A New York State appellate division panel rejected what was likely Extell Development’s last effort to pay a much lower commission rate on a $66 million, five-building portfolio sale in Hamilton Heights from 2012.
The broker on the deal, Georgia Malone, had agreed to accept a commission of $500,000 for the sale, but Extell rejected that offer. Now the company, headed by President Gary Barnett, is facing a judgment of $1.48 million as of January. And that amount is growing at an annual rate of 9 percent.
On Thursday, the panel of appellate court judges sided with Malone in her battle with Extell.
The dispute began after Malone brokered the sale in December 2012 of 601, 605, 607, 609 and 611 West 137th Street, a group of buildings known as the Westbourne, to investor Bonjour Capital.
While court records show that Extell had agreed to a commission in principal, neither side locked in the amount. In the days before the sale closed, court record shows that Malone wrote in an email that she would accept $500,000, or .75 percent of the sale price, which is on the low end of the acceptable commission rates for a deal that size, insiders told The Real Deal. Extell countered that it would pay $400,000, and Malone balked, court records show.
Just before the sale closed, Malone filed suit, asking for a 2 percent commission, or $1.32 million. A State Supreme Court judge sided with Malone, ruling in November 2013 that Extell should pay her the 2 percent rate. Extell appealed, and the decision last week was a response to that appeal. Insiders said it was unlikely, based on the decision, that Extell would seek to take the case to the state’s highest court.
A spokesperson for Extell said the firm declined to comment. Malone did not respond to a request for comment.
Claude Castro, the attorney with Claude Castro & Associates, who represented Malone, said this decision should make owners and brokers think twice about not being precise about the commission amount.
“For both brokers and owners, if you don’t have a clear amount [specified], both sides are taking the chance that it is going to be a court that will set the amount,” Castro said.