How Commercial Real Estate Brokers Can Recover Unpaid Commissions
Commercial real estate transactions are often complicated and can involve many moving parts, which makes commission disputes a challenge. Even when a listing agreement is written out in detail, legal disputes can arise during or after the sale of a property.
The confusion around procuring cause is a common source of disputes in real estate sales, and commercial brokers can easily find themselves embroiled in contentious litigation as a result.
The challenges of determining procuring cause
Procuring cause is a party that is responsible for successfully securing the sale. This concept is often at the heart of real estate disputes involving brokers and property owners.
The Florida Supreme Court has explained that to earn a commission as the procuring cause of a transaction, a broker must perform two essential tasks:
1. The broker must initiate negotiations by doing some affirmative act to bring buyer and seller together.
2. The broker must remain involved in the continuing negotiations between the seller and the buyer, unless the seller and buyer intentionally exclude the broker from the negotiations.
Listing agreements are legally binding contracts.
Unless the broker has failed to uphold their end of the deal, a property owner who refuses to pay commissions upon the sale of the property is usually found to be in the wrong. Even so, property owners or buyers may use the issue of procuring cause to claim that the broker is not owed any commissions.
In March 2016, the Business Trial Group helped real estate company Florida Outdoor Properties recover unpaid commissions from property owners accused of breaching an Exclusive Right-to-Sell Listing Agreement.
The contract stipulated that Florida Outdoor Properties would have the right to seek and procure a buyer within a specified period of time.
The lawsuit alleged that the property owners pursued a sale without the involvement of Florida Outdoor Properties, and refused to pay the real estate company the appropriate commissions once the sale went through.
Ultimately, the jury found that the property owners had in fact breached the terms of the listing agreement, and awarded $427,800 in damages to Florida Outdoor Properties.
Commission disputes involving verbal agreements
Though most real estate contacts involve written listing agreements, verbal agreements are still utilized in some circumstances, often in conjunction with a written contract.
Whether oral real estate commission agreements can be upheld in court or arbitration depends in part on the laws of each state; in Florida, these types of contracts are considered legal and binding.
It can be difficult, however, to prove the terms of an oral contract.
Having witnesses other than the two contracted parties can be helpful in demonstrating the validity of these agreements. Any informal correspondence such as emails, faxes, and letters can also prove critical in supporting a broker’s claims to unpaid commissions.
Don’t wait to look for representation
Whether your contract was in writing or simply a hand shake agreement, it’s important to have qualified legal representation before entering the litigation or arbitration process.
First and foremost, you’ll want to ensure that you have the necessary legal protections in place so that you and your attorney can figure out the best way to approach your case.
For many clients, that involves initiating a broker’s lien. This is a process whereby the commercial broker can place a lien on the proceeds of the sale, and sometimes the property itself, until any owed commissions are paid. It is possible to file liens for the full value of those commissions.
Acting quickly to find representation will give you the best opportunity to recover what you’re owed under your listing agreement.
If you are involved in a commission dispute, you should contact an attorney with experience in commercial real estate litigation who will make sure that all pertinent documents and witnesses are leveraged to support your case.
To learn about the Business Trial Group’s contingency-fee commercial litigation practice, contact us here. Our experienced trial attorneys have helped many commercial real estate brokers resolve their disputes and recover the commissions they were owed.