The Doctrine
In Florida, a real estate broker may be entitled to a commission despite not having a written agreement. Under Florida’s procuring cause doctrine, in certain circumstances, “[w]here a sale is consummated by the vendor and a purchaser produced by the broker, the broker is entitled to the commission if he or she was the procuring cause of the sale.” 7 Fla. Jur 2d Brokers § 88 (2021). Generally, to be the procuring cause of a sale, a broker must satisfy two requirements: (1) that he or she called the potential purchaser’s attention to the property; and (2) that it was through his or her efforts that the sale was consummated. Id. There is an exception to the second requirement, referred to as the continuous negotiation requirement, if “the seller and buyer intentionally exclude the broker and thereby vitiate the need for continuous negotiations.” Venturvest Realty Corp. v. A.K.S.I.P. Corp., 793 So. 2d 1054, 1056 (Fla. 3d DCA 2001).
When Broker is Excluded from Negotiations
In the case of Venturvest Realty Corp., the owner of an improved property and out-parcel engaged the plaintiff to act as its exclusive broker to market the property. The broker received two offers from a potential buyer, GFS corporation, and negotiations ensued for two months with no resulting sale. The property owner terminated plaintiff with a sixty-day protection period and hired another broker, who ultimately sold the property to GFS corporation. There was a five-month period in which all negotiations with GFS corporation ceased. When the second broker brokered the sale to GFS corporation, the first broker was excluded from the negotiations. The court held that the first broker was due a broker’s commission as the procuring cause of the ultimate sale.
In reaching its holding, the Third District Court of Appeals explained that “[a] broker, to be considered the ‘procuring cause’ of a sale, must have brought the purchaser and seller together and effected a sale through continuous negotiations inaugurated by him unless the seller and buyer intentionally exclude the broker and thereby vitiate the need for continuous negotiations.” The court further explained that the parties need not have acted in a “‘secret,’ ‘clandestine’ and ‘conspiratorial’” manner. Nothing more is require than that the “buyer has negotiated directly with the seller without the participation of the broker who first called the property to the buyer’s attention.” The court also noted that the variation between the initial offer for sale (the improved property and the outparcel) and the ultimate consummated transaction (only the improved property) did not defeat the plaintiff’s procuring cause claim.
Relevant Factors and Differing Terms of Final Deal
Similarly, in a Third District Court of Appeals case, Nat’l Airlines, Inc. v. Oscar E. Dooly Assocs., Inc., the court found that a broker was entitled to a commission as the procuring cause despite the fact that the broker did not physically introduce the parties to one another. 160 So. 2d 53, 55 (Fla. 3d DCA 1964). Rather, the court’s analysis was based upon the following factors: (i) the broker pointed out “[t]he potentialities of the property for a motel development” to the potential buyer; (ii) all involved parties were aware the broker was acting as a real estate broker in the situation; (iii) the broker brought the “subject property to the attention of the purchaser” and “also brought the parties together”; and (iv) the broker made diligent attempts to promote the sales transaction through correspondence subsequent to the initial meeting “but his efforts were ignored.” “Consequently, [the broker] was precluded from entering into further negotiations between the parties.” The court held that the broker satisfied the element of continuous negotiations as required by the procuring cause doctrine and therefore was the procuring cause and entitled to a commission.
Claim Procedure and Analysis
Given that real estate brokers work solely on a commission basis and often input significant time, energy, and effort into their work, procuring cause claims frequently arise when a broker is excluded from final negotiations and receipt of a commission. Depending upon the circumstances, if one or more of the brokers involved is a Realtor®, it is possible that the dispute may be eligible for arbitration through the National Association of Realtors® mediation or arbitration procedures established in the National Association of Realtors® Code of Ethics and Arbitration Manual. However, be aware that time limitations may apply to claims and all parties involved should act promptly to seek legal advice. Procuring cause cases are fact-intensive and the best practice is to have a licensed attorney analyze your particular situation, as many factors may affect the outcome.
Applicable law is continually evolving. Therefore, this blog post is for general information and education purposes only. It is not offered as legal advice or legal opinion. To the extent this message contains tax advice, the U.S. Treasury Department requires us to inform you that any advice in this article is not intended or written by our firm to be used, and cannot be used by any taxpayer, for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code. Advice from our firm relating to Federal tax matters may not be used in promoting, marketing or recommending any entity, investment plan or arrangement to any taxpayer.
