor of the buyer's agent. Now the co-lister/broker is taking his 50% plus the brokerage's percentage plus an additional $40,000 as "punishment" for the error.

JD 1992 :

Hello and thank you for contacting Just Answer. I am an expert here and I look forward to assisting you today. If at any point any of my answers aren’t clear please don’t hesitate to ask for clarification.

JD 1992 :

The broker's ability to take anything at all is dependent upon the language of the listing agreement.

JD 1992 :

However, if there was an error made by the broker or someone they authorized to handle the financial affairs the broker usually wouldn't be authorized to take any money from the seller to make up for it.

JD 1992 :

Not without a court order.

JD 1992 :

And they should never be able to take money as "punishment".

JD 1992 :

In addition, based on the facts as set forth, it would appear that the most the listing agent would be responsible for would be $20k since the $40k would be the total mistake, but all it cost the broker was $20k since it was a joint commission.

Customer:

I should clarify - the real estate agent who agreed to add the broker as a co-lister for the $16M property (as the broker was more seasoned with high-end listings), made the $40,000 mistake (the real estate agent verbally agreed to take a commission cut before discussing it with "co-lister" - mind you, the broker is not even listed as a co-lister on the listing agreement but I digress...)

JD 1992 :

I still don't see that the broker would, even arguably, be entitled to more than $20k.

JD 1992 :

And if the broker agreed to the commission cut then they probably aren't entitled to anything, although that could depend on the wording of the contract as well since some contracts specifically prevent oral amendments.

Customer:

I agree. Is this something the agent can argue with the broker? Right now the broker is threatening to fire him from the brokerage and is now "only" going to take his 50% commission, the brokerage's split of 20% and the $40,000 punishment. Basically, on a 16 million dollar deal the agent is walking away with a mere $36,000.

JD 1992 :

Certainly it can be argued. The $40k punishment is ridiculous and just sounds like something the broker has decided they want to do. I can't imagine any contract allowing that.

Customer:

Okay, one more question - thank you by the way!

JD 1992 :

You're welcome.

Customer:

From my perspective, the broker is taking advantage of his fiduciary duty as a broker because he is threatening to fire the agent and I'm sure will should the agent decide to argue the $40,000 punishment.

Customer:

So, either the agent takes the $40,000 hit or gets fired. It just doesn't seem fair or legal.

JD 1992 :

He may be but I don't think the termination would be a breach of a fiduciary duty since he doesn't have the same fiduciary relationship to the employee.

JD 1992 :

There may be some other provision under CA employment law that would apply. You would need to ask that question in that category.

JD 1992 :

CA has unique employment laws, different than almost every other state.

Customer:

Oh, this is Florida

JD 1992 :

I'm sorry, I thought it was CA. FL employment law wouldn't allow any remedy.

Customer:

what do you mean by "wouldn't allow any remedy"

JD 1992 :

There could be an argument that it was a breach of contract of some kind or possibly even a criminal extortion.

JD 1992 :

FL is what is known as an employment at will state. That means an employer can take any action they want so long as it isn't motivated by race, age, gender, etc.

JD 1992 :

However, there is one other exception known as the "public policy exception".

JD 1992 :

I have ever seen a case with facts like these, but this might meet that exception.

JD 1992 :

What it means, essentially, is it is so unfair that it is against public policy.

Customer:

Gotcha.

JD 1992 :

It would be akin to an employer telling the employee that they have to give back some of their salary or get fired.

JD 1992 :

Not exactly, but kind of.

Customer:

Yep, I see.

JD 1992 :

It is close enough to where it would be beneficial to discuss this with a local employment attorney.

Customer:

Okay, I see.

JD 1992 :

Anything else I can assist with?

Customer:

Can you hold on a quick second?

JD 1992 :

Sure

Customer:

Thank you.

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