How Florida real estate brokers and agents can best protect and get their commissions
Video Description
In this video Board Certified expert business lawyer David Steinfeld explains what real estate brokers and agents need to know about their commissions and what they can do to best protect and get their commissions from a sale.
Attorney Steinfeld explains how residential and commercial real estate brokers and agents in Florida should properly document their transaction so they can later ensure that they receive their commission from the sale. He also explains how Chapter 475 of the Florida Statutes allows for commercial brokers to record a lien for their commission and how to record that lien for a real estate commission against the property.
Attorney Steinfeld explains how residential and commercial real estate brokers and agents in Florida should properly document their transaction so they can later ensure that they receive their commission from the sale. He also explains how Chapter 475 of the Florida Statutes allows for commercial brokers to record a lien for their commission and how to record that lien for a real estate commission against the property.
Video Transcript
I'm Dave Steinfeld. I own the Law Office of David Steinfeld and I'm a certified expert in Florida business litigation law. This is a video for real estate brokers on what they can do to keep their commissions. This video is not intended to provide you with any legal advice. For that you can contact me through DavidSteinfeld.com and while you're there please take a look at the other videos and articles on Florida business law and other topics. Thanks for watching.
The risks to a broker's commission
For brokers how do you keep your commissions. What does a broker need to do. There are two common scenarios that we often see litigated in court in these types of situations. There's first there's no closing that occurs so then the broker is not paid the commission during the time that the broker has a contract such as an exclusive listing agreement. Or there is a post-closing refusal to pay the commission.
The broker must be the procuring cause
Now in the first scenario I'm going to give you some little like a little fact pattern here so you can kind of gauge it in your own mind. Usually you have a real estate broker and they'll enter into an exclusive listing agreement on a particular property that's not uncommon.
Let's say that that exclusive listing agreement lasts for six months. What will wind up happening is the broker will get a buyer such as me, I'm the buyer, they'll show me the property and they'll say do you want to buy this property and I'll say no, not interested thank you very much. And I'll wait until that six months on the brokerage agreement on the exclusive listing agreement expires and then on my own I'll go to the seller and I'll say hi, remember me, I want to buy your house now and we don't have to deal with the broker because the contract expired so we can save the money on that commission.
What does the broker then do to ensure that the broker can go back and capture that commission to which the broker was otherwise entitled. Documentation. It's very very easy nowadays in the electronic world that we live in where we're using cell phones and tablets and other devices like that to document your meetings with people on a calendar, to send emails.
The key for the broker is to prove that the broker was what we call the procuring cause of that transaction. Meaning that it but for the broker that buyer never would have met the seller. But the broker needs to be able to document that and to show to a court either to a judge or to a jury that the broker was the one that brought them to see the property, they had emails exchanged, and then when the listing agreement expired they didn't renew it, and then we have the ability to get all the other exchanges between that buyer and seller. And then you start seeing the emails after that agreement saying by the way I'm now interested in buying your property and since we let that contract expire we can save the 6% commission for the broker. So brokers need to protect themselves by documenting the parties that they bring out to see the property.
Let's say that that exclusive listing agreement lasts for six months. What will wind up happening is the broker will get a buyer such as me, I'm the buyer, they'll show me the property and they'll say do you want to buy this property and I'll say no, not interested thank you very much. And I'll wait until that six months on the brokerage agreement on the exclusive listing agreement expires and then on my own I'll go to the seller and I'll say hi, remember me, I want to buy your house now and we don't have to deal with the broker because the contract expired so we can save the money on that commission.
What does the broker then do to ensure that the broker can go back and capture that commission to which the broker was otherwise entitled. Documentation. It's very very easy nowadays in the electronic world that we live in where we're using cell phones and tablets and other devices like that to document your meetings with people on a calendar, to send emails.
The key for the broker is to prove that the broker was what we call the procuring cause of that transaction. Meaning that it but for the broker that buyer never would have met the seller. But the broker needs to be able to document that and to show to a court either to a judge or to a jury that the broker was the one that brought them to see the property, they had emails exchanged, and then when the listing agreement expired they didn't renew it, and then we have the ability to get all the other exchanges between that buyer and seller. And then you start seeing the emails after that agreement saying by the way I'm now interested in buying your property and since we let that contract expire we can save the 6% commission for the broker. So brokers need to protect themselves by documenting the parties that they bring out to see the property.
Refusals to pay commission post-closing
The other scenario is where there would be some sort of refusal to pay a commission post-closing. And there's a whole host of scenarios that can lead to that, but the key is for the broker to be able to move quickly before the money is dispersed in order to secure that commission. And the way that a broker does that is to consult with counsel.
Commercial brokers have a lien right that residential brokers do not
In the commercial sector a little bit different than a residential broker, the commercial broker has a specific lien that's allowed to them for their commission under Chapter 475 of the Florida Statutes. It's called a broker's lien appropriately for the commission.
But just like in construction law there has to be notice given so therefore before the money is dispersed in the closing the commercial broker needs to, with counsel, react quickly and file and record the proper notice, which is a commercial commission notice to owner. That needs to be recorded in the public records. It's not a lien against the property. It's a lien against the monies. So you need to react very quickly before that money is dispersed.
One of the other items that's important for commercial brokers to deal with is to know who's on the contract. Because if the commercial broker gets into the situation where they're going to have to file the commercial commission notice to the owner it's the name of the broker that's on that contract that has the lean right. Brokers oftentimes work for brokerage agencies. If the commission agreement is in the name of the agency, the broker, the individual person the broker may not have that lean right. It goes back to the agency. So that's where the broker has to be aware of whose name is on the contract. Is it the individual broker, is that the brokerage agency, who's got that lean right that they can activate in order to pursue that.
But just like in construction law there has to be notice given so therefore before the money is dispersed in the closing the commercial broker needs to, with counsel, react quickly and file and record the proper notice, which is a commercial commission notice to owner. That needs to be recorded in the public records. It's not a lien against the property. It's a lien against the monies. So you need to react very quickly before that money is dispersed.
One of the other items that's important for commercial brokers to deal with is to know who's on the contract. Because if the commercial broker gets into the situation where they're going to have to file the commercial commission notice to the owner it's the name of the broker that's on that contract that has the lean right. Brokers oftentimes work for brokerage agencies. If the commission agreement is in the name of the agency, the broker, the individual person the broker may not have that lean right. It goes back to the agency. So that's where the broker has to be aware of whose name is on the contract. Is it the individual broker, is that the brokerage agency, who's got that lean right that they can activate in order to pursue that.
