Broker’s Entitlement to Commission

Real estate brokers are employed by property sellers to assist in finding a purchaser or producing a sale. The terms of the broker’s employment may be outlined in a listing agreement. The listing agreement indicates what a broker must do in order to receive a commission. Once the broker either finds a purchaser or produces a sale, depending on the listing agreement, the broker is entitled to his commission. Problems concerning broker commissions can arise where a sale is negotiated without the involvement of the broker during the life of the listing agreement. This scenario is discussed in Wood/Fay Realty Group, Inc. v. New Aquarius Corp., 842 So. 2d 914 (Fla. 3d DCA 2003).

In this case, Wood/Fay Realty Group, Inc. (the “Firm”), a real estate brokerage firm, had an exclusive listing agreement on a mobile home park. The listing agreement provided that a commission is due where there is a transfer, or a contract to transfer, the mobile home park within 180 days after the end of the listing agreement to any prospects with whom communications regarding the mobile home park were had before the listing agreement ended. The listing agreement also had an extension clause which extended the listing agreement through the date of actual closing where there is a sales contract made during the life of the listing agreement. Also under the listing agreement, Stanley G. Tate (the “Receiver”), receiver for the mobile home property being sold, was obligated to immediately refer all questions about the mobile home park’s sale to the Firm.

During the life of the listing agreement, a mobile home park company executed a contract to purchase the mobile home park. The sales contract included an option to cancel which terminated on April 1, 1997. Three weeks after the listing agreement was originally supposed to end and during the existence of the sales contract with the mobile home park company, the Receiver spoke with a representative of New Aquarius Corporation (the “Buyer”). Ten days after this communication, the sales contract was cancelled. Two days after the cancellation, on April 2, 1997, the Buyer made an offer on the mobile home park, which the Receiver accepted. No commission was paid to the Firm.

The Firm brought an action against the Buyer and the Receiver seeking the commission. The Circuit Court decided in favor of the Buyer and the Receiver. On cross-appeals, Florida’s Third District Court of Appeal held that: (1) the Buyer was a “prospect” under the listing agreement, and (2) the Receiver’s canceled sales contract with the mobile home park company extended the duration of the listing agreement, requiring the Receiver to inform the Firm of the Buyer’s interest in property so that the Firm could facilitate the sale.

If you are a real estate broker and have been excluded from sale negotiations or are a property seller and are being accused of excluding a broker from sale negotiations, contact the real estate litigation attorneys at Schecter Law today at (954) 779-7009.

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 thereafter.Id.at 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.

A broker who is the procuring cause is entitled to a commission.  A seller and buyer may not deny the broker’s status as procuring cause by excluding the broker from negotiations. 

In order for the broker to be the procuring cause, the buyer and seller must come to a meeting of the minds regarding the transfer of property.  The meeting of the minds must be the result of continuous negotiations.  The continuous negotiations must be “conducted and orchestrated by the broker.”  See Osheroff v. Rauch Weaver Millsaps & Co., 882 So. 2d 503, 505 (Fla. 4th DCA 2004).

The broker is required to conduct and orchestrate negotiations unless “the seller and buyer intentionally exclude the broker from the negotiations.”  See Rotemi Realty, Inc. v. Act Realty Co., Inc., 911 So. 2d 1181, 1189 (Fla. 2005); Siegel v. Landquest, Inc., 761 So. 2d 415, 417 (Fla. 5th DCA 2000).  If the broker is excluded from negotiations, then the broker is entitled to a commission, regardless of whether the broker continued to conduct negotiations. 

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.

A seller has the ability to limit a broker’s entitlement to a commission.  Unless a seller and a broker have a “special contract,” the broker is entitled to a commission if the broker is the procuring cause.  See Siegel v. Landquest, Inc., 761 So.2d 415, 416-17 (Fla. 5th DCA 2000). 

In order for the broker to be the procuring cause, the broker must bring the buyer and seller together.  Also, the buyer and seller must come to a meeting of the minds regarding the transfer of the property.

Courts use the procuring cause in cases where the seller and the broker have not negotiated their own terms regarding the broker’s commission.  The seller may negotiate the broker’s commission in a “special contract.”  Id.  The special contract is usually a listing agreement.

In the listing agreement, the seller may condition the broker’s commission upon the actual transfer of the property.  The seller may set a minimum sales price.  If the broker does not find a buyer who is ready, willing, and able to purchase the property for the sales price, or if the property is not actually transferred, then the broker will not be entitled to a commission.

If you have entered into a listing agreement or if you are currently operating without a listing agreement, call one of our South Florida real estate attorneys today at (954) 779-7009.