NEW, ENHANCED ABILITY TO COLLECT REAL ESTATE COMMISSIONS
by Christopher P. Parnagian and J. Laurence Chang (March 2009)

A recent amendment to Section 294-b of the New York State Real Property Law considerably strengthens the ability of a broker firm to collect its commissions. In the paragraphs below, we summarize the old and the new law.

Under the old law, a broker could file an "affidavit of entitlement" for unpaid commissions with the recording officer of the county in which the subject property was located. However, such a filing rarely spurred a seller to pay commissions owing because the affidavit did not create a lien on the property and because the seller was not required to deposit the disputed commission in escrow. Under the law as amended,¹ while the affidavit filed with the recording officer still does not create a lien, seller is now required to deposit with the recording officer the lesser of the net proceeds of the sale and the amount of the unpaid commission, pending resolution of the dispute. There are certain consequences if the deposit is not made.

In order to avail itself of the these new remedies, the brokerage firm must satisfy certain requirements, including (i) setting forth in the written commission agreement a clear, conspicuous, bold-face statement to the effect that seller will be required to deposit the commission with the recording officer, (ii) serving seller with a copy of the affidavit, and, if the matter can't be resolved earlier, (iii) instituting a legal action against seller within a prescribed time period.²

O'Hare Parnagian LLP advises clients on a wide range of real estate matters and handles business and finance transactions and commercial litigation. If you have questions about this memorandum, please contact Chris Parnagian (cparnagian@ohareparnagian.com) or Laurence Chang (jlchang@ohareparnagian.com). General information about the firm may be obtained at www.ohareparnagian.com.