The Florida Commercial Real Estate Sales Commission Lien Act Explained
Needless to say, commercial real estate sales commission lien rights can be complex...
Unfortunately, sellers of commercial property sometimes decide to dispute the amount of the listing agent’s commission. In some cases, they fail to pay the earned commission entirely, breaching the listing agreement. If you’re the broker this happens to, you might wonder if you have any available remedies.
Brokers often seek to place a lien for commissions on a commercial property that’s being sold. Under Florida real estate law, this is not a given right and isn’t always an available remedy. Here’s what you need to know about Florida’s commercial real estate lien law.
Broker’s Lien for Sales Commission in Florida
Florida’s Commercial Real Estate Sales Commission Lien Act states that a closing agent must reserve from the owner’s net proceeds an amount equal to the broker’s commission as claimed in the commission notice. Unlike the limited rights available in residential transactions, the statute provides commercial real estate brokers substantial rights that can be expanded or limited by contract. Which rights you have as a broker typically depends on the language of the listing agreement or other contract.
Section 475.42 of Florida Statutes prohibits a sales associate or broker from recording in the public records any document to collect a commission or to coerce payment of money. However, there are two exceptions to this rule:
- A broker or sales associate can record a judgment to create a lien on a property.
- A broker can place a lien on a property where expressly permitted by contract otherwise allowed by law.
What this means is that brokers can include in their listing agreements a clause providing a lien right and a right to record a lien to protect their commission. When the clause is included, you may be entitled to file a lien. A recorded lien not only helps you get paid but it can also place a lien against the property, which would need to be resolved as part of the closing. If it isn’t resolved, the seller cannot convey a marketable title. As you must include your commission lien right in the listing agreement, it’s advisable to have any sales documents read and reviewed by a Florida real estate law attorney.
Florida Commercial Real Estate Liens
In contrast to residential broker lien rights which can only be createdby contract, Florida real estate law gives commercial real estate sales brokers an automatic lien that can only be divested by contract.
Brokers involved in the sales of commercial properties have an automatic lien on the owner’s net proceeds of sale, and the lien cannot be waived before the commission is earned. The commission is earned when the sales contract is signed or such other date specified in the brokerage agreement. Thus, the commercial property seller cannot require the broker to waive lien rights in a listing agreement.
A commercial real estate broker does have obligations they must meet. For instance, they must at or before signing the listing contract disclose to the seller that the Florida statutes bestow lien rights for a commission, and they are not waivable before the commission’s earned. If the broker fails to make such a disclosure, they have no right to enforce a lien.
Assuming the commercial property lien right isn’t waived, Florida statutes set out a procedure to perfect the lien and ensure commission payment. A “perfected lien” is simply one that has been filed with the appropriate filing agent so as to make the securing interest in an asset binding. To perfect the lien in a commercial property sale:
- The broker must send a commission notice to the owner and the closing agent.
- The notice must assert that, unless the owner notifies the closing agent no later than five days after closing that the owner disputes the commission claim, the closing agent must pay the commission.
- Notice must be delivered at least one day before closing.
Once you, as the broker, timely deliver a notice of commission, you can also record the notice in the public records. Although the lien’s only against the seller’s net sale proceeds, it does cloud the title. So, until the commission is paid, the lien remains against the property.
Lastly, Florida commercial real estate law requires that provided a broker complies with the state’s statutes, the closing agent must withhold sufficient funds from the owner’s net proceeds to pay the claimed commission. However, the closing agent may not disburse the withheld funds to the broker unless the owner approves or fails to timely object to payment. If a closing agent receives a timely objection, they must hold the funds until the dispute’s resolved.
Needless to say, commercial real estate sales commission lien rights can be complex, often succeeding or failing on contract language. It’s prudent to consult with and, if necessary, retain a Florida real estate law attorney when acting as a broker for a commercial real estate sale. An attorney will review the proposed listing agreement or contract and can represent you through the closing.
How to Enforce Your Commercial Real Estate Lien Rights
Florida’s commercial lien acts provide significant benefits to real estate brokers. To enforce your right to a Florida real estate commission under Section 475.01 Part II of the Commercial Real Estate Sales Commission Lien Act, you must within 30 days after the commission is earned, and at least one day before the closing, deliver a statutorily prescribed commission notice to:
- The owner of the commercial property as specified in the brokerage agreement.
- The designated closing agent, where the identity of the closing agent is known. If the closing agent’s identity is unknown but later discovered, the required notice must be sent to the closing agent within three days after learning of their identity and at least one day before closing.
Commission notices must be in writing and signed and sworn to or affirmed by you, the broker, under penalty of perjury before a notary public. The broker’s commission notice under the Act must include:
- The name of the commercial real estate property owner who’s required to pay the claimed commission.
- The commercial property’s legal description.
- The broker’s name, mailing address, telephone number, and license number.
- The brokerage agreement’s effective date.
- The amount of commission the broker is claiming.
- A statement under penalty of perjury that the broker has read the commission notice, knows its contents, and believes the same to be true and correct. Further, they must affirm they make the commission claim according to the brokerage agreement described in the notice.
- A statement that the notice or a copy of it’s been delivered to the commercial property owner and that the notice may be recorded in the public records of the county or counties where the property is located.
- A statement that if the owner disputes the claimed commission, the owner must notify the closing agent of the dispute not later than five days after the closing. Otherwise, it will be deemed the owner confirms the commission, and the closing agent will be required to pay it to the broker from the owner’s net proceeds.
If you are a broker handling a commercial real estate sale, it’s essential you fully understand and follow the requirements outlined in Florida’s Commercial Real Estate Sales Commission Lien Act before entering into the contract. This summary is intended to provide you with practical and useful information, but it doesn’t take the place of legal advice.
If you need legal advice regarding commercial real estate sales in the State of Florida, contact Munizzi Law Firm today to schedule a consultation.