Commercial Real Estate Sales Commission Lien Act - PowerPoint by rockman11

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									 Commercial Real Estate
Sales Commission Lien Act

         Burt Bruton

      November 4, 2005
                  HB 1459
   Ch. 2005-275, Laws of Florida
   Effective October 1, 2005
   Sales Commission Lien Act is Part III of
    Chapter 475 of the Florida Statutes
    (Sections 700 through 719)
   Leasing Commission Act is Part IV of
    Chapter 475 of the Florida Statutes
    (Sections 800 through 813)
     Sales Commission Lien
   Applies to sale of COMMERCIAL
    REAL ESTATE only

   Secures commission earned under a
    written BROKERAGE AGREEMENT

   Attaches only to OWNER’S NET
    PROCEEDS from the sale
     “Commercial Real Estate”
§701(5) Definition: All real property EXCEPT:
 A single family residence

 A multifamily structure containing up to 4 units

 Unimproved land where the maximum permitted
  development is 1-4 residential units
 Land improved with single family residential
  units capable of unit-by-unit conveyance, such
  as condo's, townhouses, timeshares, homes in a
  subdivision, and mobile homes
    “Commercial Real Estate”
Examples:
 Shopping center or other retail property

 Office building

 Hotel

 Apartment building over 4 units that is
  NOT a condominium
 Vacant land zoned for more than 4 units
     Sales Commission Lien
   Applies to sale of COMMERCIAL
    REAL ESTATE only

   Secures commission earned under a
    written BROKERAGE AGREEMENT

   Attaches only to OWNER’S NET
    PROCEEDS from the sale
      “Brokerage Agreement”
§701(2) Definition:
 A written contract

 Made on or after October 1, 2005

 Between an owner of commercial real
  estate and a broker
 Obligating the owner to pay the broker a
  commission
 For licensed services by the broker
  relating to sale of commercial real estate
          No Commission Lien

   Oral agreements
   Claims based on “procuring cause” theory
   Buyer’s brokers
     Sales Commission Lien
   Applies to sale of COMMERCIAL
    REAL ESTATE only

   Secures commission earned under a
    written BROKERAGE AGREEMENT

   Attaches only to OWNER’S NET
    PROCEEDS from the sale
      “Owner’s Net Proceeds”
§701(12) Definition: Gross sales proceeds, MINUS:
 Any money that is required to pay any
  encumbrance, claim, or lien that has priority
  over the recorded commission notice (other than
  an encumbrance, claim, or lien that the buyer
  authorizes to remain after the conveyance)
 Any costs incurred by the owner to close the
  sale, including real estate transfer tax, title
  insurance premiums, ad valorem taxes and
  assessments, and escrow fees
 “Priority” of Commission Notice
“Priority” of commission notice under §715 affects
  ONLY the computation of owner’s net proceeds
 Closing agent subtracts all statutory liens,
  consensual liens, mortgages and other
  encumbrances, including modifications, recorded
  before commission notice
 Includes construction liens relating back to a
  prior notice of commencement
 “Priority” of commission notice does NOT mean
  the notice is a lien on real property
                Limitations
§703: A Sales Commission Lien under the Act:
 Does not attach to real property

 Belongs to the broker only (not to employee or
  independent contractor) and cannot be assigned
 Cannot be enforced by anyone except the
  broker
 Cannot be waived by anyone except the broker

 Cannot be waived before the commission is
  earned
       Disclosure of Lien Rights
   At or before time owner executes the
    brokerage agreement
   Broker must disclose statutory lien rights
    to owner
   Broker must disclose that lien is not
    waivable until earned
   No disclosure, no lien
Suggested Statutory Disclosure
“The Florida Commercial Real Estate Sales
Commission Lien Act provides that when a
broker has earned a commission by performing
licensed services under a brokerage agreement
with you, the broker may claim a lien against
your net sales proceeds for the broker's
commission. The broker's lien rights under the
act cannot be waived before the commission is
earned.” §703(5)
        Commission “Earned”
§703(2): Broker's commission is deemed EARNED
  when the FIRST of the following events occur:
 A certain event that is defined by the brokerage
  agreement as the time when the commission is
  earned, or
 The owner enters into a contract to sell or
  exchange the property, provided a commission
  would be payable to the broker if the buyer
  closes under the contract
        “Commission Notice”
§705: Written notice by broker containing:
 Name of owner obligated to pay the
  commission
 Legal description of the property

 Broker’s name & contact information

 Date of brokerage agreement

 Amount of commission claimed (or
  formula)
     “Commission Notice” (continued)
   Broker’s statement under oath that broker
    believes commission notice is true and correct
   Broker’s statement that commission notice was
    delivered to owner
   Warning to owner that commission notice may
    be recorded in real estate records
   Warning to owner that commission claim is
    deemed correct if owner does not contest within
    5 days after closing
         Delivery to Owner

§705(3): Broker must deliver copy of
  commission notice to owner
 At least 1 day before closing, and

 Within 30 days after earning commission
     Delivery to Closing Agent

§705(3): Broker must deliver copy of notice
  to closing agent
 At least 1 day before closing, and EITHER

 Within 30 days after earning commission
  (if broker knows identity of closing agent),
  OR
 Within 3 days after broker learns identity
  of closing agent
    Who Is the Closing Agent?
§701(4) defines “closing agent” as:
 The person who receives documents and
  funds for recording and disbursement in
  closing a transaction for the disposition of
  commercial real estate
 Generally, title company or title agent
     “Concealed Deal” Affidavit
§705(4): If broker fails to deliver the commission
  notice within §705(3) time period SOLELY
  because owner concealed sales contract from
  broker, broker may still enforce a lien if:
 Broker delivers a sworn affidavit to that effect to
  closing agent, and
 Broker delivers commission notice to owner and
  closing agent before closing agent disburses the
  owner's net proceeds to the owner
 Notice AFTER Disbursement
         Is Too Late
§705(4): A broker who fails to deliver a
copy of the commission notice to the
owner and the closing agent before the
disbursement of the owner's net proceeds
may not enforce a lien for the commission
    Recording Commission Notice

   §707(1): Broker may record commission
    notice AFTER delivery to owner
   Date of recording establishes priority for
    computation of owner’s net proceeds (no
    relation-back)
   Recording creates constructive notice to
    closing agent after 60 days
    Recording Commission Notice

   Recording perfects broker’s lien on
    owner’s net proceeds
   Recording does not create lien on real
    property
   Recording does not excuse owner from
    closing
Life Span of Commission Notice

   Expires 1 year after recording
   May be extended for 1 additional year by
    recording extension notice in last 60 days,
    if brokerage agreement still entitles broker
    to commission
   Cut off by conveyance to BFP for value
    Release of Commission Notice
   Broker must release recorded notice within 7
    days after payment, or 7 days after event
    precluding payment of commission
   Closing agent or owner may require broker to
    deliver a recordable satisfaction or release in
    escrow to closing agent pending disbursement
    to broker at closing
   Court may order discharge of recorded notice if
    owner prevails in §713 proceeding
    Closing Agent Must Reserve
    Broker’s claimed commission from
    owner’s net proceeds under §709(1) IF,
    before closing agent disburses proceeds:
   Closing agent receives commission
    notice,
   Closing agent has actual knowledge of
    recorded commission notice, or
   Commission notice has been of
    record at least 60 days
  Owner’s Commission Affidavit
§709(2): Closing agent may require owner to
  execute a commission affidavit disclosing:
 Whether the owner is a party to a brokerage
  agreement under which a broker may claim a
  commission for this property
 If so, the name and contact information of the
  broker and the amount of commission that may
  be claimed, if known to the owner
 Whether the owner confirms or disputes the
  amount of any commission claimed
          Safe Harbor Rule
§709(3): Closing agent has NO duty to
  reserve against owner’s net proceeds IF:
 Closing agent has no actual or
  constructive knowledge of a commission
  notice under §709(1), AND
 Owner’s commission affidavit under
  §709(2) says there is no brokerage
  agreement under which a commission may
  be claimed for this property
       Insufficient Net Proceeds
   If closing agent determines owner’s net closing
    proceeds are insufficient to pay commission,
    then notify owner and broker within 3 days but
    not later than closing
   Closing agent must reserve lesser of claimed
    commission or all net proceeds
   Owner still obligated for any commission due
    under brokerage agreement, but lien attaches
    only to owner’s net proceeds
            Reserved Proceeds
   If owner confirms commission amount, then
    closing agent disburses reserved proceeds to
    broker at closing
   If owner and broker dispute the amount of the
    commission, then closing agent must reserve the
    higher of the two amounts
   If owner confirms a portion of the commission,
    then closing agent must disburse the confirmed
    amount to broker and reserve the disputed
    funds
          Sound of Silence
§709(6): If closing agent reserves proceeds
  on account of a commission notice under
  §709(1), the owner is DEEMED to have
  confirmed commission if:
 5 days have passed since closing, and

 Owner has neither confirmed nor disputed
  commission, and
 Broker provides satisfactory evidence that
  commission notice was delivered to owner
       No Excuses for Owner
§709(10): Owner is not excused from obligation to
  close transaction by:
    Closing agent requiring an owner's
     commission affidavit, or
    Closing agent reserving any of owner's net
     proceeds
  Owner remains obligated to discharge any
  mortgages, liens or encumbrances recorded
  after commission notice (i.e., amounts not
  subtracted from gross sales proceeds)
      Closing Agent Protected
§709(11): Closing agent has no liability to
  owner or broker or anyone else for any
  action taken by closing agent to comply
  with the Act

§709(12): Closing agent cannot be required
  to serve involuntarily more than 5 days
  after a closing as an escrow agent or
  stakeholder
      Closing Agent Protected

§709(5): Closing agent does not resolve
  disputes-- until parties agree or a court
  decides, a closing agent shall not release
  the disputed reserved proceeds to any
  person except to deposit the proceeds in
  court registry
  Interpleader by Closing Agent
§711(1): Closing agent MUST file interpleader if:
 There are disputed reserved proceeds, and

 Owner and broker have not agreed in writing,
  within 5 days after the closing, regarding
  disputed reserved proceeds, and
 Neither owner nor broker has commenced a civil
  action regarding disputed proceeds
      Suit by Owner or Broker
§713: Owner or broker may bring civil action in the
  county where property is located
 If commission notice is delivered and owner
  disputes all or part of commission
 Owner may invoke expedited procedure to get
  commission notice released by court order
 Non-prevailing owner or broker pays clerk’s
  service charge, closing agent’s attorney’s fees,
  and prevailing party’s attorney’s fees
  Net Deposit in Court Registry
§711(2): In interpleader or §713 civil action,
  unless owner and broker agree otherwise,
  closing agent must deposit the disputed
  reserved proceeds in the court registry,
  MINUS
 Service charge by clerk of court (§28.24)

 Closing agent’s expenses, including
  reasonable attorney’s fees
 Cost of recording closing agent’s affidavit
              Effect of Deposit
   If closing agent deposits net disputed reserved
    proceeds in court registry, closing agent records
    an affidavit reciting the deposit, which releases
    the recorded commission notice
   Depositing the net disputed reserved proceeds
    in court registry discharges closing agent from
    any further liability or responsibility
              Buyer’s Broker
§719: A commission agreement between a broker
  and a buyer is not a “brokerage agreement”
  under the Act
 A buyer’s broker has no lien rights under the Act
  against real property or closing proceeds
 A buyer’s broker cannot record a commission
  notice under the Act
  BUT...
               Buyer’s Broker

   A buyer’s broker with a written
    commission agreement has a right to be
    noisy without liability for “tortious
    interference,” provided that any
    confidentiality provisions of sales contract
    and commission agreement are not
    violated
    For More Information:

Florida Commercial Real Estate
     Commission Lien Acts
     (a seminar on DVD including forms)
               Available now from
         Florida Land Title Association
       Florida Association of Realtors®
     Florida Legal Education Association

								
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