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    When Can a NJ Broker Sue for a Commission?

    The short answer: A New Jersey broker can sue for a commission only when three things line up. The broker was licensed at the time the claim arose (N.J.S.A. 45:15-3). The broker's authority was in a writing signed by the client that states the amount or rate of commission, or the broker met a narrow oral-agreement exception (N.J.S.A. 25:1-16). And the commission was actually earned, which under the leading New Jersey case usually means the deal closed (Ellsworth Dobbs, Inc. v. Johnson, 50 N.J. 528 (1967)). Salespersons can sue only their own broker.

    This page explains the rules; it isn't legal advice. For an actual dispute, talk to a New Jersey attorney. For the kinds of listings, see our guide to listing agreement types.

    What has to be true before a broker can sue?

    RequirementWhere it comes fromWhat happens if it's missing
    Licensed as a broker when the claim aroseN.J.S.A. 45:15-3The lawsuit can't be brought or maintained
    Written authority signed by the client, stating the amount or rateN.J.S.A. 25:1-16(b)No commission, unless the oral-agreement steps were followed
    Written brokerage services agreement in residential dealsP.L.2024, c.32, s.11(g)The firm can't receive compensation from any party
    Commission earned under the agreement and case lawEllsworth Dobbs v. JohnsonNo commission from the seller if the buyer defaults

    Does the broker have to be licensed?

    Yes. No one may "bring or maintain any action" in New Jersey courts to collect compensation for brokerage work without "alleging and proving" they were a duly licensed broker when the cause of action arose (N.J.S.A. 45:15-3). Getting licensed later doesn't fix it. Our guide to unlicensed real estate activity covers the penalties on top of losing the fee.

    Does the commission agreement have to be in writing?

    Generally, yes. A broker acting for a client in a transfer of an interest in real estate is entitled to a commission only if the broker's authority is "given or recognized in a writing signed by the principal or the principal's authorized agent," and the writing states "either the amount or the rate of commission." The statute expressly includes lease interests for less than three years (N.J.S.A. 25:1-16(b)).

    The writing can be signed before or after the transfer. But a writing that leaves out the amount or the rate doesn't meet the test, even if the client clearly agreed to use the broker.

    What if the agreement was only oral?

    The statute gives a narrow path. A broker working under an oral agreement is entitled to a commission only if both of these happen (N.J.S.A. 25:1-16(d)–(e)):

    1. Within five days after making the oral agreement, and before the transfer, the broker serves the client with a written notice stating that its terms are those of the oral agreement, including the rate or amount of commission. Service is personal or by registered or certified mail to the client's last known address.
    2. Before the client serves a written rejection, the broker either completes the transfer or, in good faith, starts negotiations with a prospect who later completes it.

    Miss either step and the oral route fails.

    How does the 2024 law add to the writing rule?

    P.L.2024, c.32 adds its own layer. Agreements on compensation "shall be in writing signed by the seller or buyer, as applicable." To receive compensation from any party, a firm needs a written brokerage services agreement with the buyer or seller in a residential deal (with the seller only in a commercial deal), stating the compensation terms (P.L.2024, c.32, s.11(a), (g)).

    Narrow exceptions cover broker price opinions, CMAs and some referrals (s.11(h)). See our guide to written buyer agreements.

    When is a commission earned in New Jersey?

    Before Ellsworth Dobbs v. Johnson (1967), New Jersey courts generally held that a broker earned the commission once the seller signed a contract with the broker's buyer, even if that buyer later couldn't pay. The Supreme Court rejected that rule. A broker earns the commission when:

    1. the broker produces a buyer ready, willing and able to buy on the owner's terms;
    2. the buyer enters into a binding contract with the owner; and
    3. the buyer completes the transaction by closing title as the contract requires.

    If the deal fails because the buyer lacks the money or otherwise defaults, the broker has no claim against the seller. If it fails because of the seller's "wrongful act or interference," the broker's claim is valid (50 N.J. at 551).

    The Court also limited brokers' ability to contract around the rule. Where there is "substantial inequality of bargaining power," a broker-prepared clause that makes commission due on signing, even if the buyer never closes, is unenforceable as against public policy (50 N.J. at 555–556).

    A seller who simply accepts a buyer's default and settles for what the Court called "salvage" doesn't owe the commission. A seller who sues the buyer and recovers damages for the lost bargain can owe it (50 N.J. at 557–558).

    Can a broker go after the buyer instead?

    Sometimes. When a buyer asks a broker to find property, the owner agrees to sell at the buyer's price, and the buyer knows the broker expects a commission from the owner, the law implies a promise by the buyer to complete the purchase. A buyer who backs out without a valid reason can owe the broker the lost commission (50 N.J. at 558–561). Whether that promise exists is a question of fact; in Dobbs the Court sent it to a jury.

    Can a salesperson sue a client for a commission?

    No. A salesperson or broker-salesperson may sue for compensation only against "the licensed broker with whom the salesperson or broker-salesperson was employed or contracted at the time the alleged cause of action arose," and must prove they were licensed at that time (N.J.S.A. 45:15-3). Clients pay the brokerage, and the brokerage pays you. Our guides to how NJ agents get paid and commission split plans cover what that agreement has to say.

    What does this mean for your paperwork?

    • Get the listing or buyer agreement signed before you start work, with the amount or rate stated.
    • Give the client a fully executed copy at signing and include a definite end date. Failing to do either is grounds for discipline (N.J.S.A. 45:15-17(f)).
    • A signed contract of sale isn't a paid commission. Attorney review, contingencies and buyer financing can still end the deal (NJ attorney review).
    • If a fee dispute comes up, talk to your broker and an attorney, and don't give clients legal advice (where agents must stop).

    For the related statute of frauds, see our contracts exam guide.

    If you're getting ready for the licensing course, Business Elementary's 75-hour pre-licensing course is one place to start.

    Sources

    Last reviewed: November 13, 2026

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