This opinion -- delivered orally on the return date of plaintiffs' order to show cause and on defendants' motion for summary judgment -- is reduced to writing at the request of counsel because the subject matter is of general interest.
The issue involved is rather simple, occurs commonly, but, so far as research has been able to determine, has not been ruled on, definitively, in New Jersey. It is this. Does the broker whose efforts lead to the signing of a contract for the sale of
real estate have a lien for his commission on the proceeds of sale due to the seller at closing? The answer is, yes.
On July 22, 1986, Jean Sheridan,*fn1 Gerald Lizotte and Jean S. Lizotte, his wife, signed an "Exclusive Right to Sell Agreement" with the Monmouth County Board of Realtors' multiple listing service through a "listing broker," defendant, Barry Associates. That agreement provided that the owners would pay a commission of 6% of the sales price.
On November 3, 1986 the owners-defendants signed a written contract to sell the property to the plaintiffs-Cohen. That contract, on a standard realtors' printed form, provided for a sales price of $290,000 with a total commission of 6% of which 3% was to go to Jersey Shore Real Estate Associates, the "selling broker," a member of the multiple listing service. The closing date was scheduled for May 16, 1987. As provided in the contract, the required deposit of $25,000 was paid by the purchasers and held in the trust account of Jersey Shore Real Estate Associates. In all of its other terms, the contract was quite ordinary and in full compliance with the Statute of Frauds.
The title search ordered by the attorneys for the purchasers revealed a substantial first mortgage lien on the property as well as a number of judgment liens. The estimated closing costs to clear all liens (including taxes) as well as to pay the real estate commission of $17,400 came to $302,252. It was quite apparent that the sellers had no independent funds to make up the difference between that figure and the purchase price of $290,000.
In anticipation of that problem, the purchasers filed this action on April 16, 1987 seeking specific performance of the contract and, in connection therewith, a declaration that the real estate commission due was not a lien on the property which had
to be satisfied at closing in order that they receive clear title. Process was by way of an order to show cause seeking declaratory relief on its return day. All parties were promptly served. Both realtors (listing and selling), represented by the same attorney, filed their answers and a motion for summary judgment returnable on the same day as the order to show cause. By that motion they sought a declaration that the commission was a lien on the property and on the closing proceeds. The purchasers and realtors fully briefed their respective positions. The sellers took no position.
If the plaintiffs prevail, the court will order Jersey Shore to turn the $25,000 deposit over to the seller's attorney (to be used to pay off liens) and, to the extent that there are insufficient funds at the closing to pay the $17,400 commission, the brokers will be left to an action at law against the sellers for the balance. In doing so they will necessarily incur the added expense and delay attendant to that litigation, and run the practical risk (as noted above) that the sellers are "judgment proof."
There is no contention, here, that the brokers have not earned the commission. Under existing law, upon performance of the contract by the buyer, the owner/seller becomes liable for the payment of the real estate commission. Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528, 551 (1967). The ...