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Alamagan Corp. v. The Daniels Group, Inc.: Court Approves Broker's Use of Lis Pendens

A Florida court has considered whether a real estate broker in that state can retain a lis pendens notice on a commercial property for an unpaid commission.

Rona Daniels ("Broker"), through Tecton Realty Group, Inc. ("Tecton"), introduced various interested buyers to a property owned by Alamagen Corporation ("Owner"). The Owner entered into a purchase agreement with Vestec Brickell Corp. Thereafter, a lawsuit was filed against Vestec by a former employer of Vestec's president as well as LaSalle Ventures One, Ltd. ("Buyer") over who had the right to purchase the property. Both the Broker and Tecton intervened in the lawsuit, asserting their right to collect a commission from whomever the trial court determined should be allowed to purchase the property. The trial court determined that the Buyer had a contractual right through a lease to purchase the property, and the Buyer also had a contractual obligation to pay the Broker and Tecton a commission from the sale of the property. The trial court also ruled that the commission amount would constitute a lien against the property until paid and the Broker received a judgment for her share of the commission amount. The Buyer purchased the property but did not pay the commission.

The Buyer paid Tecton its half of the commission, but refused to compensate the Broker. The Broker recorded the final judgment against the property, filed a motion with the trial court seeking to enforce the judgment against the Buyer, and the Broker also filed a "Notice of Lis Pendens" ("Notice"). A lis pendens notice is filed in the public records and serves to put any potential purchaser or lender on notice that the property is subject to litigation and the purchaser/lender will be bound by whatever the outcome of that litigation is regarding the property. In response to the filing of the Notice, the Buyer filed a complaint with the Florida Department of Business and Professional Regulation, Division of Real Estate. The complaint alleged that it was illegal for the Broker to file the Notice. After the complaint was dismissed, the Buyer filed a separate lawsuit alleging slander of title by the Broker. The Broker filed a motion seeking supplementary relief against the Buyer. The trial court granted the Broker's motion for supplementary relief and also extended the Notice for another year. The court also ruled that the Notice would remain in place until the commission amount was paid or placed into escrow by the Buyer. The Buyer appealed.

The District Court of Appeal of Florida, Third District, affirmed the trial court's rulings. The court considered the Buyer's first argument that the Broker's filing of the Notice was contrary to a Florida statute. In relevant part, the statute provides that no real estate broker or salesperson shall place any sort of encumbrance on a property's title in the public records, but the statute makes an exception for the recording of a judgment against a property. The court ruled that since the Broker had obtained a judgment for the commission amount, she was not barred by the statute from filing a lis pendens notice against the property. The court found that recording the judgment alone did not provide adequate protection to the Broker because the Buyer had satisfied part of the judgment and so it could confuse a potential purchaser or lender when it found a satisfaction of judgment order in the public records. The court found that the Notice served the purpose of protecting the Broker's right to collect its unpaid judgment, and so trial court's rulings were affirmed.

Alamagan Corp. v. The Daniels Group, Inc., 809 So. 2d 22 (Fla. Dist. Ct. App. 2002).

Editor's Note: Although Florida does not currently have such a law, approximately twenty other states have other statutory protections available to real estate licensees for unpaid commissions. These laws mainly apply to transactions involving commercial real estate, but do vary in their terms from state-to-state. Click here to read a brief summary of these laws prepared by NAR Legal Affairs.