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Commission Disputes: It’s All About the Money/Users/adamp/Desktop/Stuff for FAR/Magazine Assets/JUN08/Images/KnowLaw

What do you do when you have a commission dispute between a broker and sales associate? We’ve got answers.

For many real estate professionals, commission disputes are simply part of the business. In fact, just about every licensee’s career—whether spanning several years or several decades—is likely to include at least some experience with a dispute over commissions. Of course, the origin of the dispute may vary. Maybe it involved a seller whose property you had listed, who decided before the closing that he or she didn’t want to pay the listing agreement’s agreed-upon commission. Or the dispute was with a broker from another firm and involved the question of whether or not you were the procuring cause of a sale.

In this article we’ll address a different type of commission dispute—the one that arises between brokers and their sales associates—and some of the common questions.   

Will the Florida Real Estate Commission resolve a commission dispute that exists between a broker and his or her sales associate?

No. FREC doesn’t resolve commission disputes. Disputes over commissions (or any other agreed-upon compensation) between a broker/brokerage firm and its sales associates are civil matters. The ultimate recourse for sales associates looking to recover unpaid commissions is to file suit against the broker/brokerage firm.

If these disputes are civil matters, then what factors would be considered by a court in determining the outcome of the lawsuit?

Generally, the “employment” agreement that exists between the broker/brokerage firm and the sales associate will be the controlling factor in determining outcome. Many brokers require a sales associate to sign a written independent contractor agreement as a condition to being allowed to place his or her license with the broker.

These written agreements typically address compensation matters such as the amount of the sales associate’s commission split, when a sales associate earns a commission, the timeframe in which the broker/brokerage firm is obligated to pay the sales associate, the rights of the broker/brokerage firm to deduct from the sales associate’s compensation amounts due the broker/brokerage firm, as well as many other matters relating to the broker–sales associate “employment” relationship.

In addition to a written independent contractor agreement, any existing office policy manual as well as the past business practice of the broker/brokerage company and any verbal agreement between the parties that can be shown to exist may play an important role in determining a sales associate’s entitlement to, and the broker/brokerage firm’s obligation to pay, the disputed compensation.

If a sales associate who obtains a judgment for disputed commissions is not paid by the broker pursuant to that civil judgment, would FREC then have cause to discipline the broker if it receives a complaint against the broker?

Yes. Section 475.25(1)(d), Florida Statutes, provides that FREC may discipline a licensee where a civil judgment for a share of a commission has been obtained against that licensee “and said judgment has not been satisfied in accordance with the terms of the judgment within a reasonable time. …”

Some commission disputes between brokers who are real estate licensees are subject to mandatory arbitration at their local Board/Association of Realtors®.  Would a commission dispute between a sales associate and his or her broker, where both parties are Realtors, also be subject to arbitration at the local Board/Association of Realtors®?

Such a dispute would be subject to local Board arbitration only if both parties (i.e., both the broker and the sales associate) voluntarily agree to the arbitration in writing and the local Board/Association of Realtors® finds the matter properly subject to arbitration.