I am a CA licensed Broker and entered into a written contract with a borrower who was seeking to refinance his office building whose loan rate was scheduled to adjust. I ran his loan scenario by countless lenders and because his scores were under the minimum requirements, I performed credit repair which increased his scores to acceptable levels. After a year of hard work and a file folder 10 inches thick, I located a lender who approved his loan with terms acceptable to him. I submitted my Broker Demand for compensation to Escrow and thereafter the loan documents were emailed to Escrow. I received a call from the borrower and he said "I ain't paying you sh--. You didn't do anything." After calmly explaining to him all of the hard work that I had expended, I reminded him that we have a binding contract. He said he wouldn't pay and then hung up. Escrow also refuses to honor the terms of my Broker Demand and Contract. Escrow management assured me that the transaction would not proceed until my fee is resolved. I called the borrower to request a resolution and he said that he would need to speak to his wife. The next day he and his wife called me from Escrow and reiterated that they would not pay me because they said I didn't do anything. The lender who I used emailed me and told the borrower's that I had submitted a complete file and but for my services, they would not have approved the loan or even had received it. The lender said I was entitled to my compensation. They do not want to deal in good faith and I would like to know my rights and remedies. Can I sue for Breach of Contract, Unfair Dealing and Unjust Enrichment etc? His wife said that unless I pull my Broker Demand she would consult legal and sue for damages. Once again they will be losing out because I locked in an interest rate 2% lower than their current adjusted rate so they will be the big losers if they don't amicably resolve my compensation in good faith. What are your thoughts and suggestions?
2 Answers from Attorneys
You can sue for breach of contract, unjust enrichment, unfair business practices, etc. as you say. You can also sue for fraud, since it seems likely that your client never intended to honor his contract. And you can seek declaratory relief.
There might be reasons why you *shouldn't* sue, especially if there was something shady about your "credit repair". I don't have enough information to assess your case. You should consult with a lawyer about how best to proceed.
It may be enough to have a lawyer write a letter explaining your position. That might make the client back down, or at least help you work out a compromise.
Note that the client may sue you instead of waiting for you to act. He's the one in a hurry, since his loan is hanging in the balance. If you have liability insurance, the insurer may pay for your defense counsel. You could then file a cross-complaint, but the legal bills for that part of the case would be your responsibility.
I don't have your contract in front of me, but normally the loan broker's commission is paid out of the loan proceeds. This is usually paid out of the lender's loan fees (points) charged to the borrower. The fee is normally paid at loan closing, when the loan is funded, although it can be paid at times when the loan commitment is issued.
It sounds to me as though you have met the conditions of the contract. I think at this point your fees are going to have to remain in escrow until the matter is resolved either between the borrower and you, or by a court of law.
I do think you should speak in person with a competent real estate attorney near you who has experience with issues involving brokers and commissions. I have no idea from your post what they would sue you for, and at this point it seems like some sort of idle threat.
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