REAL ESTATE COMMISSION UNENFORCEABLE WITHOUT WRITTEN SIGNED AGREEMENT
Suits to enforce payment of real estate commissions generally turn on the presence or absence of a signed agreement providing for the commission.
PLAIN LANGUAGE OF THE TEXAS REAL ESTATE LICENSE ACT
The Texas Real Estate License Act (“RELA”) statute of frauds provision in section 1101.806(c) of the Texas Occupations Code states:
A person may not maintain an action in this state to recover a commission for the sale or purchase of real estate unless the promise or agreement on which the action is based, or a memorandum, is in writing and signed by the party against whom the action is brought or by a person authorized by that party to sign the document.
TEX. OCC. CODE ANN. § 1101.806(c); see also Tex. Builders v. Keller, 928 S.W.2d 479, 481 (Tex. 1996) (“A real estate broker may not sue for a commission unless the agreement is evidenced by a writing complying with the Real Estate License Act.”).
“The [l]egislature was quite explicit: a broker may not recover a commission unless the commission agreement is in writing and signed by the party to be charged.” Trammell Crow Co. No. 60 v. Harkinson, 944 S.W.2d 631, 635 (Tex. 1997). Therefore, courts have required strict compliance with RELA and held an “agreement to pay a real estate commission must be in writing or it is not enforceable.” Brice v. Eastin, 691 S.W.2d 54, 57 (Tex. App.—San Antonio 1985, no writ); see also Harkinson, 944 S.W.2d at 637 (holding Texas courts strictly adhere to RELA’s statute of frauds requirements).
REQUIREMENTS OF WRITTEN COMMISSION AGREEMENT
“To comply with this section, an agreement or memorandum must:
- be in writing and must be signed by the person to be charged with the commission;
- promise that a definite commission will be paid, or must refer to a written commission schedule;
- state the name of the broker to whom the commission is to be paid; and
- either itself or by reference to some other existing writing, identify with reasonable certainty the land to be conveyed.”
Lathem v. Kruse, 290 S.W.3d 922, 925 (Tex. App.—Dallas 2009, no pet.); see also Levenson v. Alpert, 399 S.W.2d 955, 956 (Tex. App.—San Antonio 1966, no writ) (holding same requirements to comply with section 1101.806(c)’s predecessor statute). “The essential elements of a commission agreement cannot be supplied by parol evidence.” Boyert v. Tauber, 834 S.W.2d 60, 62 (Tex. 1992).
PROOF REQUIRED TO DEFEAT A COMMISSION CLAIM IN THE ABSENCE OF A WRITING
A party resisting a suit to collect a commission based on section 1101.806(c) must prove:
- the plaintiff’s suit is for the recovery of a commission for the sale or purchase of real estate, and
- the defendant signed no written promise, agreement, or memorandum to pay a commission.
See TEX. OCC. CODE ANN. § 1101.806(c); Neary v. Mikob Props., Inc., 340 S.W.3d 578, 584 (Tex. App.—Dallas 2011, no pet.); McKellar v. Marsac, 778 S.W.2d 573, 576 (Tex. App.—Houston [1st Dist.] 1989, no writ).
Thus, “[a] seller may defeat a claim seeking payment of a real estate commission by establishing that the seller did not sign an agreement to pay the commission.” NLD, Inc. v. Huang, 615 S.W.3d 444, 450 (Tex. App.—Houston [1st Dist.] 2019, pet. denied).
ALTERNATE THEORIES OF COLLECTION ALSO FAIL WHERE THERE IS NO WRITTEN COMMISSION AGREEMENT
“When RELA applies and its requirements are not met, courts have denied recovery when fraud, conspiracy, deceit, quantum meruit[, promissory estoppel,] and breach of contract have been pleaded.” Lathem, 290 S.W.3d at 925; Harkinson, 944 S.W.2d at 636–37 (holding failure to satisfy requirements of RELA’s statute of frauds provision bars recovery under a claim for promissory estoppel); see also Frady v. May, 23 S.W.3d 558, 562 (Tex. App.—Fort Worth 2000, pet. denied) (“RELA bars actions in both contract and tort for recovery of a real estate commission that does not comply with its requirements that the agreement or promise to pay a commission be in writing.” (citing Harkinson, 944 S.W.2d at 636–37)).
PARTIAL PERFORMANCE EXCEPTION DOES NOT APPLY
In some types of cases, a party is able to defeat the statute of frauds (and recover even though there is no written agreement) because their claim falls within the partial performance exception.
“The doctrine of part[ial] performance, under the general statute [of frauds], developed as a protection to a purchaser of land who, in reliance upon an oral contract, paid consideration, took possession of the realty and/or made valuable improvements upon the land.” Id.; see also Myer v. Kitano, No. 93-1787, 1994 WL 83429, at *3 (5th Cir. 1994) (not for publication) (“In general, the doctrine of part[ial] performance shields contracts for the sale of real estate from invalidation under the [s]tatute of [f]rauds, if certain requirements are satisfied.”).
However, Texas Courts have held that the doctrine of partial performance does not apply to RELA brokerage commission contracts because the equitable justifications for the exception to the general statute of frauds “are not present in the context of brokers . . . licensed to practice real estate.” Brice, 691 S.W.2d at 57; see also Harkinson, 944 S.W.2d at 636 (reaffirming “the doctrine of partial performance would not render [a brokerage commission] agreement enforceable” when it failed to comply with RELA’s statute of frauds provision); see also Myer, 1994 WL 83429, at *3 (“The applicability of the part[ial] performance doctrine to TRELA brokerage commission contracts is doubtful . . . .”)
“Allowing a broker to recover on the ground of his performance alone would permit enforcement of any commission agreement fully performed by the broker whether or not it complies with [RELA’s statute of frauds provision].” Boyert, 834 S.W.2d at 64; see also Carmack, 701 S.W.2d at 41 (“We do not hold that a broker’s full performance alone is sufficient to take a commission agreement out of [RELA’s statute of frauds provision] because such a construction would nullify the statute.”). “This would be in direct opposition to the expressed will of the legislature and would unduly expose the public to fraudulent claims for commissions.” Boyert, 834 S.W.2d at 64; see also Harkinson, 944 S.W.2d at 635 (“The [l]egislature was quite explicit: a broker may not recover a commission unless the commission agreement is in writing and signed by the party to be charged.”). Further, the Texas Supreme Court disfavors exceptions to RELA’s statute of frauds provision and has “consistently . . . refused to erode [RELA’s statute of frauds provision] with the same exceptions as may render oral contracts within the general statute of frauds enforceable.” Harkinson, 944 S.W.2d at 636.
