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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: May 26, 2019

Statute of Frauds Did Not Bar Claim Based on Alleged Oral Contract for Real Estate Commission

On May 23, 2019, the First Department issued a decision in Elhanani v. Kuzinez, 2019 NY Slip Op. 04042, holding that the Statute of Frauds did not bar a claim based on an alleged oral contract for a real estate commission, explaining:

The complaint alleges that plaintiff Eran Elhanani, a real estate broker, and defendant Boris Kuzinez, a real estate developer, entered into an oral agreement pursuant to which Elhanani would lower his commission rate from the industry standard of 3% to 1% in exchange for exclusive rights to broker sales of residential luxury apartments to be developed in a building purchased by Kuzinez. Pursuant to the contract, Elhanani also agreed to promote the units by partnering with a national real estate sales and marketing agency approved by defendants. The complaint alleges that defendants accepted plaintiffs’ services, which included free consulting based on the alleged agreement, for almost two years, but once they had obtained the benefits of the bargain, defendants fired plaintiffs and refused to pay them anything for their work.

. . .

The complaint should not have been dismissed pursuant to the statute of frauds. As an initial matter, defendants did not move to dismiss based on the statute of frauds and plaintiffs were not afforded the opportunity to address the issue. Moreover, the statute of frauds is inapplicable here as General Obligations Law ยง 5-701(a)(10) specifically exempts contracts to pay compensation to licensed real estate brokers, which is the type of contract alleged by plaintiffs.

(Internal quotations and citations omitted).

New York contract law–usually straightforward–has traps for the unwary, like the requirement that some contracts be in writing (the statute of frauds). And as this decision shows, there are ways to escape from those traps, but the exceptions are narrow and difficult to meet. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you or a client face a situation where you are unsure how to enforce rights you believe you have under a contract.

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