Commercial Real Estate Sales Commission Lien Act

Part 3 of Florida Statutes Chapter 475 codifies the Commercial Real Estate Sales Commission Lien Act (hereinafter sometimes referred to as the “Act”).  The Act provides that when a broker has earned a commission by performing licensed services under a brokerage agreement with you for the sale or purchase of commercial real property, the broker may claim a lien against your net sales proceeds for the broker’s commission.  The broker’s lien rights under the act cannot be waived before the commission is earned.  See Florida Statutes § 475.703(1) (2012).  Although often times the word “lien” conjures up an encumbrance upon real property, the Act specifically provides that the lien upon the property owner’s net proceeds for a broker’s commission is a lien upon personal property, attaches to the property owner’s net proceeds only, and does not attach to any interest in real property. Id.

A broker is required to disclose to the property owner, at or before the time that the property owner executes a brokerage agreement, that the Florida Statutes create lien rights for a commission earned by the broker that are not waivable before the commission is earned.  Should the broker fail to make such a disclosure, then the lien shall be unenforceable. 

If a broker wishes to enforce a lien for a commission pursuant to the Act, the broker is further required, within 30 days after a commission is earned by the broker, and at least one day prior to the closing, to deliver a statutorily proscribed commission notice to (1) the owner of the commercial property as specified in the brokerage agreement; and (2) the closing agent designated to close the transaction, where the identity of the closing agent is known (if the identity of the closing agent is not known, but later discovered, then the required notice is to be sent to said closing agent within 3 days after acquiring such knowledge and at least 1 day prior to the closing). See Florida Statutes § 475.705(3) (2012).

Should a broker fail to deliver a copy of a commission notice within the statutorily proscribed period, as required by the Act, then the broker shall not be entitled to enforce the broker’s lien, unless the broker’s failure to deliver said notice is solely because the owner entered into a contract for the disposition of the property without the knowledge of the broker. See Florida Statutes § 475.705(3) (2012). In such a case, the broker may then enforce the lien for a commission if (1) a copy of the commission notice is delivered to the owner and the closing agent before the closing agent disburses the owner’s net proceeds; and (2) the broker executes and delivers to the closing agent a sworn affidavit stating that the copy of the commission notice was not delivered within the time period specified in the Act solely because the owner entered into a contract for the disposition of the commercial real estate without the knowledge of the broker. See Florida Statutes § 475.705(4) (2012).

The Act is only applicable to commercial real estate.  For purposes of the act, the term “commercial real estate” has a limited definition, and is defined as a fee simple interest or other possessory estate in real property, except an interest in real property that is: (1) improved with one single-family residential unit or one multifamily structure containing one to four residential units; (2) unimproved and the maximum permitted development is one to four residential units under any restrictive covenants, zoning regulations, or comprehensive plan applicable to that real property; or (3) improved with single-family residential units such as condominiums, townhouses, timeshares, mobile homes, or houses in a subdivision that may be legally sold, leased, or otherwise conveyed on a unit-by-unit basis, regardless of whether these units may be a part of a larger building or parcel containing more than four residential units. See Florida Statutes § 475.701(5) (2012).

 

Nevertheless, it is worth noting that a real estate broker may place a lien on your real property for a commission earned, in either a residential or commercial real property transaction, where you have specifically agreed in writing to same, for instance, in a listing or breakage agreement. 

In most commercial and residential real property transactions, sellers will utilize a real estate broker to market and sell their property.  Often times, and preferably, the broker and seller will memorialize their relationship in writing by virtue of a real estate brokerage agreement, likely in the form of a listing agreement.

Listing agreements are generally set forth on pre-fabricated forms and are usually prepared by the real estate broker or agent. More times than not, listing agreements will favor the broker.    Sellers of both residential and commercial property will often have an attorney review their purchase and sale contracts, but not their brokerage agreements.  This is a mistake that could end up costing a seller thousands of dollars.

Generally, a broker or agent may not place, or cause to be placed, in the public records any writing which purports to affect the title of, or encumber real property.  Fla. Stat. § 475.42(j) (2012).  However, a broker may be able to place a lien on your property where it is expressly permitted by a contractual agreement, such as a listing agreement.  Id.  Why would a broker want to place a lien on your property?  For the purposes of securing its commission pursuant to the listing agreement.  

Should you unknowingly agree to such a provision, and a lien is ultimately placed on your property, not only will the lien inhibit your ability to dispose of the property, but it can also cost you significant attorneys’ fees to have the lien successfully removed from the property.   

There are additional hidden issues in a listing agreement that make the decision to hire an attorney a prudent one.  For example, where a buyer defaults under the purchase and sale contract, the seller generally has the option to retain the buyer’s deposit as liquidated damages. A listing agreement may contain a provision entitling the broker to a certain percentage of this retained deposit, sometimes up to as much as 50%. Where commercial properties or luxury residential real estate are involved, the deposit will likely be significant.

Accordingly, if detailed attention is not paid to a brokerage agreement, a seller may unknowingly consent to a lien being placed on their property or forfeit a large percentage of their retained deposit.  Your interests will be better protected by having an attorney review these agreements before you execute them.