If You Need to Sue to Get Paid Your Commercial Real Estate Commission
When I was brand new in commercial real estate brokerage, the man who was my broker, a wonderful man named Al Rose, told me that if I ever needed to sue someone to collect a commercial real estate commission, to do everything that I could to settle the matter first, rather than go the entire distance through our court system. And of course, with me being the young broker without the decades of experience that Al had within our industry, I was convinced that justice would ultimately prevail within our legal system, and that I would be vindicated, if necessary, and receive my full commission in the end.
But then years later, having had to sue to collect commissions on three consecutive transactions during an economic downturn, I began to recognize the wisdom in what Al had said.
First of all, in echoing Al’s words, do everything that you can to settle on an agreed upon dollar amount to resolve the entire matter, before you ever file a lawsuit against someone to get paid your commission. Because once you file the lawsuit, you’ll now have legal fees involved, thereby reducing any amount that you’ll get paid when settling, or in going the entire distance in the courtroom.
Secondly, if you need to file a lawsuit, hire an attorney who will take your case on a contingency basis, meaning that for their legal fees, they’ll receive a percentage of the proceeds from any settlement or lawsuit, and that percentage will typically be between 30-40% of the entire amount that you’ll receive.
Two big reasons you’ll want to hire an attorney on a contingency basis are, 1) You won’t owe them any legal fees if you don’t receive any money, and, 2) If they take your case on a contingency basis, this means that they believe you have a good case, and they now have a vested financial interest in making sure that you win.
Contrast this instead with hiring a law firm that will charge you by the hour the entire way for their efforts, and they’ll be receiving the same amount of money in legal fees whether you win, or whether you lose.
Call me old-fashioned, but that scenario to me just doesn’t seem like it possesses the exact same kind of intense motivation to win.
Then when it comes to how strongly you feel that you are in the right with your case, and how well-grounded it is in real estate law, proving that you are in the right and that the other person is a total and complete shyster, here is what I’ve learned when it comes to chasing after money in the courtroom:
You can take the exact same case, try it individually before ten different judges, and then you can get ten different opinions on exactly how they see it.
So the case that you thought was very compelling, may not be as compelling to the judge.
Then again, you may be dealing with the same kind of principal that I had to deal with on the other side, too…someone who is content in spending much more in legal fees, than what they actually owed me in commission. So when you’re dealing with someone like this, it definitely isn’t fun.
With this in mind, I recommend that you do what you can to settle any commission dispute before ever suing the person and taking them to court. As I’ve mentioned, you’ll save the 30-40% in legal fees from the proceeds, that you’d normally need to pay to your attorney, you’ll save countless hours of aggravation during the lawsuit, with all of the depositions, appearances, worrying, and the ongoing telephone conversations with your attorney. And, you’re then guaranteed that you won’t run the risk of going the entire distance, losing your judgment in court, and then having the judge tell you that you’ll now need to reimburse the other side for their attorneys’ fees, too!
Unless you feel that the other side is offering you a settlement that is completely ridiculous, and totally insulting to you as a broker, when you settle your dispute and move on, you now won’t be fighting through all of that negative energy for many months, and all of that worry and concern along the way, and you’ll free yourself up to focus on finding that next great opportunity for you to earn and get paid a solid commission.