Negotiating LA Law (Louisiana Law, That Is)
by Ron Davis
Continuing payment of leasing commissions must go to a real estate agent who acquired tenants for the owner of several shopping centers throughout Louisiana.
The agent had for some 20 years assisted the owner of the shopping centers in leasing space to a variety of tenants. In return, the owner of the shopping centers agreed to pay the agent a percentage of the lease revenues from the tenants that the agent had procured.
Eventually, the relationship between the two men ended—and with it the payment of commissions to the agent. The agent then sued, arguing that he should continue to receive both unpaid and future commissions.
In response, the owner of the shopping centers pointed out that the real estate contracts between the two parties did not include a specific duration for payment of commissions. And under Louisiana law, he added, a contract of unspecified duration “may be terminated at the will of either party by giving notice, reasonable in time and form, to the other party.”
In fact, all the contracts between the two men were similar in that they did indeed fail to provide precise duration dates. But each did state that the agent would receive commissions on “all monies collected during the initial term, options, renewals, extensions, assignments or additional leases with the Tenant.”
A Louisiana appellate court, in ruling in favor of the real estate agent, explained, “The applicable law can only be applied to contracts of ‘unspecified duration,’ that is, contracts having an uncertain and undeterminable term. In this case, we find the commission agreements do not contain an uncertain and undeterminable term, but rather an uncertain but determinable term…. The contracts at issue in this case have a determinable term because the payment of commission is specified as being due ‘during the initial term, options, renewals, extensions, assignments or additional leases with the Tenant.’ It is clear that when each tenancy ends, the contract for the payment of commission ends. Therefore, the law cited is inapplicable.”
The judges consequently ordered an accounting to determine the commissions owed to the real estate agent. (Schultz v. Hill, 840 So.2d 641)
Decision: May 2003
Published: August 2003