Buyer Beware: Broker May Have A Lien On Your Property

March 6, 2019by Brandon Banks

Any buyer of a commercial or residential property wants to obtain clear title to a property. A buyer wants to make sure that the property being purchased is free of liens or levies placed on the property by creditors or other third parties.

A lien attaches to property and alerts the public that the owner of the property owes money to a creditor. Liens are typically filed with the county recorder’s office. Liens impact the ability to sell or refinance a property. For this reason, it is imperative that one holds clear title to a property.

Broker places lien on property to recover commission

Liens can be placed on a property for a variety of reasons, some of which have nothing to do with the underlying property. Examples of liens include property tax liens, IRS liens, child support liens, judgment liens and contractor liens.

What about broker liens? Can a broker place a lien on a property to obtain a commission from the sale of a property? This issue was recently addressed by a Florida appeals court in J. Milton Dadeland, LLC, etc., v. Abala, Inc., et al.

The facts of the case are as follows: The owner of a property entered in a commission agreement with a real estate agency that acted as the owner’s broker to market and sell the property. The commission agreement stated that if the property sold, the broker would receive a 6% commission. Furthermore, the agreement also stated that the broker had the right to place a lien on the property for any commission owed.

Eventually, a buyer was found for the property and the owner entered into a contract to sell the property for $25 million. Before the closing took place, the broker recorded a lien on the property for the 6% commission. As a result of the lien, the purchaser sued the owner of the property, but the parties settled the dispute out of court. The purchase price was reduced by $500,000 and the buyer also received a $70,000 check at closing. The purchaser and the owner eventually closed on the property and title was transferred.

Finally, after the closing, the purchaser of the property sued the broker to cancel the lien and the broker counterclaimed. The trial court entered judgment in favor of the broker and the purchaser appealed.

Appeals court holds that broker’s lien was proper

On appeal, the purchaser of the property argued that Florida law only permits a lien for a real estate commission on the proceeds of sale and not on a property. The appellate court, however, disagreed.

While the Florida Commercial Real Estate Sales Commission Lien Act permits a lien for a commission only on the “owner’s net proceeds” from the sale, the court held that this is not the exclusive remedy for a broker. Otherwise if it were, in situations such as a short sale, a broker would have no meaningful remedy because there are no net proceeds.

In affirming the trial court’s ruling, the court looked to the fact that the commission agreement unambiguously provided a 6% commission and authorized the broker to obtain a lien on the property. The Florida Statute also specifically states that a broker is not prohibited from placing a lien on a property to collect a commission that was permitted by contract.

Avoid Unnecessary Complications Work With A Qualified Real Estate Attorney

If you have any questions regarding purchasing or selling a property, Walsh Banks Law’s real estate attorneys can help guide you through this process. We have experience representing all parties, including buyers, sellers, lenders, developers, and landlords, in a variety of real estate transaction and disputes.

We can help! Give us a call at (407) 259-2426 or contact us online to Schedule a Free Confidential Consultation

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