By Joe Hernandez
On July 30, 2014, the 3rd DCA decided a very important case affecting real estate transactions. The Court upheld the right of a broker to place a lien on property in the transaction – not just the proceeds from the sale – in order to protect the right to a commission. The requirement, however, was that the brokerage agreement had to provide for such a right. Up to now, it has been generally thought that, pursuant to the Commercial Real Estate Sales Commission Lien Act, the right of a broker was limited to placing a lien on the transaction proceeds, but could not be a lien encumbering the property. The importance of this right cannot be overstated. By placing a lien on the property during a transaction, the commission has to be paid off in order to convey clear title and close the sale. That is what the broker did in the case in question.
One of the questions that remains unclear is whether the Court meant to include residential property in this decision. Since the case involved commercial property and the Appellant, J. Milton Dadeland, LLC, argued that the broker was not entitled to impose a lien on the real property under the Commercial Real Estate Sales Commission Lien Act, the implication is that the Court meant to restrict this decision only to commercial property, however, the Court never explicitly said as much. The Court’s decision seems to say that if a broker in ANY real transaction includes a provision in the listing agreement or the purchase contract stating that they can impose a lien on the property to secure the payment of their commission then they can do so under Florida law. This would indeed be an extraordinary result.
For our real estate clients who are considering selling property, they now must now carefully review any listing agreement to understand if the broker is attempting to reserve the right to impose a lien on the property to secure their commission, in addition to the rights that Brokers have under the Commercial Real Estate Sales Commission Lien Act. For our clients who are purchasing property, they must do additional due diligence to understand the terms of any listing agreement and must make sure that any commission amounts are paid at closing or risk having a lien placed on the property they purchased. For our broker clients, they must now consider adding language to their listing agreements allowing them to impose a lien separate and apart from their right to lien the net proceeds under the Commercial Real Estate Sales Commission Lien Act.
Any parties dealing with the purchase or sale of real estate should consult their real estate attorney to review the decision and its implications on the transaction.
WSH Partner Joseph Hernandez is the firm’s Real Estate Practice Group chair. With more than 25 years’ experience in the real estate industry, Joe has seen Miami’s highs and lows when it comes to the real estate market, and can handle the challenges for a variety of clients.
Hernandez and the Real Estate Group represent local governments as well as private investors, developers and lenders in all aspects of real estate transactions.
