Realtors Beware of Commercial Tenant’s Right of First Refusal

In a decision published on October 26, 2017, the Appellate Division affirmed the grant of summary judgment in favor of a commercial tenant against a realtor who claimed that the tenant, who had a right of first refusal under its lease to purchase the premises, was obligated to pay the realtor's commission arising from a separate contract with another prospective purchaser of the leased premises.

In Seth Pollack et al. v. Quick Quality Restaurants, Inc. (Approved for Publication on 10/26/17) the Appellate Division considered whether a tenant, exercising under its lease a contractual right of first refusal to adopt the terms of a purchase contract for its leased premises, is obligated to pay a commission to a broker who secured a prospective buyer for the landlord/seller. The broker secured a prospective purchaser, who orally represented it would enter into a written commission agreement, separate and apart from the purchase contract, to pay the broker 1.5% of the purchase price. When the tenant exercised its option to purchase the premises, no commission agreement was included in the sales contract. Because there was no contractual relationship, either express or implied, between the broker and the tenant, nor any other basis to impose an obligation to pay the commission, the panel affirmed the trial court's grant of summary judgment for the tenant.

Before securing a prospective purchaser for a leased commercial premises, all realtors should check to see if the seller's existing lease with its tenant(s) allows the tenant a right of first refusal to purchase the premises.   Nehmad Perillo & Davis specializes in all facets of real estate law, including the lease and purchase of commercial property.  For any questions, contact the attorneys at NPD today at (609) 927-1177.