by:    Michael L. Rich

What happens when a commercial real estate salesperson’s affiliation with a real estate brokerage firm terminates?  What duty, if any is there to account for earned but unpaid commissions as of the termination date?  Regulations of the New Jersey Real Estate Commission squarely address this issue.   N.J.A.C. 11:5-4.1(e) provides:

"Upon the termination of the affiliation of a salesperson with a broker, the broker shall make a complete accounting in writing of all monies due the salesperson as of the date of termination and/or which may become due in the future.  In the event any sums so accounted for are not in accord with the terms of the post-termination compensation clause in the written agreement between the broker and the salesperson, the broker shall give a complete and comprehensive written explanation of any difference to the salesperson with the accounting.  Such accounting shall be delivered to the salesperson not later than 30 days after termination."    

      Failure to comply with this accounting requirement could subject the broker to potential fines or other penalties of the Real Estate Commission, or to civil action by the salesperson for money judgment for any earned but unpaid commissions.       

    Besides post-termination compensation provisions, the written agreement between the broker and salesperson frequently contains post-termination restrictive covenants such as confidentiality, non-solicitation and non-competition restrictions imposed on the departing salesperson.  The enforceability of those post-termination restrictions is subject to the governing state law.