Real Estate Brokers and Commission PaymentsBusiness & Commercial Law FAQ
Q:Does a broker need a written brokerage agreement to claim its commission?
A:No written agreement is required in Florida for the enforcement of a commission payment owed; a written agreement is required in order to impose a broker’s lien. While a written agreement is not required in Florida, it is wise for parties to enter into written brokerage agreement with their respective brokers as soon as possible to avoid any unwarranted claims for commission payments.
Q:When is a broker entitled to its commission and can a broker earn a commission if the closing does not occur?
A:In Florida, a broker is entitled to a commission payment when that broker procures a purchaser or tenant that is ready, willing and able to proceed with the transaction. Because of the uncertainty concerning when a buyer or tenant is ready, willing and able, parties should enter into a commission agreement very early on. Whether and when a commission is owed is contingent on the specific details of each transaction and the express language drafted in the commission agreement.A procuring broker is the procuring cause of a sale or lease of real estate, when the procuring broker has: (1) brought the parties together; and (2) effected the sale or lease assignment as a result of continuous negotiations inaugurated by him or her.To be the procuring cause, the broker must show that: (a) he brought the property to the attention of the potential purchaser; and (2) the sale was consummated through the continuous negotiations between the vendor and the purchaser.
Q:Does Florida impose any statutory restrictions on commission rates?
A:Florida law does not restrict commission rates, the parties are free to negotiate and determine the commission rate.
Q:What is the range of negotiated rates?
A:Rates vary considerably by county based on market factors and case-by-case conditions.
Q:Who pays the commission – seller, landlord, or both?
A:Responsibility for payment of the commission varies by county dependent on the particular market and the type of transaction.The seller commonly pays the commission in the sale of commercial real estate, though parties may negotiate that the payment is shared between the purchase and seller, or that payment is to be made entirely by the purchaser.The landlord typically pays the commission for a commercial lease, though this may be negotiated by the parties so that the payment is shared between the tenant and the landlord. In a commercial lease situation, the commission is usually paid over a period of time outlined in a schedule attached to the commission agreement. For this reason, careful attention should be paid to the terms of the written brokerage agreement to avoid disputes over commissions.
Q:Is fee splitting allowed?
A:Fee splitting is permitted in Florida; however, Florida limits the splitting of a fee, commission or other compensation received by a real estate broker to other Florida licensed real estate brokers.