Business and Legal Insights

A good deal of our practice involves litigation over busted deals - sales of real estate, sales of businesses, commercial leases. By the time we’re asked to get involved, the deal is usually already dead, with the parties upset at one another and headed to court.

We’ve helped commercial real estate and leasing brokers deal with many mistakes over the years. Here are ten to avoid.

1. Not getting it in writing. We all have clients and business associates who insist that their word is their bond, and that there’s no need to reduce a deal to writing. Do not listen to them. Get their signature. If there is a dispute down the road, without something in writing from them your commission will hinge on conflicting “he said, she said” evidence. Not good. Get it in writing.

2. Not sending confirming emails; not saving texts. This is a corollary to #1. Where it’s not practical to reduce an agreement or understanding to a signed contract, at a minimum follow up with a confirming email, such as “Bob, this will confirm that we’ve agreed to work together on the Jones deal and to split costs and revenues equally between us. Looking forward to working with you on this one!” Unless Bob responds in writing disagreeing with your characterization of the deal, there is support in Florida law for a court treating his silence as a tacit agreement. There are apps available to back up your texts. Do this regularly. A text can significantly shore up your side of the “he said, she said” dispute in court.

3. Treating emails and texts like phone calls. Shouting at someone over the phone, while not the smartest way to do business, rarely gets recorded and therefore doesn’t find its way into evidence at trial. But written communications can live forever. That ticked-off email you just sent off full of ALL CAPS and exclamation points will be waved in front of the jury at every opportunity, I promise. Never hit “send” on any email or text that you would not be willing to have a judge or jury read. Never!

4. Not extending listing agreements. Do you always stop working on a listing once it expires, or do you keep going, in the hope that the client will still pay you if you can just get that hesitant buyer/tenant to sign an offer? If you don’t get the listing extended in writing, the client may just sign with someone else. Don’t assume you still have your automatic right to a commission once the listing expires. You don’t. Get it extended!

5. Not checking for sales after a listing expires. Your listing agreement likely provides that the commission is still owed on any deals that close within a certain time after expiration with a prospect who was introduced during the listing period. But do you follow up on every expired listing to see if such a deal has closed? Call me cynical, but sometimes this does happen. Don’t let it happen to you without getting paid.

6. Sharing commissions with non-licensed “brokers.” The Florida brokerage law, Chapter 475, Florida Statutes, prohibits sharing real estate or business brokerage commissions with anyone who is not licensed in Florida. You cannot share your commission with an uncle who is licensed in New York but not Florida, or with the friend who introduces you to a new client. If they are not licensed as brokers in Florida, don’t do it!

7. Selling a business without business valuation expertise. Is your client selling a restaurant? A diagnostic center? A car wash? The value of any ongoing business can be much greater than just the value of the real estate. Every industry has experts who can determine the value of the business. If your client is selling an ongoing business, make sure your team includes this expertise.

8. Getting greedy with deposits as liquidated damages. Contracts commonly provide a seller the right to keep the buyer’s deposits as liquidated damages upon the buyer’s breach. But too much of a good thing can actually be a bad thing. Liquidated damages amounts that are too high a percentage of the contract price will be disallowed as overreaching, leaving the seller with the difficult task of proving actual damages in court. Each case stands on its own facts, but liquidated damages provisions of up to ten percent have generally been approved by Florida courts, with higher percentages in rare cases. Even if your client is pushing for a higher percentage, to be safe cap liquidated damages provisions at ten percent.

9. Being escrow agent. Ever. Maybe I’m overstating this. But agreeing to hold deposit funds can make you a target if the deal blows up. Most written escrow agreements permit the escrow agent to deposit the funds with the court in the event of a dispute, but your seller client may not appreciate that you can’t give him the deposit just because he claims the buyer has defaulted. The buyer will see it differently, and as escrow agent you have duties to both. Let someone else hold the money, like the title agent or the closing attorney.

10. Not getting a lien. Florida’s Commercial Real Estate Sales Commission Lien Act, 475.700 et. seq., Florida Statutes, permits commercial brokers to impose liens to insure they get paid. Not liens on the real property itself, but on the owners’ net proceeds, which is probably just as effective in getting you paid. Note – the law has strict notice requirements and other procedural hoops to be jumped through to perfect the lien, so before filing one make sure to consult with knowledgeable counsel. But in the right case this rarely-used tool can be your best friend.