Real estate brokers can be employed as an agent for either the buyer or seller to represent them in a real estate transaction. In most circumstances, a written listing agreement defines the material terms of the relationship between the broker and the seller. Disputes often arise in residential or commercial real estate transactions as to whether the real estate broker is entitled to a commission. An aggrieved broker’s rights and remedies are often contingent on whether the listing agreement was an “exclusive listing agreement” versus and “open agreement.” In an exclusive arrangement, a broker can be entitled to compensation for commissions on a closed deal even if they did not assist the seller in finding the buyer. In an open listing agreement, the broker’s available remedies are, generally, limited only to situations where they procured the actual buyer of the subject property.
A real estate broker does not necessarily have to enter into a written listing agreement with the buyer or seller for the broker to have earned a commission on the sale of real estate. If the listing agreement was entered into orally or if the listing agreement has expired, then the real estate broker may still be entitled to a commission under the procuring cause doctrine.
The procuring cause doctrine, under Florida law, provides that a real estate broker is entitled to a commission when he/she produces a purchaser that is “ready, able and willing to perform upon the terms fixed.” Procuring cause applies in commercial and residential real estate contexts, and even to brokered sales outside of real estate such as aircraft and yacht sales.
In order for a real-estate broker to establish a prima facie case against a seller for recovery of their real estate commission, the broker must show:
- Possession of a valid real-estate license;
- An employment contract with the seller (verbal or written);
- Performance of the terms of the contract ; and
- The seller’s breach by refusing to pay the agreed commission.
The procuring cause doctrine applies to the third element above regarding the broker’s performance under the contract. The broker/agent must meet two requirements under the doctrine to have performed the terms of the contract and be entitled to a commission: (1) initiate negotiations by doing some affirmative act to bring buyer and seller together; and (2) remain involved in the continuing negotiations between buyer and seller.
Whether a broker is the procuring cause of a sale must be factually determined on a case-by-case basis using many factors. Each factor is weighed in conjunction with the other factors relevant to your case. One factor is not determinative by itself. Common factors that are considered in broker commission lawsuits are:
- The nature and status of the transaction;
- The nature, status and terms of the listing agreement or offer to compensate;
- The roles and relationships of the parties;
- The initial contact with the purchaser;
- The conduct of the broker or agent;
- Continuity and breaks in continuity;
- The conduct of the buyer; and
- The conduct of the seller.
The damages available to a broker in a breach of contract action against the seller for recovery of a commission under the procuring cause doctrine may include the amount of the agreed to, or a computed commission, interest, and punitive damages. In some cases, depending on the contract at issue, attorneys’ fees and costs can also be awarded to the prevailing party in a procuring cause lawsuit.
It is important to note that for commercial real estate transactions, the broker’s entitlement to a commission is protected by the Florida Commercial Real Estate Sales Commission Lien Act under Chapter 475, Part III, Florida Statutes. In certain circumstances, the Act protects the interest of the procuring broker by allowing them to file and foreclose on a lien on the proceeds from the transaction. For residential real estate transactions, the broker’s entitlement to a commission is determined by Florida common law as discussed above.
If you think you are owed a commission on a residential or commercial real estate transaction, it is imperative you speak with an experienced real estate attorney as soon as possible.
Call the Law Offices of Jarrett R. Williams, P.A. today to have our attention to detail and real estate transactional and litigation experience provide you with the insight to achieve solutions to your most complex real estate matters.
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