Florida Appeals Court Clarifies Real Estate Procuring Cause Doctrine

Florida Appeals Court Clarifies Real Estate Procuring Cause Doctrine

Robert J. Powell is a Shareholder and a member of the firm’s Commercial Litigation department.
His practice focuses on real estate litigation, creditor’s rights & bankruptcy, and appeals.

Florida Appeals Court Clarifies Real Estate Procuring Cause Doctrine

Last week, the Florida Third District Court of Appeal issued its decision in Esslinger-Wooten-Maxwell, Inc. v. Lones Family Ltd. Partnership involving a real estate broker’s claim to a commission for having procured the sale of a nine-acre estate containing a residence and a school. As background, the broker entered into an exclusive right of sale listing agreement with the property owner/seller. The agreement granted the broker an exclusive right for a one-year period to sell or lease the property in exchange for a six percent commission. The agreement entitled the broker to the same commission if the property was sold or leased during the year after expiration of the original one-year listing to anyone to whom the property was presented for sale or lease during the original listing period. During the original listing period, the broker showed the property to a prospective buyer who never presented an offer. After expiration of the listing agreement, the seller engaged a different brokerage to market the property under a new listing agreement. The second brokerage then re-introduced the seller to the same prospective buyer but negotiations ultimately fell through. The following year — outside the one-year “protection period”— the seller accepted a lease proposal from a corporation with which the prospective buyer was affiliated as a former board member. Several years later, the corporation purchased the property from the seller.

The original broker sued the seller claiming the right to a commission as the procuring cause of the sale. The appellate court affirmed the trial court’s decision denying the broker a commission. The appellate court concluded that the procuring cause doctrine did not apply because the broker and the seller had entered into a “special contract” specifically expressing a limited time period in which the broker could claim the right to a commission for having procured a buyer. The appellate court reasoned the general equitable principle underlying the procuring cause doctrine — preventing nefarious sellers from avoiding a commission payment by awaiting expiration of a listing agreement, only to sell to an entity the broker had procured — did not apply where the parties specifically negotiated a limited “protection period” following expiration of the listing agreement. In that instance, “freedom of contract” prevailed, and the appellate court declined to infer any intent among the parties to incorporate the procuring cause doctrine. The court noted the substantial, twelve-month duration of the listing agreement’s protection period in declining to apply this equitable doctrine to supersede the parties’ express contractual bargain, particularly where there was no evidence of any deliberate intent to delay the sale. The court also observed the corporate buyer was not the same entity the buyer the broker had procured in any event, despite any attenuated relationship between the corporation and the buyer as a former board member. Regardless, the corporation presented its offer long after expiration of the “protection period” in the listing agreement.

This decision contextualizes the procuring cause doctrine and highlights a key limitation on its application. The takeaway is a commission may be due to a broker for procuring a sale to any entity that ultimately purchases property under a listing agreement — even if the offer is accepted after expiration of a listing agreement — unless the parties specifically negotiate an express time limitation in the listing agreement on the broker’s right to receive a commission as the procuring cause of a sale. Additional considerations impacting a court’s decision in this setting include the extent of any evidence of the seller’s intent to defer a sale to a party the broker clearly procured, and the duration of any “protection period” expressed in the listing agreement.

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Download a PDF of Robert’s complete article here.

Robert J. Powell became a Florida real estate broker nearly fifteen years ago. He sold real estate during the mid-2000s boom in the Destin/South Walton market before entering law school. He levers his real estate sales, rental management, and development experience to provide practical insight and advice to developers, brokers, commercial landlords, sellers, and buyers confronting any real estate dispute, including a procuring cause commission dispute. In fact, his relationship with Clark Partington began as a client of the firm when Bill Bond successfully defended Robert’s right to a commission for having procured the sale of a South Walton restaurant whose corporate owner was in Chapter 11 bankruptcy.  Robert can be reached at rpowell@clarkpartington.com or (850) 208-7078.

About Clark Partington:

Clark Partington is the largest business focused firm in the Florida panhandle with offices in Pensacola, Destin, Grayton Beach & Tallahassee.  The firm also maintains a presence in South Alabama with an Orange Beach office.  Since 1976 Clark Partington has grown to over forty lawyers and has served the people and businesses of Florida through an innovative and collaborative approach to practicing law.  Our lawyers are consistently recognized for their service to the profession and excellence in the courtroom.  More information about the firm’s practice, its attorneys, and recognitions may be found at www.clarkpartington.com.

This publication should not be construed as legal advice.  Its applicability is dependent upon specific facts and circumstances and is provided for informational purposes only.  You should not act upon this information without seeking advice from a lawyer licensed in your own state.