Until recently, it was generally thought that real estate brokers seeking to enforce payment of their commissions could only assert liens against the owner’s net sale proceeds.  However, according to a recent decision from Florida’s Third District Court of Appeal, brokers can impose liens on the property sold, not just sale proceeds.

In J. Milton Dadeland LLC et al. v. Abala Inc. et al., the owner of an apartment complex contracted with a broker to sell the complex in return for a 6 percent commission if the broker procured a sale.  The broker’s commission agreement provided that the broker had the right to lien against the property for that commission.  The seller subsequently signed a sales agreement with a buyer to purchase the property for $25 million.  After the sales contract was signed, but before the closing took place, the broker filed a lien for its commission.  Upon discovering the lien, the buyer sued the owner and the owner’s lender to remove the broker’s lien.  The parties settled that suit, the purchaser received a $500,000 purchase price reduction and other consideration, and the parties closed.

Post-closing, the buyer sued the broker seeking to essentially cancel the lien.  The buyer claimed thatpassed in 2009 limited the broker’s lien rights to the seller’s net proceeds.  The trial court disagreed, entering judgment for the broker.  The buyer appealed, and the Third District affirmed.

The Third District made clear that, in order for a broker to assert a lien against the property, the commission agreement must expressly include that right; commission agreements can be easily amended to include that language to the extent they do not already.  And where commission agreements contain such provisions, a lien against the property may be filed at any time prior to closing without having to file a lawsuit, and potentially without the buyer being aware of the lien.

The ruling has the potential of materially changing the relationship between buyers, sellers, brokers, title insurers, and closing agents is likely to garner attention in the coming months, and may be subject of further appeals and possible legislative efforts.  However, in the interim, the decision highlights the need for, and places a premium on, due diligence for all parties involved in real property transactions. Further, title companies may require that seller’s affidavits address broker’s lien issues or that the broker itself provide contemporaneous releases or waivers.