Commercial Brokers Can Force Commission Payments through Lien Act
If you sell or lease commercial real estate, Florida law changes
effective October 1, 2005, may help you collect your commissions.
The law allows brokers to file liens to protect their sales
commissions, and may benefit brokers who either sell or lease
nonresidential property. Before this change, a broker could file a
lien against real property only if the broker had a judgment, or a
lien was specifically allowed in the listing agreement.
In that case, the lien was against the subject real property. Remember, a listing agreement is between a seller and a broker, so sales associates cannot file liens or sue sellers for commissions.
“It is important for brokers to include provisions of the Commercial Real Estate Lien Act in brokerage agreements,” said The Real Estate School President Edward O'Donnell. “Licensees are well advised to master all components of the lien law to protect themselves from loss of commissions.”
If you sell nonresidential property, your broker has the right to place a lien against a seller's net proceeds (not the property itself) before the closing of the sale. It's important to understand that the term “nonresidential” means that the property cannot be a single-family home, condominium, any building with less than five units, or unimproved property that is permitted for residential dwellings of one-four units.
The broker must give the owner a disclosure before the listing is signed. If the broker wants to enforce a lien for the commission, the broker must, within 30 days after the commission is earned and at least one day before closing, file a lien notice that has been signed by the broker and sworn to in front of a notary public.
There are two conditions under which brokers may impose liens even if the commission notices have not been delivered, including:
- In a case where a seller has signed a contract for sale before the broker has been notified, but a commission notice has been sent to the seller and a closing agent prior to the disbursement of funds; and
- Transactions in which closing agents receive sworn affidavits from brokers indicating the brokers were unaware commission notices had not provided to sellers when contracts were signed.
If the broker has followed all requirements, the law requires the closing agent to reserve the broker's commission. If the parties dispute the commission, the closing agent must deposit the amount of the commission with the court less costs incurred by the agent.
If you lease nonresidential property, and if the management agreement was entered into after October 1, 2005, your broker has the right to place a lien against the owner's property (but not against the tenant's leasehold interest) for the amount of commissions due from the owner. If the tenant owes the commission, the lien attaches to the tenant's leasehold interests, but not the owner's interest.
The broker must give the owner a disclosure before the listing is signed. After the commission is earned, the broker may record a lien notice (signed by the broker and sworn to in front of a notary public) in the public records no more than 90 days after the tenant takes possession. If the property is transferred before the lien is recorded, the lien will have no effect. The broker must deliver a copy of the lien notice to the owner within seven days.
Many details of the law are beyond the scope of this article, and a broker should read the entire commercial broker lien statute before deciding to use the lien rights.