As South Florida’s Economy Rebounds, What We Learned in the Courtroom
By Kluger Kaplan January 15, 2014
By Todd A. Levine and Lisa J. Jerles
Prior to the 2008 recession, the South Florida skyline was teeming with cranes as the real estate market boomed. But then the newly or partially completed projects remained empty as developers and brokers were unable to sell residential and commercial properties and projects. With the entire real estate community reeling, brokers, developers, lenders, investors and buyers and sellers often turned to the courthouse to resolve issues that emerged as the South Florida real estate market was plummeting. As we emerge from the recession, a review of the events of the past few years may help to avoid future litigation.
During the recession, we saw many real estate brokers resorting to litigation when they were not paid commissions they believed were due under their agreements. In condo projects, the agreements between developers and brokers often called for brokers to receive commissions in a series of payments. For example, a broker may have been paid one-third of the commission after the first deposit, one-third of the commission after the second deposit and the final third of the commission after closing. But as the economy slipped and units stopped selling, there were often insufficient funds to make the last commission payment or payments, forcing brokers to litigate. Many cases settled for a portion of the full amount due.
Brokers whose experience and reputation give them leverage to demand more money upfront learned from this experience, which has likely already led, or will continue to lead, to restructured brokerage agreements.
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…..But, as the economy rebounds and cranes again rise in the sky, brokers, developers, lenders, investors, buyers and sellers should use the lessons of the past to look clearly towards protecting their futures.