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Commission Escrow Act

Dear Broker

As the Nassau County Clerk, I would like to inform you about a recently enacted New York State statue that expands your rights as a broker: the Commission Escrow Act.  Effective January 1, 2009, this amendment to Section 294-b of the New York State Real Property Law protects the rights of brokers to receive their commission after the sale of a residential property by requiring a seller to place a broker's commission funds in an escrow account when there is a dispute over the payment.

This brochure explains the parameters of the Commission Escrow Act, as well as the procedure by which brokers can receive benefits under this law.  The process begins here at the County Clerk’s Office, with the filing of an Affidavit of Entitlement to Commission by the broker.  If you have any further questions about the Commission Escrow Act, please feel free to contact the County Clerk’s Office.  We look forward to assisting you.

Sincerely,

County Clerk

The Commission Escrow Act

The Commission Escrow Act addresses the situation in which a seller does not pay a broker the full commission upon closing.  The Act requires the seller to deposit any amount not paid to the broker (or the net proceeds of the transaction, whichever is less) with the County Clerk.  The Act went into effect on January 1, 2009 and applies to 1 to 4 family dwellings, individual condominium units and individual co-op units.

To be in compliance with the new law:

  • Brokers should have a written listing agreement signed by the seller. 
  • The listing agreement must contain the following disclosure language in clear and  bold face type:

At the time of closing, you may be required to deposit the broker’s commission with the County Clerk in the event that you do not pay the broker his or her commission as set forth herein.  Your obligation to deposit the broker’s commission with the County Clerk may be waived by the broker.” 

If the listing agreement does not include this language, the seller is not required to escrow the disputed amount. The listing agreement must state the seller’s address, separate from the address for the property to be sold (even if the two addresses are the same).

Note: The Act does not create a lien or encumbrance on the property, therefore a violation of the Act will not invalidate a transfer of property or prevent a subsequent buyer from taking clear title to the property.

Filing An Affidavit of Entitlement to Commission

The Affidavit of Entitlement to Commission is a sworn statement by the real estate broker asserting that he/she is entitled to the commission as set forth in the listing agreement due to the fact that the broker produced a buyer for the residential property.
The affidavit must include:

  • Name and license number of the broker
  • Name of seller or other party responsible for paying commission
  • Name of person authorizing sale (if other than the seller) and date of said authorization
  • A copy of the brokerage agreement
  • A description of the property
  • The amount of commission
  • A description of brokerage services, and dates

When filing an Affidavit of Entitlement to Commission at the County Clerk’s Office, brokers should bring three copies of the affidavit and listing agreement: one for the County Clerk to file, one for the seller, and one for the broker. The Clerk should stamp all three copies as proof of filing.

There is a $95 recording fee, $150 per block fee, and $5 per page fee for filing the affidavit with the County Clerk.

Questions?

Please contact the Nassau County Clerk’s Office at (516) 571-2664 with any questions.

Procedures to Follow:

  1. The broker files an Affidavit of Entitlement to Commission with the County Clerk and pays the appropriate filing fees after the contract is signed and prior to the closing.
  2. Within five days of filing, the broker must serve the seller with notice by mail or personal delivery to the address in the listing agreement.  If closing is to occur within five days of filing the affidavit, the broker must serve by personal delivery.  If there are multiple owners, service upon one is sufficient.
  3. Along with the affidavit, the broker must mail or deliver to the seller a $25 check payable to the Nassau County Clerk.
  4. The broker must provide a copy of the affidavit to the seller’s attorney by mail, fax, e-mail, or personal delivery, within five days of filing.
  5. If the seller refuses to pay at the closing, the seller must deposit the disputed amount (or the balance of the purchase price, whichever is less), into escrow with the County Clerk along with the brokers $25 fee.  (If the seller fails to deposit the monies, the seller must immediately return the $25 fee to the broker.  If the broker is subsequently determined to be entitled to the commission in a lawsuit, the broker can recover all costs and reasonable attorney’s fees.)
  6. The County Clerk will deliver the money to the County Treasurer, where it will remain until a court order for payment is entered.
  7. If the broker has not commenced an action within 60 days after the escrow deposit, the seller may petition the court to have the money returned to him/her. The broker must commence an action within six months of the date of the escrow deposit.
  8. If the seller fails to pay the commission and the broker succeeds in his/her claim, the broker is entitled to the amount of commission due, plus costs, filing fees, and reasonable attorney fees.