Court Allows Licensed Real Estate Salespersons to Share Commissions Without the Involvement of Their Brokers

In Sanowicz v. Bacal, a California Appellate Court recently permitted an agent to pursue a commission from another agent based on a commission sharing agreement, even though the broker did not sign or approve of the agreement.

In Sanowicz, Plaintiff was a licensed real estate agent employed by a broker. He began working with defendant, who was licensed through Keller Williams. Subsequently, Plaintiff moved to Keller Williams and the two entered into oral and written agreements to share commissions earned on the sale of certain properties. Subsequently, Plaintiff introduced Defendant to a seller who wished to sell a property in Los Angeles. They agreed that they would split the commission earned on the sale and entered into a written agreement.

The document was not signed by the agents’ broker, nor anyone at Keller Williams. The following year, Defendant left Keller Williams. The defendant subsequently, sold the property for approximately $14 million. He received a commission of $210,000. Plaintiff sued seeking half of that commission.

Defendant filed a demurrer arguing that the agreement was unenforceable, since the broker had not signed it. Under Business & Professions Code Section 10137, it is unlawful for a real estate agent to accept compensation from any other person other than the real estate broker under whom he or she is licensed. The court sustained the demurrer without leave to amend and dismissed the case with prejudice. The plaintiff appealed, arguing that the court misinterpreted the scope of Business & Professions Code Section 10137.

The Court of Appeal reversed, holding that the sustaining of the demurrer without leave to amend was an abuse of discretion. The court held that the statute does not forbid commission sharing arrangements between agents. Therefore, the court allowed the plaintiff to pursue his claim.

Shannon B. Jones, Partner, sbj@sbj-law.com