Commercial Real Estate Brokerage Agreements – Seller’s Response to Broker’s Commission Claim

by Mitchell Reed Sussman on Feb. 23, 2024

Real Estate Real Estate Other 

Summary: The Nevada legislature passed Senate Bill 452 in 1999 to address the problem of brokers being shortchanged on commissions in commercial real estate sales transactions at the close of escrow.

The Nevada legislature passed Senate Bill 452 in 1999 to address the problem of brokers being shortchanged on commissions in commercial real estate sales transactions at the close of escrow.

 

The additional statutes, added to Chapter 645 of the Nevada Revised Statutes, give brokers a claim for commission before the close of escrow, but also provide options for sellers on how they may respond to an asserted claim.

 

Commercial Real Estate Brokerage Agreements

 

What happens when a commercial real estate seller in Las Vegas wants to dispute the broker’s commission claim?

 

Commercial Real Estate Brokerage Agreements, after broker gives written notice to the seller of the broker’s asserted commission claim, specify that the seller must give a written response to the broker within 5 days of being served written notice (but no later than 7 days before the transfer of the property) as required under NRS 645.8775.

 

The seller has two options for how to respond:

 

  • First, they can confirm the claim, and, after notifying the broker in writing of said confirmation, they may instruct the escrow agent to disburse funds to the broker in the amount claimed.
     
  • Alternatively, the seller may dispute the claim by notifying the broker in writing. If the seller fails to respond within the time frame specified by the statute, the seller has effectively disputed the claim.

 

When the claim is disputed, the broker may then record the claim with the office of the recorder of whatever county in which the commercial real estate is located.

 

Under NRS 645.8791, once the claim is recorded, the seller may then file a civil action in court and, between when the summons is issued and when the broker files an answer to the complaint, apply for an order directing the broker to appear and show cause why the broker’s claim should not be dismissed.

 

The court will then issue an order specifying the time and date of a hearing on the claim and direct the seller to serve the notice to both the broker and the escrow agent.

 

If the broker fails to appear at the hearing, the court will submit an order dismissing the claim with prejudice, and will instruct the broker to record a copy of the order of cancellation, which must state that the order of cancellation has the same effect as expungement of the claim.

 

If both broker and seller appear at the hearing, they will both present evidence to the court, and the court will determine which party to whom the funds should be disbursed “with reasonable probability”.

 

Whichever party prevails will be entitled to attorney’s fees and costs as well.

 

To learn more please reach out to Las Vegas Real Estate Attorneys at https://www.lasvegasrealestateattorney.com or call 800-233-8521 for a free phone consultation.

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