No Commission Without Procuring Cause Absent Unequivocal “Exclusive Right” Language in Financing Brokerage Agreements

Commentary on Angelic Real Estate, LLC v. Aurora Properties, LLC (2025 NY Slip Op 04223)

Introduction

Angelic Real Estate, LLC v. Aurora Properties, LLC is a Second Department decision that reaffirms and applies the New York Court of Appeals’ Morpheus rule to the context of financing (mortgage) brokerage agreements. The case involves a dispute over a commission claimed by a New York-licensed real estate broker—specializing in securing commercial debt—after the owner independently obtained a loan commitment from a lender that had been temporarily carved out of the broker’s fee schedule.

The central question: When an agreement says the broker is engaged “exclusively” to obtain financing, but lacks an express statement that the owner owes a commission on a deal the owner negotiated on its own, is the broker entitled to a fee simply because financing closed during the agreement’s term and after a carve-out period expired?

The court’s answer is no. Unless the agreement clearly and unequivocally gives the broker an “exclusive right to sell” (or the functional equivalent in a financing context)—by, for example, expressly obligating a commission even when the owner procures its own deal or by barring the owner from negotiating independently—the broker must still be the procuring cause. Because the broker here was not the procuring cause of the Mountain Commerce Bank (MCB) loan, no commission was due.

Summary of the Judgment

• The Appellate Division, Second Department affirmed the Supreme Court’s order denying the broker’s motion for summary judgment and granting the owner’s cross-motion to dismiss the complaint.
• The letter agreement did not clearly and expressly grant the broker an “exclusive right to sell/deal” (i.e., an exclusive right that would earn a commission regardless of the broker’s role).
• Absent such unequivocal exclusivity, New York law requires the broker to be the “procuring cause” of the transaction to earn a commission.
• The broker was not the procuring cause of the MCB loan; the owner secured it independently.
• The agreement’s temporary “Exclusion” provision for certain lenders (including MCB) did not, upon its expiration, create an obligation to pay a commission on an owner-negotiated loan.

Factual Background and Procedural Posture

• Agreement: On June 8, 2020, Aurora Properties retained Angelic Real Estate “exclusively” to obtain debt financing for several Tennessee office buildings.
• Scope: Angelic would identify, solicit proposals, and negotiate with lenders. If Angelic did not secure written quotes/term sheets with desired terms by June 20, 2020, the agreement became non-exclusive as to lenders not already approached, with a “protected lenders” list to be supplied. Exclusivity could be reinstated if Angelic later secured conforming terms with a protected lender or another lender without an existing term sheet.
• Term: 120 days from June 8, 2020.
• Fees: Payable at closing pursuant to a scale, but with an “Exclusion” provision for three lenders—including MCB—if a term sheet was signed on or before June 30, 2020.
• Events: On August 21, 2020 (well after the June 30 exclusion deadline, but before the 120-day term expired), Aurora obtained a $16.75 million commitment from MCB and later closed, without paying a fee to Angelic.
• Litigation: Angelic sued for its commission, arguing the agreement was exclusive and the expired exclusion meant its fee applied. The trial court denied Angelic’s motion and granted Aurora’s cross-motion. The Second Department affirmed.

Detailed Analysis

Precedents Cited and Their Influence

• Morpheus Capital Advisors LLC v UBS AG, 23 NY3d 528
  • Core rule: An “exclusive right to sell” arises only if the contract “clearly and expressly” provides a commission is due upon an owner-negotiated sale or otherwise precludes the owner from independently negotiating a sale.
  • Rationale: An owner’s freedom to dispose of its property should not be curtailed by implication.
  • Breadth: The rule is not confined to real estate; it applies equally to financial instruments and investment banking engagements. This case adopts Morpheus’ logic in the financing brokerage context.
• Exclusive Agency vs Exclusive Right to Sell
  • Hammond, Kennedy & Co. v Servinational, Inc., 48 AD2d 394; Solid Waste Inst. v Sanitary Disposal, 120 AD2d 915
    • Exclusive agency: The owner cannot hire another broker, but may sell or negotiate independently without incurring a commission.
    • Exclusive right to sell: The broker earns a commission even if the owner independently sells or negotiates.
  • Audrey Balog Realty Corp. v East Coast Real Estate Devs., 202 AD2d 529; Gaillard Realty Co., Inc. v Rogers Wire Works, Inc., 215 App Div 326
    • Language that requires the owner to refer all inquiries/offers to the broker and that promises commission “regardless of whether [the broker] has actually procured” will be construed as an exclusive right to sell.
  • J.E. Horan Duffy Realty v Brighton, 216 AD2d 358; Barnet v Cannizzaro, 3 AD2d 745
    • Courts look for clear, express commitment that commissions are owed regardless of procuring cause.
  • Solid Waste Inst. v Sanitary Disposal, 120 AD2d 915; Cantor Fitzgerald & Co. v ObvioHealth Pte Ltd., 233 AD3d 563; Far Realty Assoc. Inc. v RKO Del. Corp., 34 AD3d 261; Harvard Assoc. v Hayt, Hayt & Landau, 264 AD2d 814
    • Labels alone (“exclusive” or even “exclusive right to sell” in headers) do not suffice. Clauses that tie commissions to the broker producing a ready, willing, and able counterparty undercut any claim to an owner-negotiated commission.
• Procuring Cause Requirement
  • All Is. Estates Realty Corp. v Singh, 219 AD3d 1392; Blooming Home Realty, LLC v Infinity Holdings Northeast, LLC, 228 AD3d 815; New York Commercial Realty Group, LLC v Beau Pere Real Estate, LLC, 216 AD3d 793; Saunders Ventures, Inc. v Catcove Group, Inc., 209 AD3d 893; Multiloan Mtge. Co. v Asian Gardens, 303 AD2d 658
    • Absent an exclusive-right arrangement, the broker must show it was the procuring cause of the transaction to collect a commission.
• Financing/Mortgage Brokerage Applications
  • Silvergrove Advisors, LLC v Crosswing Holdings LLC, 197 AD3d 1057
    • “Exclusive broker” language is not an exclusive right of sale; without express exclusivity, no commission is owed on a deal the broker didn’t procure.
  • Matusik v Ward, 68 AD3d 1213
    • Where the agreement expressly states the broker earns a commission “regardless of whether” the broker or someone else procured the financing, the broker can recover even if not the procuring cause.
  • Alta Capital Partners Intl. LLC v Parsons Capital LLC, 155 AD3d 493; Miron Props., LLC v Eberli, 126 AD3d 479; Harvard Assoc. v Hayt, Hayt & Landau, 264 AD2d 814
    • Support for denying commissions where brokers were not procuring causes and agreements lacked clear exclusive-right language.
  • Dominick & Dominick LLC v Deutsche Oel & Gas AG, 2016 WL 11259075, aff’d, 756 Fed Appx 58
    • Federal application of the same New York law principle: express terms are necessary to establish an exclusive right to sell/deal.

Legal Reasoning Applied by the Court

• Textual focus: The letter agreement used the word “exclusively,” but did not:
  • State that a commission was due regardless of who procured the financing;
  • Bar the owner from independently negotiating/closing its own financing; or
  • Require the owner to channel all inquiries or offers through the broker.
• Structure of the agreement reinforced non-exclusivity:
  • Time-limited “exclusivity” subject to immediate erosion: If the broker failed to secure quotes/term sheets by June 20, the arrangement became non-exclusive as to lenders not already approached, with a “protected lenders” list to follow. Exclusivity would be reinstated only if the broker later secured a qualifying term sheet.
  • “Exclusion” clause for three named lenders, including MCB, if a term sheet was signed by June 30. Critically, the court held that the expiration of this exclusion did not create a right to a commission on an owner-negotiated loan thereafter.
• Procuring cause: It was undisputed the broker did not procure the MCB loan. Under New York law, absent an exclusive right with unequivocal language, procuring cause is mandatory to recover a commission.
• No ambiguity: The court treated the contract as unambiguous on this point, making resolution appropriate on summary judgment without resort to parol evidence.

Why the Broker’s Arguments Failed

• “Exclusive” label: As Morpheus and progeny teach, the word “exclusive” is not talismanic. Without explicit clauses guaranteeing a commission on owner-negotiated deals or barring owner self-negotiation, the owner’s inherent right to deal remains intact.
• Exclusion window: The carve-out for MCB through June 30 was a fee exclusion when a term sheet issued by that date. Its expiration did not convert the agreement into an exclusive right to deal or trigger a commission entitlement for a later, owner-negotiated MCB loan.
• Reinstatement mechanics: The agreement provided that any lapse in exclusivity could be reinstated only if the broker secured a qualifying term sheet. The broker did not do so; thus, no reinstatement occurred.

Impact and Implications

For Financing and Investment-Banking Engagement Letters

• Clear drafting is paramount: To secure an exclusive-right arrangement, contracts must expressly state one or more of the following:
  • A commission is due on any transaction closed during the term, regardless of the source or who procured it;
  • The client is prohibited from independently negotiating or closing a deal during the term;
  • All inquiries, offers, and negotiations must be referred to and conducted through the broker.
• “Exclusive broker” is not enough: As Silvergrove and this case confirm, that phrase typically creates at most an exclusive agency, not an exclusive right to deal.
• Carve-outs and exclusions must be handled carefully:
  • Tailored exclusions (e.g., for existing relationships) should be clear about whether commissions revive after a date, and on what terms.
  • Absent explicit revival language, courts will not imply a post-exclusion commission on an owner-negotiated deal.
• Consider adding a “tail period”:
  • Contracts often provide that if a transaction closes within a specified period after termination and involves a party contacted or introduced by the broker during the term, a commission is due. No such tail was relevantly pled or triggered here.

For Litigation Strategy

• Summary judgment is achievable: Where contract language lacks unequivocal exclusivity, courts will resolve the issue as a matter of law without weighing parol evidence.
• Proof of procuring cause remains the default: Brokers should be prepared to show a direct and proximate causal link between their efforts and the consummated transaction unless the contract unmistakably displaces that requirement.

For Market Practice

• Owner autonomy preserved: The decision continues to protect an owner’s right to place debt or sell assets directly unless the owner has clearly yielded that right in writing.
• Commercial certainty: By reaffirming Morpheus across financing engagements, the court promotes predictable outcomes and incentivizes precise drafting.

Complex Concepts, Simplified

• Procuring cause:
  • The broker’s efforts must be the direct and proximate link to the transaction that closed. Mere introduction without more, or mere involvement in unsuccessful negotiations, often will not suffice unless the contract says otherwise.
• Exclusive agency vs. exclusive right to sell/deal:
  • Exclusive agency: The broker is the only broker, but the owner can still negotiate and close on its own without owing a fee.
  • Exclusive right to sell/deal: The broker gets paid if the deal closes during the term, even if the owner did everything independently.
• Exclusion provision:
  • A clause that removes or limits commissions for specified counterparties (here, three lenders including MCB) for a defined time or condition (here, if a term sheet was signed by June 30). Its expiration does not, by itself, obligate payment unless the contract says so.
• Protected lenders list:
  • A list identifying lenders the broker has contacted, used to preserve the broker’s position when exclusivity narrows or lapses. Under this agreement, exclusivity could be reinstated if the broker later secured terms with a protected lender or with a new lender not otherwise engaged.
• Term sheet vs. commitment:
  • Term sheet: A preliminary, usually non-binding outline of financing terms. Commitment: A lender’s binding agreement to extend credit subject to specified conditions. The agreement here used the term-sheet milestone to define exclusivity triggers and the exclusion window.

Practice Pointers (Drafting Checklist)

• To create an exclusive right to deal:
  • State plainly that a commission is due on any financing closed during the term, “whether or not Broker is the procuring cause.”
  • Include a clause requiring the client to refer all inquiries and negotiations to the broker, and prohibiting independent negotiations.
  • Add a tail period covering closings with parties contacted during the engagement.
• If you intend only an exclusive agency:
  • Say the owner retains the right to negotiate and close independently without a commission.
• Manage carve-outs:
  • Be explicit whether the broker’s right to a commission revives after a carve-out window and under what conditions (e.g., only if the broker is the procuring cause, or regardless).

Conclusion

Angelic Real Estate, LLC v. Aurora Properties, LLC is a clear reaffirmation of New York’s insistence on unequivocal contract language to create an “exclusive right to sell” (or its financing analog). The court held that:

• Absent clear, express terms guaranteeing a commission on owner-negotiated transactions or barring owner self-negotiation, the broker must be the procuring cause to recover.
• Using “exclusive” in an engagement letter is insufficient to displace the default procuring-cause requirement.
• The expiration of an exclusion provision does not, by itself, impose a commission on an owner-negotiated deal.

For brokers and clients alike, the message is unmistakable: if you intend to award commissions regardless of who closes the deal, you must say so plainly. This decision strengthens contractual certainty in financing brokerage relationships, preserves owner autonomy in the absence of express constraints, and ensures that commissions flow only where the parties’ written bargain truly commands it.