The U.S. Court of Appeals for the DC Circuit (the “Court”) recently issued a ruling vacating the District Court’s grant of summary judgment to 1441 L Associates, LLC (“Landlord”) in a $781,000 leasing commission dispute with brokerage firm Jones Lang LaSalle (“JLL”). In granting summary judgment, the District Court had accepted Landlord’s contention that JLL could not enforce Landlord’s contractual promise to pay a commission because JLL had not disclosed its dual representation in the format set forth in § 42-1703(i)(2) of the Brokerage Act.
The relevant section (§ 42-1703(i)(1)–(2)) of the Brokerage Act (Title 42, Chapter 17 of the Code of the District of Columbia) states as follows:
§ 42–1703. Duties of real estate brokers, salespersons, and property managers.
(i) Disclosed dual or designated representation authorized.
(1) A licensee may act as a dual representative only with the written consent of all clients to the transaction. Such written consent and disclosure of the brokerage relationship as required by this section shall be presumed to have been given as against any client who signs a disclosure as provided in this section.
(2) Such disclosure may be given in combination with other disclosures or provided with other information, but if so, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box. Any disclosure which complies substantially in effect with the following [model disclosure form] shall be deemed in compliance with this disclosure requirement: [model disclosure form provisions]
As explained in the opinion, Landlord asserted that JLL disclosed its dual representation in a non-standalone disclosure (i.e., given in combination with other disclosures or provided with other information) but that the disclosure did not meet the formatting specifications stated in the law (i.e., it was not “conspicuous, printed in bold lettering, all capitals, underlined, or within a separate box”). Therefore, the question on appeal was whether the Brokerage Act invariably requires adherence to these formatting specifications whenever a broker discloses a dual representation in a non-standalone disclosure. The Court concluded that it does not and that a broker disclosing dual representation in a non-standalone disclosure can still meet the Brokerage Act’s requirements even without adhering to the formatting specifications.
The Court noted that “[a]fter the first sentence of [§] 42-1703(i)(1) sets out the written consent requirement, the provision’s second sentence adds: ‘Such written consent and disclosure of the brokerage relationship as required by this section shall be presumed [emphasis in the Court opinion] to have been given as against any client who signs a disclosure as provided in this section.’ D.C. Code § 42-1703(i)(1).” The Court thus determined that the Brokerage Act does not categorically require a broker involved in dual representation to obtain a signed “disclosure as provided in this section” from all clients. Obtaining such a signed disclosure from a client establishes only a presumption that the written consent requirement has been satisfied with respect to that client. And because the formatting specifications go only to triggering the presumption, the Court explained, nothing in § 42-1703(i)(2) mandates adherence to the formatting specifications when a broker does not seek to take advantage of the presumption.
According to the Court, the “disclosure of the brokerage relationship” mentioned in § 42-1703(i)(1) does not concern the same disclosure as the “disclosure [that] must be conspicuous” mentioned in § 42-1703(i)(2). Rather, the “disclosure of the brokerage relationship” mentioned in § 42-1703(i)(1) refers to a distinct disclosure obligation set forth in the immediately preceding subsection (§ 42-1703(h)).
The Court advised that “[o]n remand, JLL will have the opportunity to show that, even if it failed to adhere to the formatting specifications and thus failed to qualify for the presumption of written consent, it still fulfilled the written consent requirement by obtaining [Landlord’s] truly informed written consent to the dual representation following full disclosure of the dual nature of the relationship” (citations and quotations omitted).
The property for which JLL secured a tenant (and claims a commission in this case) is located at 1441 L Street NW in Washington, DC. It is a Class A office building, built in 1967 and containing 206,799sf of space, according to Cushman & Wakefield. Its 2023 assessed value is $61,420,510, according to public record.
