Engel & Völkers faces suit from former Hamptons franchise owner

TRD New York /
May.May 25, 2011 04:07 PM
Jonathan Lerner, EV Scarsdale president, Rauert Peters, COO of Engel & Völkers U.S, and 300 Heathcoate Road in Scarsdale

Scarsdale President Jonathan Lerner has filed a suit against Manhattan-based Engel & Völkers Northeast, alleging his Hamptons and Westchester County franchises lost more than $1.5 million due to E&V providing misleading information and failing to support him.

The suit, filed in New York State Supreme Court April 29, claims that Engel & Völkers committed a breach of contract and violated New York state’s general business law, which requires filing disclosure statements that detail historical and potential earnings involving a franchise operation.

The suit was filed after Lerner sold his former Hamptons business to rival brokerage Nest Seekers.

According to the suit, Engel & Völkers International, based in Hamburg, Germany entered a deal in January 2006 to sell the rights to franchise brokerages in the U.S, through Engel & Völkers U.S., based in Manhattan.

Engel & Völkers has an affiliate firm in Germany, called Engel & Völkers IT-Services, which provides various technology services, including software, to the franchise operations. Rauert Peters, who was also named as a defendant, is president and CEO of Engel & Völkers NY and Northeast, and COO of Engel & Voelkers U.S.

Lerner alleges in the suit that he became interested in acquiring the rights to a franchise in February 2011, and established EV Scarsdale Corp. He alleges that Peters showed him presentations in 2008 indicating that net operating profits ranged from almost $251,000 to nearly $1.5 million by the fifth year of operations.

The presentation also showed that the shops would increase in value from about $4 million the first year to $11.4 million by the fifth year.

He claimed that Peters provided profit and loss statements for the Engel & Völkers Southampton location, which showed 2007 commissions of more than $619,000, and Lerner eventually bought that operation. Lerner says his firm signed a deal in 2008 with Engel & Völkers to operate an office for five years. A separate agreement involving the Southampton business was signed in November 2008 to allow Lerner’s firm to operate up to three offices for five years.

The agreement also called for Lerner’s firm to pay 6 percent monthly royalty fee of all net commissions and a 1.5 percent monthly marketing fee to Engel & Völkers.

In December 2008, Lerner says his firm acquired an existing E&V shop at 20 Main Street in Southampton. In early 2011, Lerner’s firm began operating at 26 Montauk Highway in East Hampton, according to the suit.

His firm allegedly rescinded its license agreements April 29, 2011 and lost more than $1.5 million in startup costs and operating losses

Last week, Nest Seekers hired a former Corcoran broker to help run the company’s new Southampton office.

Engel & Völkers officials did not return calls for comment. Lerner was not immediately available for comment and nor were Nest Seekers officials.

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