The Real Deal Miami

E&V faces new suits from U.S. brokers

Florida broker complains of termination and a lack of support
By David Jones | June 15, 2011 08:06PM

German real estate brokerage Engel & Völkers is facing a new round of litigation in Manhattan Supreme Court, as former broker EV Scarsdale filed an amended complaint last Friday and was joined by two new lawsuits by E&V franchises in upstate New York and of Rhode Island. And a Florida broker is saying there are problems throughout the state.

EV Scarsdale filed a suit last month against E&V alleging the real estate franchise provided him with misleading financial data and failed to support his operations, resulting in $1.5 million in damages.

Now, Riverside Homes Realty, based in Hastings-on-Hudson and James Ian Properties, based in Cranston, R.I., are making similar accusations against E&V. 

Former E&V executives say that Engel & Volkers failed to provide basic services that it agreed to provide, including Web support, back-end office support and other services needed to operate profitably. 

“I know in the northeast there are other partners that are also unhappy,” Jonathan Lerner, president of EV Scarsdale, told The Real Deal

Lerner eventually sold his Hamptons operations to Nest Seekers, which acquired the firm’s former East Hampton and Southampton offices.

The suits all stem from a February merger of E&V Northeast and E&V New York operations. Both operations were led by Rauert Peters, president and CEO and Michael Audet, who is head of license distribution.  

A Florida real estate executive said that several of E&V’s brokers in the state were terminated or left the chain, and complained of a similar lack of support by the company.

“A number of people — other licensees like myself — had similar issues with them,” said Gary Gardiner, who operated an E&V franchise in Naples until this past Friday. “I just got fed up with their never ending bullying tactics.”

According to the Riverside Homes complaint, owner Ling Ho formed the brokerage in January 1996 and entered talks to join E&V in June 2008. She said E&V failed to provide her with a franchise disclosure document. She said E&V didn’t enter into an agreement with her until March 2009, but at the company’s request, back-dated the agreement to August 2008.  

The  agreement called on Ho to operate franchised operations in Hastings-on-Hudson and a second shop in the area, but she never opened a second brokerage office, according to the complaint. She terminated the relationship as of June 10 after spending about $400,000 in startup costs.   

Gary Leveillee and Gordon Dwan, the owners of the Rhode Island franchise, said they first established a firm called James Ian Properties in August 2007, for the purpose of opening up a franchise operation under E&V. They said they met with E&V officials at the time, and they were never provided a franchise disclosure document, which is required in that state.  

They were told by E&V that they would only need a three-month reserve fund to support the operation, because they would be breaking even by then and were told they would recoup their initial investment after two years. They began operating their E&V franchise in June 2010 and terminated the franchise June 10, alleging they lost $600,000 in startup costs. 

Riverside alleges E&V breached its contract, provided fraudulent earnings claims and violated Rhode Island disclosure laws. It is demanding $1.8 million in compensation.

E&V officials did not return calls for comment, and nor did Michael Einbinder, attorney for the E&V plaintiffs.