Real estate brokerage is a business. No point in finding a willing buyer for your client’s property unless you get paid for your efforts, right? A lien can be a powerful tool to make sure this happens, but not without risk.
There are two types of liens for commercial real estate sales brokers to consider – on the seller’s net proceeds, or on the real estate itself. The former is an automatic right in Florida. The latter isn’t, but still may be viable.
Note – the scope of this post is limited to Florida commercial real estate sales, not leases. Florida has a commercial real estate leasing commission lien law, too, which is similar but has some important differences. That law will be addressed in a separate post.
Lien on seller’s net proceeds.
Under Florida’s Commercial Real Estate Sales Commission Lien Act Florida (F.S. 475.700-475.719, “the Act”), real estate brokers have a right to impose a lien on a seller’s net proceeds from the sale of commercial real property, and to have the commission amount held back by the closing agent.
Two important caveats:
- This is a lien only on “net proceeds,” not the real property itself.
- This law applies only to commercial sales, not residential.
The Act has detailed requirements, including:
- a notice containing specific information (legal description of the property, effective date of listing agreement, contact info for the broker, amount of commission claimed, etc.);
- a sworn statement as to the truthfulness of the claim;
- a statement that notice of the lien has been provided to the property owner; and,
- a statement that unless the owner notifies the closing agent that it disputes the claim within five days after closing, it will be deemed to have confirmed that the commission is owed. This section also contains an approved notice form.
(This is just a summary. Before proceeding with a lien, readers are urged to review the entire Act, particularly the notice provisions found in F.S. Section 475.705, for the specific requirements.)
The notice must be delivered to the closing agent and property owner at least one day before closing and within 30 days of the lien having been earned. After delivery, the lien notice may also be recorded in the public record, and it expires one year later. Despite recording, the lien affects just the owner’s net proceeds, not the property itself.
Upon receipt of the notice, the closing agent must reserve the commission amount from the seller’s net proceeds. If the owner acknowledges the commission, it gets released to the broker. If the owner disputes it, the closing agent pays the commission into the court registry. Owner and broker then litigate over it, with the loser owing attorneys’ fees to the winner. (This again is a mere summary. Please refer to the Act itself for the specific requirements.)
Liens on real property.
When the Act was passed in 2006, many people thought its lien on net proceeds was the only lien remedy available to commercial real estate brokers. Then Florida’s Third District Court of Appeal issued J. Milton Dadeland, LLC v. Abala, 145 So.3d 175 (Fla. 3rd DCA 2014), turning Florida broker lien law on its head.
Abala held that the Act is not a broker’s only lien remedy and that as long as the listing agreement authorizes it, a broker can enforce a lien on the real property itself. In the two years since Abala, no more appellate cases have addressed the issue, and Abala appears to be the law of the land, at least for now.
But before placing a lien on either the net proceeds under the Act, or on the real property under Abala (and pursuant to a listing agreement specifically authorizing such a lien), be aware that filing a false lien can result in a significant damages judgment against the filer. A false lien can constitute disparagement of title, entitling the aggrieved party to damages. More on that in a later post.