Was the Realtor Entitled to a Commission? | Business Transaction Newsletter

In the case of Tomlin vs. Nephrology Associates, P.C., the Court ruled that Tomlin, the real estate broker was entitled to a commission when the Nephrology Associates Clinic renewed and amended several leases. The facts in the case were that Tomlin, a commercial real estate broker, signed a contract to establish new dialysis clinics for Nephrology Associates. Tomlin spent three years locating sites for the clinics, negotiating leases, as well as land and building purchases. The company agreed to pay Tomlin a 4% commission on the gross rental payments of all leases upon signing of the leases and at the renewal or extension of such leases.  

Later the company negotiated and executed amendments to leases without Tomlin’s participation. At least ten of the leases were amended, some more than once. Tomlin demanded payment of a commission, and the company refused. Thereafter a breach of contract lawsuit was brought. Both the trial court and the Court of Appeals ruled that Tomlin was entitled to a 4% commission “at the renewal or extension” of the leases he had procured.

The Court of Appeals pointed out that “renewal” is not a term of art. The word has no legal or technical significance. But while renewal can have multiple meanings, it is frequently used as a synonym for extension.

In the Tomlin case, the Court went through an analysis of each of the leases and made a determination as to whether the lease renewals and amendments were truly renewals or whether those were new leases. The Court looked at the listing contract and determined that the intent of the parties was that any renewal of the leases would result in a commission owed to Tomlin. The Court said that in any contract dispute, the Court’s task is “to ascertain the intention of the parties based upon the usual, natural, and ordinary meaning of the contractual language.” The parties’ words are the “lodestar” of contract interpretation. As such, the Court found that Tomlin was entitled to a commission on seven of the ten leases that were done as renewals.

MY RECOMMENDATION:  Real estate brokers as well as the parties need to be precise and careful as to what and when they intend for a commission to be earned and owed to a broker. Often times, Broker Listing Agreements are “form” contracts in which the blanks are filled in. The parties need to review these form contracts carefully.

Yours very truly,
RAINEY, KIZER, REVIERE & BELL, P.L.C.

William C. Bell, Jr., Attorney at Law

This letter is intended to provide you with ideas for consideration in commercial transactions.  It is not intended to give a general solution applicable to all apparently similar individual problems, since slight changes in facts may require variance in legal advice.  Please contact legal counsel with specific questions.