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It's The Law: A Real Estate Broker Can File A Lien

Question: I am selling some property and arguing with my broker about his commission. He said he will file a lien if I do not pay him. Does a real estate broker have a right to file a lien?

Answer: Florida Statutes provide expansive lien rights for real estate brokers in commercial property sales, but much more limited rights in residential transactions. In addition, a brokers lien rights can be expanded or limited by contract. That means the answer to your question may depend on the language of your listing agreement or other contract with your broker.

Section 475.42 of Florida Statutes prohibits a broker or sales associate from recording in the public records any document for the purpose of collecting a commission or to coerce payment of money, with two (2) exceptions. A broker or sales associate can record a judgment to create a lien on property. A broker can also place a lien on property where expressly permitted by contract otherwise allowed by law.

That means a broker can include in his or her listing agreement a clause providing a lien right and right to record a lien to protect the commission. If your listing agreement has such a clause, your broker may be entitled to file a lien. A recorded lien will not only help the broker get paid, but could also be a lien against the property that would have to be resolved as part of the closing so you can convey marketable title. Since the lien right would have to be in your listing agreement, it emphasizes the importance of reading documents and review by an experienced attorney.

In contrast to lien rights of residential brokers, which can only be created by contract, Florida Statues give brokers in commercial real estate sales an automatic lien that can only be divested by contract. A broker in a sale of commercial property has a lien on the owner's net proceeds of sale. The lien cannot be waived before the commission is earned. The commission is earned at time the sales contract is signed, or such other date as is specified in the brokerage agreement. That means, an owner of commercial property cannot require a broker to waive lien rights in a listing agreement.

A broker in a commercial sale must disclose to the owner, at or before signing of the listing contract, that Florida Statues create lien rights for a commission that are not waivable before the commission is earned. If the disclosure is not made, the broker has no right to enforce a lien.

If the commercial property lien right is not waived, the statutes provide a procedure to perfect the lien and insure payment of the commission. To perfect the lien, the broker must send a commission notice to the owner and the closing agent. The notice must state that unless the owner notifies the closing agent that the owner disputes the commission claim no later than five (5) days after closing, the closing agent must pay the commission. Notice must be delivered at least one (1) day prior to closing.

If the broker timely delivers notice of commission, the broker can also record the notice in the public records. Although the lien is only against the seller's net proceeds of sale, it does cloud the title and a buyer will find that unless the commission is paid, the lien remains against the property.

The statutes require the closing agent to withhold sufficient funds from the owner's net proceeds to pay the claimed commission if the broker has complied with the statutes. The closing agent is not to disburse the withheld funds to the broker unless the owner has approved or has failed to timely object to payment. If the closing agent receives a timely objection, the agent must hold the funds until the dispute is resolved.

Commission and lien rights in these cases can be complex and turn on contract language. For that reason, it is prudent to retain an experienced attorney at the earliest time when buying or selling property. The attorney can review a proposed listing agreement or other contract with the broker, sale contracts and other agreements and represent a buyer or seller from inception through closing. If you do not already have an attorney, you should retain one immediately.

By: William G. Morris, Esquire

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