The job of a real estate broker is to facilitate the sale of real estate property (or "procuring" the sale), whether he or she is representing the buyer or the seller. Unless the real estate broker has a enforceable written or oral agreement with the seller or the buyer, this doctrine may control how the real estate broker's entitlement to a commission is decided. Disputes can and do arise in residential or commercial real estate transactions where a real estate broker claims that a transaction is the product of the broker's involvement in the transaction. That involvement may include making an introduction of the real estate to an interested party who moves forward with negotiations, with or without the real estate broker's participation, resulting in contract for the purchase and sale of the property.
When a satisfactory resolution of the real estate broker's claim for payment of a commission does not occur, litigation may ensue. In such real estate litigation actions, the buyer seller and/or the buyer will defend claiming, among other reasons, that the real estate transaction was not the result of the real estate broker's actions or participation in the transaction, and that the broker is not entitled to payment of a real estate commission. As a result, a judge or a jury will be called upon to decide the relevant facts necessary to decide the real estate commission issue.
Where there is no enforceable written or oral agreement in effect with the real estate broker or where an agreement has expired and is no longer in effect, the issue of entitlement to a real estate commission will turn on the particular facts of the case. In order to provide guidance to a real estate broker claiming entitlement to a commission or a party to a real estate transaction who believes no commission is due, an understanding of Florida law, is essential. That process requires an understanding of the procuring cause doctrine, which has been fine-tuned through numerous court decisions over the past several decades. The procuring cause doctrine is clearly articulated by the Florida Supreme Court in Rotemi Realty, Inc. v. Act Realty Co., Inc., 911 So.2d 1181 (Fla. 2005).
In its opinion, the Florida Supreme Court explains that a broker must perform two essential tasks in order to receive a commission:
- The broker must take affirmative action to initiate negotiations and bring the buyer and seller together.
- Unless intentionally excluded by the seller and the buyer, a broker must continue to be involved in negotiations.
This is the rule against which the specific facts of a commission dispute case will be decided, in the absence of a controlling contract or agreement with the real the real estate broker. Even though the rule is straightforward, no two cases are exactly alike. As stated by the Florida Supreme Court, whether a broker has performed these tasks is a question of fact that the trial judge or the jury must determine from the surrounding circumstances. The specific facts of each case must be carefully analyzed in trying to predict how a judge or a jury may decide those facts for or against the real estate broker.
Details of Rotemi Realty, Inc. v. Act Realty Co., Inc.
Two real estate brokers claimed that a property seller wrongfully withheld their commission for a successful real estate transaction. The brokers were facilitating a deal involving two separate parcels, one of which was owned by Act Realty Co., Inc.) The real estate brokers had in place a written agreement which provided that the amount of the real estate commission to be paid, if earned, would be equal to the amount sale proceeds exceeded one million dollars. While the agreement set forth the amount of the commission owed, it is unclear from the opinion whether the agreement also provided what specific acts or conditions were required in order for the brokers to earn the stated commission on the sale of the property.
Before and after the closing on the sale of the property, the brokers claimed they were entitled to a commission from the seller based on their agreement with the seller. In the trial court, the seller disputed the brokers' claim, arguing the brokers were not the procuring cause of the sale and thus not entitled to a commission. The seller claimed that the buyer was already interested in the property before the brokers brought the buyer and seller together and the seller did some of its own negotiating. The trial court ruled in favor of the brokers, concluding the brokers proved that their efforts resulted in or procured the sale of the property.
The seller successfully appealed trial court's decision and that reversal by the appellate court was appealed by the real estate brokers to the Florida Supreme Court. Ultimately, the Supreme Court reinstated the trial court's decision in favor of the real estate brokers. By examining the particular facts established at the trial against the procuring cause rule above, the court concluded that the evidence showed that the brokers in this case did, in fact, procure the sale of the property. Addressing the first requirement of the rule, the court concluded that the brokers initiated negotiations between the seller and the buyer through a faxed letter to the eventual buyer, which set the negotiations in motion. The brokers' services were rendered based on a letter from the seller authorizing the brokers to negotiate the sale of its property. Addressing the second requirement of the rule, the Supreme Court determined that the evidence demonstrated that the brokers remained involved by maintaining regular contact with the buyer and seller and were instrumental in the negotiation process. Ultimately, the brokers were able to secure the commission that they rightfully earned.
I am a Palm Beach real estate litigation attorney who handles real estate brokerage commission disputes as part of my legal practice at Gregg H. Glickstein, P.A. I welcome the opportunity to represent either side in a real estate commission dispute—the broker who is seeking payment of a commission, or the seller/buyer contesting a commission claim. Whatever side of a real estate commission dispute you are on; do not hesitate to contact my firm for effective representation!