The Second Department Explains the Difference Between a Brokerage Agreements Granting an “Exclusive Right to Sell” and an “Exclusive Agency”
Print Article- Posted on: Jul 25 2025
Folks enter into brokerage agreements all the time. The most familiar situation involving brokerage agreements are those related to the sale of real property. Litigation over brokerage agreements often involves the payment of commissions. In general, “to prevail on a cause of action to recover a commission, the broker must establish (1) that it is duly licensed, (2) that it had contract, express or implied, with the party to be charged with paying the commission, and (3) that it was the procuring cause of the sale.” Blooming Home Realty, LLC v. Infinity Holdings Northeast, LLC, 228 A.D.3d 815, 816 (2nd Dep’t 2024) (citations, internal quotation marks and brackets omitted). However, a broker with an “exclusive right to sell” is entitled to a commission even if the seller “alone were responsible for the sale” because under such circumstances, the broker “need not show that it was the procuring cause of the sale.” Id. (citations and internal quotation marks omitted).
On July 23, 2025, the Appellate Division, Second Department, decided Angelic Real Estate, LLC v. Aurora Properties, LLC, a case that gave the Court “the opportunity to examine the law of brokerage agreements granting an ‘exclusive right to sell,’ as well as the application of such agreements outside the context of transactions involving the sale or lease of real property.” The plaintiff in Angelic had contended “that it had an exclusive agreement to secure certain financing on behalf of the defendant and that it was entitled to a commission even though it was not the procuring cause of a loan the defendant ultimately obtained.” The Second Department, however, disagreed.
The parties to Angelic entered into an agreement pursuant to which the plaintiff, a licensed real estate broker specializing in obtaining financing for commercial properties, was to secure financing on the defendant’s behalf. The agreement “stated that the defendant was engaging the plaintiff ‘exclusively’ to obtain debt financing for multiple office buildings located in Tennessee.” The agreement, dated June 8, 2020, also provided that if term sheet(s) were not procured from lenders by June 20, 2020, the agreement remained “in place but shall become non-exclusive with regards to any lenders not already approached and engaged by the plaintiff. (Bracket omitted.) The agreement had a 120-day term. If the defendant agreed on financing terms, the plaintiff was to be paid a fee at closing. The agreement also contained a provision providing that plaintiff was not entitled to a fee if Mountain Commerce Bank (“MCB”) provided a term sheet on or before June 30, 2020. “On August 21, 2020, the defendant obtained a $16,750,000 loan commitment from MCB. The plaintiff allegedly informed the defendant that if MCB entered into a terms sheet before the expiration of the agreement and after the exclusion period, i.e., June 30, 2020, the plaintiff would be entitled to a fee under the agreement. The defendant subsequently closed on the loan with MCB and did not tender a fee to the plaintiff.”
The plaintiff commenced an action to recover a brokerage fee and moved for summary judgment arguing that: the plaintiff had the exclusive right to secure debt financing for the defendant; because the agreement was “exclusive,” it was entitled to a fee as long as financing was secured during the life of the agreement regardless of whether it was the procuring cause; the exclusion period for MCB expired two months prior to the defendant’s term sheet with MCB. The defendant cross-moved for summary judgment contending that: the agreement did not provide that the plaintiff was entitled to a fee if the defendant independently negotiated its own terms; and there is no dispute that the plaintiff was not the procuring cause of the loan. The trial court denied the plaintiff’s motion and granted the defendant’s cross-motion finding that although the exclusion provision expired on June 30, 2020, “given the lack of clear exclusivity in the agreement, the plaintiff was not entitled to receive a fee for a loan negotiated and secured solely by the defendant.” The Second Department affirmed.
The Court noted that although a broker seeking a commission “is normally required to make a showing that it was the procuring cause of the transaction,” “there is a distinction between brokerage agreements granting an exclusive agency and those conferring an exclusive right to sell, the latter of which permits a broker to recover a commission even if it was not the procuring cause of the transaction.” (Citations omitted.) The Court then explained the distinction between an exclusive agency agreement and an exclusive right to sell. Thus, “pursuant to an exclusive agency agreement, if the owner finds its own buyer, then no commission is due to the broker.” (Citation omitted.) Put another way, “where a broker has been granted an exclusive agency, the seller cannot employ another broker, but would not be precluded from itself making the sale without becoming liable to the broker for a commission.” (Citations, internal quotation marks and brackets omitted.) However, if a broker has been granted an exclusive right to sell, the broker would be entitled to a commission even if the owner were solely responsible for the sale.”
The Court explained that exclusive rights to sell has been found where, inter alia, there is “clear and express” language in an agreement that: (1) a commission was owed “regardless of whether the broker was the procuring cause of the transaction”; (2) “the owner was precluded from independently negotiating a sale”; or (3) “inquiries or offers were required to be referred to the broker.” (Numerous citations omitted.) The Court noted that an exclusive right to sell may not be found even though the preamble of an agreement provided that the broker was given an “exclusive right to sell.” In one such example provided by the Court, the phrase “exclusive right to sell” was undefined and the agreement contained a provision requiring the broker to obtain a “ready, willing and able” buyer, which “was deemed clearly inconsistent with any entitlement to a commission upon an independent sale by the owner.” (Citations and internal quotation marks omitted.)
The Court, quoting Morpheus Capital Advisors LLC v UBS AG, 23 N.Y.3d 528, 535 (2014), stated that “‘a contract giving rise to an exclusive right of sale must clearly and expressly provide that a commission is due upon sale by the owner or exclude the owner from independently negotiating a sale’” because “‘requiring an affirmative and unequivocal statement to establish a broker’s exclusive right to sell is consistent with the general principle that an owner’s freedom to dispose of her own property should not be infringed upon by mere implication.’” The Court also noted that the Court of Appeals “made clear” that “the rule requiring a clear statement to confer an exclusive right of sale is not limited to real estate brokerage agreements” and that it “saw ‘no reason to apply a different rule to brokerage contracts concerning the sale of financial instruments in the investment banking context,’ noting that, ‘in both cases, the governing principles arise from the law of agency and contract, not from the law of real property.’” (Quoting Morpheus, 25 N.Y.3d at 536 (internal brackets omitted).
In holding for the defendant, the Court stated:
Applying these principles here, the defendant established its prima facie entitlement to judgment as a matter of law dismissing the complaint. Initially, it is undisputed that the plaintiff did not secure a lender or loan with conforming terms on behalf of the defendant before June 20, 2020. Further, the defendant demonstrated that the plaintiff was not entitled to a commission for the loan the defendant independently obtained from MCB in August 2020. The agreement did not clearly and expressly provide the plaintiff with the exclusive right to deal or negotiate on the defendant’s behalf. The defendant also demonstrated that the plaintiff was not the procuring cause of the loan from MCB.
Jonathan H. Freiberger is a partner and co-founder of Freiberger Haber LLP.
This article is for informational purposes and is not intended to be and should not be taken as legal advice.
Tagged with: Brokerage Commissions, Commercial Litigation, Contract, Real Estate Contracts
