Owner Must Pay Broker's Commission Because Tenant Occupied Space

A lease required the owner to pay a broker's commission according to a brokerage agreement. (An unsigned copy of the brokerage agreement was attached to the lease as an exhibit.) The brokerage agreement said the owner must pay half the commission when the lease was signed and the other half when the tenant occupied the space. Although the owner never signed the brokerage agreement, it paid half the commission when the lease was signed. Because of financial problems, the tenant neither opened for business at the space nor paid any rent. The broker sued the owner for the rest of the commission, claiming that the tenant occupied the space. The owner argued that since it hadn't signed the brokerage agreement, it never agreed to pay the rest of the commission when the tenant occupied the space. And, it argued, the tenant never occupied the space, anyway.

A Tennessee appeals court ruled that the owner must pay the rest of the commission as required by the brokerage agreement because the tenant had occupied the space. The court noted that although the owner didn't sign the brokerage agreement, it knew that an unsigned copy of the agreement was attached to the lease. And the lease said that the terms of the brokerage agreement were incorporated into the lease. Signing the lease had the same effect as signing the brokerage agreement, said the court [Staubach Retail Services-Southeast, LLC v. H.G. Hill Realty Co.].