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Agents Can Share Fees Under Limited Circumstances

In California real estate brokers are usually allowed to share commission payments. Up until recently, however, it has been unclear whether real estate agents are allowed to share commissions. A California appellate court has finally decided this issue in a case called Sanowicz v. Bacal. The answer is yes, agents can share commissions, but only under limited circumstances.

What Happened in Sanowicz v. Bacal?

Sanowicz and Bacal are both licensed real estate salespersons. Sanowicz claimed that he and Bacal agreed to share commissions earned by either of them on sales of certain real estate, and that Bacal breached that agreement. Sanowicz sued over this alleged breach.
When Sanowicz and Bacal met they were both real estate agents working at different agencies. They worked together on a deal and, while that property ultimately did not close, the two agents kept in contact. Eventually Bacal suggested to Sanowicz that they form a “joint venture” and work together on real estate transactions. During this collaboration Sanowicz moved to the agency where Bacal worked. The two agents entered into written and oral agreements that they would share their commissions equally, and they in fact did share some commissions.

Sanowicz eventually met Joseph Lam, a man who was interested in selling some property. Sanowicz introduced Lam to Bacal with the express understanding and oral agreement that Sanowicz and Bacal would split the commission from the sale of Lam’s land. They then entered into a written agreement that they would split the commission if Lam sold the land within two years of the agreement.

Bacal then left the agency where he worked with Sanowicz. Ultimately Bacal sold Lam’s land. The commission was $210,000. Sanowicz sued to recover half of that commission plus interest, and one half the commissions earned on other sales made as required by their joint venture agreements.

The Appellate Court’s Holding

The appellate court held that two licensed real estate agents can agree to share commissions earned under the circumstances in this case. It based its decision in part on Business and Professions Code section 10137. The Court determined that Sanowicz’s complaint was not a suit to collect a commision due to a broker, but rather that he was trying to collect a portion of a commision already paid to a broker. The Court could find no cases dealing with the application of section 10137 to the sharing of commissions among agents. It determined that the plain language of the statute says that an agent may pay a commision to another licensee, and that that licensee need not be another broker necessarily. Ultimately the Court held that agents can share fees as long as the fees flow from commissions already paid to the supervising broker. One question that has been left for another day is what effect this holding will have on the supervising brokers. This may very well mean that a supervising broker is an indispensable party to this type of suit.