State Appeals Court Gives Brokers A Leg Up In Commission Fight

The opinion in J. Milton Dadeland vs. Abala changes the status quo on brokers’ rights to place a lien on real estate during a transaction, the attorneys agreed.
“The general consensus is that this case is changing the landscape in terms of the general obligations for brokers, sellers, title agents, et cetera,” said June Hoffman, an appellate attorney in the Fort Lauderdale office of Fowler White Burnett, who successfully argued for Abala Inc. “On balance, the brokers now have more leverage.”
The case before the court involved a $1.47 million award to Abala. The company brokered a $25 million short sale of an apartment complex to J. Milton Dadeland LLC in 2010. Before closing, Abala placed a lien on the property to secure its commission. J. Milton sued after closing to vacate the lien.
J. Milton’s attorney, Robert P. Frankel of Robert P. Frankel & Associates in Miami, argued the 2009 Florida Commercial Real Estate Sales Commission Lien Act provided an exclusive remedy to the broker in the form of a lien on the net proceeds but not on the real estate itself.
The court disagreed, concluding it would be absurd to limit a brokers’ rights to claims on net proceeds in a short sale.
“In situations such as this where there is a short sale, there are no net proceeds. A broker would be entitled to no meaningful security for its commission if we accepted the purchaser’s interpretation,” Judge Thomas Logue wrote for a unanimous Third District Court of Appeal panel. Judges Edwin A. Scales III and Linda Ann Wells concurred.
‘Under The Radar’
While that interpretation seemed straightforward to the appellate judges, several South Florida attorneys told the Daily Business Review that the decision is significantly different from the understanding most people had of brokers’ rights to file property liens.
“I don’t think many brokers thought they had this clear right,” said Manuel Farach, of counsel at Richman Greer in West Palm Beach. “It’s been under the radar. A lot of people presumed brokers could not file claims of lien prior to the closing.”
Farach said that even though he’s careful to review brokerage contracts for any claims of rights to liens, in many cases transactional attorneys don’t see those clauses as red flags.
“There’s a lot of stuff in contracts that people either don’t appreciate or put in there for the hell of it,” he said. “It happens all the time.”
“If they record a lien on the real property itself, it screws everything up with the deal,” Farach added. “The title companies are probably going to be really worked up about this. This is going to be another arrow in the quiver of real estate brokers.”
Hoffman agreed, saying that although she wasn’t a real estate specialist, the reaction in the legal community signaled “this may cause a flurry of pre-closing liens.”
Katherine Amador, a Miami partner in the real estate practice at Berger Singerman, called the decision “a wake-up call for brokers.”
“I’m sure that they’re all going back to their brokerage agreements and making sure those now specifically provide that the lien for their commission can be placed on the real estate,” she said.
Amador also noted even though “sellers need to be on the lookout,” title agents are likely to feel the brunt of any liability as a result. Unless otherwise stated, brokers generally have a right to a commission if they claim to be the “procuring cause” of a buyer’s offer.
“The title companies aren’t happy about this because it could be a potential land mine,” Amador said. “It may put the title agent in the situation where they have to interpret a brokerage agreement and that’s an unfair situation.”