Century 21 has terminated its franchise agreement with one of its biggest brokerages, Long Island, N.Y.-based Laffey Associates, claiming in a lawsuit that it’s owed more than $280,000 in royalties and franchise fees.
Laffey Associates executives confirm they have parted ways with Century 21, but say they intend to file a counterclaim in New Jersey Superior Court that Century 21 breached its obligations under its franchise agreements.
In a statement, Laffey Associates said many of the counterclaims it intends to make are also the subject of a lawsuit filed by other Century 21 franchises in 2002.
That lawsuit, which was granted class-action status last month, alleges that Century 21 and its parent company failed to provide the required level of services and misappropriated fees that franchisees paid into a national advertising fund.
According to the attorneys who filed the class-action lawsuit, the class of affected brokerages could include at least 1,000 current and former Century 21 franchisees.
Although Laffey Associates was not one of the five Century 21 brokerages filing suit in 2002, the company says it considers itself a member of the affected class.
Century 21’s parent company, Realogy Corp., maintains that the claims in the class-action lawsuit "were without merit, and they remain so today."
Founded in 1974, Laffey Associates claims $1 billion in annual sales by more than 500 residential agents and brokers who work out of 14 offices across Long Island and Queens.
The company claims it’s been the top-producing Century 21 firm in New York for the past 10 years, and that it ranked among Century 21’s top 10 companies nationwide in 2009.
In a statement, Century 21 said it "remains a market leader on Long Island, and this change has created an opportunity for us to grow in a new direction in this market." Century 21 says it still has 2,200 agents and brokers working out of 60 independently owned and operated offices throughout Long Island.
In its complaint against Laffey Associates, Century 21 said it had 12 separate franchise agreements with Laffey dating back to 1997, governing the operation of an equal number of brokerage offices.
The agreements, which ran for 10 or 12 years, were all due to expire on Nov. 1.
But Century 21 said it terminated the agreements on Sept. 7, after warning Laffey Associates in an Aug. 2 letter that it had determined that Laffey had breached the agreements by failing to report and pay royalties and franchise fees on closed transactions.
In addition to franchise royalty fees of 6 percent, the franchise agreements stipulated that Laffey would pay a monthly national marketing fee equal to 2 percent of gross revenue, the lawsuit said.
The complaint breaks out $280,140 in royalty fees, national marketing fees and other franchise fees that Century 21 claims were owed by the 12 offices. The lawsuit also seeks interest, attorneys’ fees and costs.
Attorneys for Century 21 said they believed the franchisor was owed other, additional fees on other unreported sales.
"Century 21 has demanded an accurate accounting of any additional sales transactions or amounts that may be owed to Century 21, and (Laffey Associates) has refused to provide this information," the lawsuit said.
In a statement, Laffey Associates said there was more to the split than the allegations detailed in Century 21’s lawsuit.
"Despite their claims, Century 21 and Realogy made numerous attempts during the past few months to extend the term of our affiliation beyond 2010," the company said.
"While we acknowledge that our business relationship with Century 21 has ended, the affiliation was not terminated by reason of our firm’s failure to live up to the terms of its franchise agreement."
Pauline Conti, associate broker for Laffey Associates, said she was confident that the brokerage will be able to thrive on its own.
Conti, whose own Jackson Heights-based brokerage Century 21 House Depot merged with Laffey Associates in December, said Laffey "had already been pretty much functioning on its own."
Laffey and Associates, she said, is a "very large organization" with its own agent training academy and "an excellent Web site" that the company has invested heavily in.
"They are very competitive on Internet marketing, and making sure their homes and listings get the best exposure, because the whole real estate industry has gone in that direction," Conti said. "They already have that whole segment of marketing covered."
Launched in 2002, Laffey claims its real estate portal for Long Island and Queens, Laffey.com, was the first to incorporate all of the Long Island Multiple Listing Services’ property listings, and attracts more than 100,000 visitors each month.
Laffey Associates also offers title insurance and mortgages through affiliates eRealty Title Agency Corp. and First Allied Home Mortgage.