Generally speaking, any agreement employing an agent or broker relating to the purchase or sale of real property and providing for compensation to the broker or agent in the form of a commission or otherwise must be in writing. The statute of frauds requires any such agreement to be in writing to be enforceable. (Civil Code § 1624(a)(4).)
However, there are two notable exceptions to this rule.
First, agreements between brokers, or between brokers and salespersons, to share or split a commission do not have to be in writing. Second, although an agreement with the owner of the real property for a finder’s fee must be in writing, a finder’s fee agreement between a broker and a third party finder does not have to be in writing.
The agreements mentioned above are outside of the statute of frauds because the purpose of the statute of frauds is to protect the buyers and sellers of real property from unfounded claims by people who have not been properly authorized to act as an agent for the buyers or sellers. Accordingly, fee agreements that do not involve the buyers or the sellers, also known as the principals, but rather only involve the brokers and other third parties are not within the scope of the Civil Code § 1624(a)(4).
Thus, if you are looking to buy or sell your real property, or if you are a broker or agent, make sure the agreement regarding compensation to the broker or agent is in writing. And even though agreements between brokers, and agreements between brokers and salespersons and finders, do not have to be in writing to be enforceable, as a matter of good practice, it is always better to get any agreement to share or split commissions in writing.
By Rachael Shinoskie
For more information on dealing with broker commission disputes or issues involving broker commissions, contact our Los Angeles based real estate lawyers at 310-954-1877, www.schorr-law.com, email@example.com