The following questions and answers are provided by Florida Realtors, the state’s real estate association. Questions about these opinions should be directed to the association’s legal department at (407) 436-1409.
Q: May a salesperson who has obtained a judgment against his real estate broker for an unpaid commission recover from the Real Estate Recovery Fund?
A: No. According to Section 475.483 (2)(a), Florida Statutes, a person is not qualified to make a claim for recovery from the Real Estate Recovery Fund when the person seeking recovery is a licensed broker or sales associate who acted as a single agent or transaction broker in the transaction that is the subject of the claim.
However, a Florida Real Estate Commission complaint for violation of Section 475.25 (1)(d), Florida Statutes, could be made when the broker has failed to pay a real estate commission if a civil judgment has been obtained against the licensee and the judgment hasn’t been satisfied in accordance with its terms within a reasonable period.
Q: My real estate brokerage is considering listing a property for sale that’s particularly hard to sell due to its location. Is our brokerage allowed to charge a higher commission than what we normally charge?
A: Yes. Your commission is completely negotiable.
Q: I’m a sales associate who recently switched brokers. Am I entitled to a commission on a listing that I procured and had under contract (but did not close) before I terminated my relationship with my former broker?
A: It depends. Generally, if your former broker does not pay you what you think you’re entitled to be paid, your only recourse would be to file a civil lawsuit against your former broker.
In determining your right to be paid, the court could consider the independent contractor agreement between the broker and the sales associate, if one exists. If no such agreement exists, or if the independent contractor agreement is silent on the issue of payment of commissions after termination, the court would consider other evidence, such as the broker’s office policy manual, verbal agreements between the broker and sales associate concerning commissions, and past business practices of the broker as well as what is customary in the industry.
Q: I’m a broker with an exclusive right of sale residential listing agreement with a seller of a house. Because the seller’s friend bought the house, the seller says he doesn’t have to pay me a commission/brokerage fee. May I place a lien on the property?
A: The real estate license law provides that a broker cannot place a lien on a property unless (1) he or she is expressly permitted by contractual agreement with the seller to do so; (2) he or she is recording a civil judgment rendered by a Florida court.
Therefore, if your listing agreement or any other agreement with the seller does not permit you to put a lien on the property, you must file a lawsuit against the seller and obtain a judgment, which you can then record.
Note: The Commercial Real Estate Sales Commission Lien Act (found in sections 475.700 - 475.719) only applies where the property at issue meets the definition of “commercial real estate” as set forth in the act. The sale of a residential property improved with one single family residential unit does not constitute commercial real estate under the act.
Q: I’m a broker. A new sales associate that I hired has obtained a listing wherein a buyer and seller have entered into a contract for sale and purchase. My sales associate wants the closing agent to pay her portion of the commission directly to her when the transaction closes next month. My understanding is that only an employer (in this case, me) may pay an associate. May I instruct the closing agent to pay the sales associate’s portion of her commission directly to her at closing?
A: Yes. In 1999, the Florida Real Estate Commission stated in a Final Order (FREC DS-98-02) that a broker “may by written authorization request that a closing agent disburse commissions directly to its salespersons following the closing of the transaction.”
FREC clearly outlines in this Final Order what must be provided in the written authorization: (a) identify the transaction; (b) state the name of the salesperson entitled to the commission; (c) specify the amount the salesperson should be paid; and (d) sign the authorization.
Q: One of my listings is about to close. The seller asked me to give him a portion of my commission at closing. I would like to do so but I’m not sure if it’s permissible under Florida’s real estate license law. Is it?
A: Yes. Florida Administrative Code rule, 61J2-10.028(2) provides “[t]he sharing of brokerage compensation by a licensee with a party to the real estate transaction with full disclosure to all interested parties is not considered a violation of Chapter 475, Part I Florida Statutes.”
Q: I’m a salesperson who listed a property for a seller. After the closing, the seller refused to pay my commission. May I sue for my commission?
A: No. Under Section 475.42(1)(d), Florida Statutes, a sales associate is not allowed to “… commence or maintain any action for commission or compensation in connection with a real estate brokerage transaction against any person except a person registered as her or his employer at the time the sales associate performed the act or rendered the service for which the commission or compensation is due.” Therefore, in order to enforce the listing agreement your broker would have to file the lawsuit against the seller.
Q: If a broker’s license was inactive when the broker procured a listing, is the listing contract valid?
A: No. Section 475.41, Florida Statutes, provides, “No contract for a commission or compensation for any act or service enumerated in Section 475.01(3), is valid unless the broker or sales associate has complied with this chapter in regard to issuance and renewal of the license at the time the act or service was performed.”
Q: Is a cooperating broker who procures a buyer entitled as a matter of law to half of the commission that the listing broker receives?
A: No. There is no law entitling a cooperating broker to half of the commission received by a listing broker.
Q: What is a variable, or dual rate commission agreement?
A: Generally, a variable or dual rate commission agreement refers to a listing where one amount of commission is payable if the listing firm is the procuring cause of the sale/lease and a different amount of commission is payable if the sale/lease results through the efforts of the seller/landlord or a cooperating broker.
Q: I’m a broker who recently represented a buyer in a purchase and sale contract. After closing, the buyer requested that I share my commission with his church in exchange for future referrals. May I do that?
A: No. Per Section 475.25(1)(h), Florida Statutes, a licensee may not share compensation with a person not properly licensed as a broker, broker-associate or sales associate under the laws of the state of Florida for the referral of real estate business.
Q: Last March, I entered into an exclusive right of sale listing agreement with a seller. I used one of the Florida Realtors Exclusive Right of Sale Listing Agreement forms. I procured a buyer, and the parties went under contract on June 30 (a July 31 closing date was scheduled).
Meanwhile, my listing agreement expired July 6, and the seller declined an extension. I told the seller I would still assist him and attend the closing, but he says our agreement has expired and he no longer wants my services. Does this mean I’m no longer entitled to a commission for this transaction?
A: No. Paragraph 1 of Florida Realtors Exclusive Right of Sale Listing Agreement includes a provision that provides, in part, that “upon full execution of a contract for sale and purchase of the Property, all rights and obligations of the Agreement will automatically extend through the date of the actual closing of the sales contract.”
Since the parties in your case went under contract before your listing agreement expired, the seller remains obliged to pay your commission July 31 (or the actual date the parties close).
Q: I recently obtained a listing. The listing is a “Limited Service Listing Agreement” wherein the seller is agreeing to pay me a flat fee to list the property in the MLS. I indicated in the remarks section that cooperating brokers should contact the seller directly for showing instructions and contract negotiations. If a cooperating broker who participates in our MLS procures a buyer who enters into a purchase and sale contract with my seller, who is responsible for paying the commission offered in the MLS—me or the seller?
A: The MLS offer of compensation is a unilateral offer made by the listing broker, not the seller. Therefore, the listing broker is responsible for paying the cooperating broker the commission offered in the MLS.
Q: May I offer my buyer a rebate of a portion of my commission upon closing a real estate purchase?
A: You probably may, provided that you make appropriate disclosures. Although Section 475.25(1) (h), Florida Statutes, generally provides that a licensee may not share real estate compensation with an unlicensed person, Rule 61J2-10.028(2), Florida Administrative Code, creates an exception: “The sharing of brokerage compensation by a licensee with a party to the real estate transaction with full disclosure to all interested parties is not considered a violation of Chapter 475, Part I, Florida Statutes.” Please note that “all interested parties” should conservatively include any person or entity involved in the deal. For example, the buyer’s lender would need to know about this rebate, as it could impact the lender’s loan calculations.
Q: My real estate license is listed as “involuntary inactive,” because I forgot to renew it with the Florida Department of Business and Professional Regulation. May my broker pay me for work I did on a listing that closed before my license became inactive?
A: Probably so. According to Section 475.25(1)(h), Florida Statutes, although your broker isn’t allowed to share a commission with any person who is not properly licensed as a broker, broker associate or sales associate in Florida, he or she could pay you if you were properly licensed during the entire time you conducted the real estate activity.
Q: I represent a tenant who recently signed a lease, but hasn’t yet moved into the premises. As the tenant’s broker, I received the first month’s rent, last month’s rent and security deposit described in the lease. May I deduct my commission from these funds and then deliver the balance to the landlord’s broker?
A: Possibly, although we highly recommend that you receive clear written instruction to do so. The tenant owes the landlord funds described in the lease, which may include a deposit and advance rent. The landlord owes the landlord’s broker the commission described in the exclusive right to lease (listing) agreement, and the landlord’s broker owes the tenant’s broker the offer of compensation described in the MLS.
When brokers deduct their commission, they’re typically taking a shortcut from the way the money should flow, based on intertwining contracts.
The following safeguards should be in place each time the tenant’s broker decides to use the shortcut method: First, the funds should come out of only the landlord’s earned money, which would likely be the first month’s rent, at the time the lease term commences.
Also, the landlord should clearly authorize the landlord’s broker to deduct commission from the first month’s rent, and the parties (or possibly the landlord’s broker) should clearly authorize the tenant’s broker to deduct the amount described in the offer of compensation.