by Ron Davis
The real estate broker who steered a retail client to a receptive Iowa shopping center will finally collect a brokerage fee for his services.
Obtaining that fee has been difficult, however. Thatís because the shopping centeróThe Shoppes at Three Fountains, in West Des Moinesóis owned in part by a brokerage firm, and that firm objected to payment of the fee to the finder broker.
The objection resulted from a dispute over the agreement between the two brokers. The retail client, on his brokerís suggestion, had met with the shopping centerís broker to determine if the centerís owners would be interested in leasing space there. Based on that meeting, a lease agreement seemed imminent, and the retailerís broker contacted the centerís brokerage firm to discuss payment of a brokerage commission. In response, the shopping centerís brokerage firm simply outlined in a letter its policy on payment of commissions.
The retailer and the shopping center eventually signed a lease. But when the retailerís broker requested his commission, the shopping center refused to pay, claiming that the agreement between the two brokers did not comply with standard professional regulations.
Specifically, the centerís brokerage firm pointed out that Iowa Real Estate Commission rules require that a contract between a broker and a third party (a lessor or a buyer, for example) include a definite expiration date. Apparently, no expiration date was included in the agreement between the two brokerage firms.
The dispute resulted in a lawsuit, and an Iowa jury decided that the centerís brokerage firm must pay the finder broker a $69,000 commission. The shopping center and its brokerage firm appealed.
The Iowa Supreme Court upheld the jury verdict, explaining, ďThe primary purpose of the rule [of the Iowa Real Estate Commission] in question is to prevent an ownerís land from stagnating on the market for in indefinite period of time in the hands of a single broker. This requirement serves to protect property owners, however, and has no similar application to agreements between brokers, as in this instance. (Hubbell Comm. Brokers v. Fountain Three, 652 N.W.2d 151 [Iowa 2002])
Decision: October 2002
Published: December 2002