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The Importance of The Listing Agreement and a Broker’s Right to Commission

Posted on: July 17, 2012

A broker’s right to a commission is controlled, in the final analysis, by the provisions of the employment (“listing”) agreement with the owner.  In some listing agreements, a broker is hired to find a purchaser.  In other listing agreements, a broker is hired to effectuate a sale.  The listing agreement controls whether or not the broker is hired to find a purchaser or effectuate a sale.

A broker employed to sell or effect a sale of a property,  as distinguished from a broker employed to find a purchaser,  is not entitled to compensation until a sale occurs. A broker may still be entitled to a commission, even if the sale does not occur where finalization of the sale is prevented by the default of the Seller. Ben-Shmuel v. Wimbish Riteway, Inc., 722 So. 2d 955 (Fla. 3d DCA 1998.

In Ben-Shmuel, Eliahu Ben-Shmuel (“Ben-Shmuel”) (as general partner of Mazel Tov Associates) entered into an exclusive listing agreement with Wimbish Riteway, Inc. (“Wimbish”) for the sale of a Golden Beach property.The term of the agreement was through May 1, 1996 Linda Bird, another broker, discovered the listing through the multiple listing system (MLS). In April 1996, she showed the property to her clients during which time Beh-Shmuel was present; however, Wimbish did not receive any notice that the property had been shown.June 9, 1996, after the termination of the Wimbish agreement, Ben-Shmuel entered into a new listing agreement with Linda Bird Realty, and shortly thereafter the property was sold to her clients for $2,500,000, of which Linda Bird Realty received a brokerage fee of $75,000.

Wimbish filed suit contending that it was entitled to the brokerage fee because the property was shown to the purchasers during the term of its listing agreement with Ben-Shmuel. Wimbish moved for and was granted summary judgment.The Third District Court of Appeal affirmed relying, in part, on the language of the listing agreement which provided, in pertinent part, as follows:

[A brokerage fee] is to be paid to WIMBISH-RITEWAY whether the purchaser is found by WIMBISH-RITEWAY, a Cooperating Broker without Subagency, a Coordinating Broker acting as Transaction Broker or a Buyer Broker, by the undersigned OWNER(S) or by any other person …. or if the OWNER(S) agree to sell, exchange or option said property within twelve months after the termination of this Authorization to a purchaser to whom WIMBISH-RITEWAY REALTORS® or any Cooperating Broker or Buyer Broker submitted said property for sale during continuance of said Authorization and was registered with OWNER(S), by WIMBISH-RITEWAY, through a prospect registration or contract presentation during the term of this authorization or within fifteen (15) business days 956 (emphasis added).

In relying on the above clause, the Third District Court of Appeal found that Wimbish was entitled to the brokerage fee under the terms of the agreement because (a) the property was sold approximately 50 days after the expiration of the Wimbish agreement, well within the 12 month period provided for, and (b) the property was submitted for sale to the purchasers during the term of the agreement.

If you are a broker who has been excluded from negotiations or if you are a seller who is being accused of excluding a broker, call one of our South Florida real estate litigation attorneys today at (954) 779-7009.