Florida District Court of Appeal Determines Real Estate Broker Abandoned Commission Agreement
In a broker commission case, the trial court enforced a written commission agreement and determined the broker was entitled to its fee, despite the fact that the broker stopped marketing the property and ceased communications with the ultimate buyer three years before the sale was actually negotiated between the buyer and seller of the property.
On appeal, the First District Court of Appeal reversed the trial court and concluded as a matter of law that the broker abandoned the commission agreement and was not entitled to any fee. Wells Capital Investments, LLC v. Exit 1 Stop Realty, — So. 3d —, 39 Fla. L. Weekly D1959d, 2014 WL 4476478 (Fla. 1st DCA 2014). The appellate court noted that the commission agreement did not provide a specific time for performance, in which instance “the law implies a ‘reasonable time limitation’” that requires the broker to “procure a purchaser within a reasonable time.” Id. at *2. The court then explained that “[a] brokerage agreement terminates if the broker abandons efforts to find a purchaser.” Id. “A dispositive factor in evaluating whether a brokerage agreement has been abandoned is whether the broker and seller continued communicating about the property from the time of the agreement until the sale.” Id.
Based upon the facts of the case, which involved the broker stopping efforts to market the particular parcel for three years, the appellate court concluded the agreement had been abandoned as a matter of law. “The three years of silence and total inactivity by Exit 1 Stop, where the parties’ brokerage agreement had not specified a time period for performance, constituted legal abandonment of the Parcel 1 brokerage agreement.” Id. The court reached this conclusion despite evidence showing the broker was the actual procuring cause of the buyer, albeit three years before the sale actually occurred. “And it makes no difference that Wells Capital ultimately sold the property to a buyer that was first introduced by Exit 1 Stop. Once a contract is abandoned, a seller is free to sell its property to anyone, including the purchaser first found by the broker, either by means of negotiations directly with the purchaser or through the medium of another broker.” Id. (internal quotations and citations omitted).
This case underscores the importance of a broker remaining actively involved in communications with potential buyers, as well as the importance of specifying a term of the broker agreement and including express provisions that govern the “tail” period after an active listing period expires. Such tail provisions can require the payment of a broker fee if the property is ultimately sold to a buyer introduced to the seller by the broker during the term of the active listing period.