What is the Real Estate Recovery Fund?
This is a short summary of what the Real Estate Recovery Fund (“RF”) is and how it works. It is not an exact restatement of the law. Any specific questions concerning eligibility or discussion of a specific claim should be directed to a licensed Florida attorney.
The Real Estate Recovery Fund is an account created by the Florida Real Estate Commission (“FREC”) to reimburse any person, partnership, or corporation adjudged by a court of competent civil jurisdiction in this state to have suffered monetary damages by reason of any act committed, as a part of any real estate brokerage transaction involving real property in this state, by any broker or sales associate.
The RF is funded by a fee of $3.50 added to the license fee of new and renewal broker's licenses, as well as a fee of $1.50 added to the license fee of new and renewal sales associate licenses.In addition, all moneys collected from fines imposed and collected by FREC are transferred to the RF.
Q: What Does This Mean for Brokers?
A: It is important to know about the process if a brokerage intends to hold escrow because the RF provides the protection for the broker if the broker receives an escrow disbursement order issued by the FREC. A brokerage should make sure they take the requisite steps when dealing with an escrow claim so that they can preserve their right to claim on the RF.
Be aware that the process of claiming on the RF is a legal one. A person must have a license to practice law to assist a third party in the filing of a claim. If a customer believes that they have been damaged by the actions of another licensee in Florida, the licensee should recommend they speak with an attorney concerning their claim.
Q: What Circumstances Allow Someone to Claim on the Recovery Fund?
A: Florida Statutes provides for two separate circumstances in which the FREC will allow recovery from the RF:
Circumstance #1[1]Recovery may be possible when a legal person or entity has suffered monetary damages by reason of any act committed as part of a real estate brokerage transaction involving real property in Florida. However, the claim will only be reimbursed if the real estate broker or sales associate:
a) Was, at the time the alleged act was committed, the holder of a current, valid, active real estate license issuedunder this part;
b) Was neither the seller, buyer, landlord, or tenant in the transaction nor an officer or a director of a corporation, a member of a partnership, a member of a limited liability company, or a partner of a limited liability partnership which was the seller, buyer, landlord, or tenant in the transaction; and
c) Was acting solely in the capacity of a real estate licensee in the transaction.
Also, the violation that caused the monetary damages to the claimant needs to be a violation proscribed in F.S. §475.25 or F.S. §475.42.
Limitations to these Claims on the Fund:
There are two primary limitations on claiming from the RF in Circumstance #1:
The Need for a Judgment
It is important to remember the primary condition for eligibility is the receipt of a final judgment in a court of competent civil jurisdiction in Florida. While it is possible to recover without a final judgment, the circumstances in which FREC will recognize such a claim is limited.[2]
In addition, the Claimant must cause to be issued a writ of execution upon the judgment, and has executed an affidavit showing that no real or personal property of the judgment debtor is available to claim upon. This means that the judgment has not been satisfied due to some sort of insolvency.
The Real Estate Activity Requirement
The RF is only eligible to those harmed by real estate activity of a Florida licensed broker or sales associate as based on the definition of F.S. §475.01(1).[3] Accordingly, F.S. 475.483(2) prevents the commission from allowing a claim for recovery from the Real Estate Recovery Fund if:
a) The person is the spouse of the judgment debtor or a personal representative of such spouse;
b) The person is a licensed broker or sales associate who acted as a single agent or transaction broker in the transaction that is the subject of the claim;
c) The person’s claim is based upon a real estate transaction in which the licensed broker or sales associate was the owner of or controlled the property involved in the transaction; in which the licensee was dealing for the licensee’s own account;[4] or in which the licensee was not acting as a broker or sales associate;
d) The person’s claim is based upon a real estate transaction in which the broker or sales associate did not hold a valid, current, and active license at the time of the real estate transaction; or
e) The judgment is against a real estate brokerage corporation, partnership, limited liability company, or limited liability partnership.
Circumstance #2[5]
The RF shall also be disbursed, on order of the commission, as reimbursement to any broker or sales associate who is required by a court to pay monetary damages due to a distribution of escrow monies made in compliance with an Escrow Disbursement Order from the commission.
However, no payment shall be made unless the broker or sales associate makes all the required statutory notifications under 475.25(1)(d) and diligently defends the legal action against them.
This is the statutory protection the licensed Brokerage disbursing in accordance with a FREC Escrow Disbursement Order.
[1] § 475.482(1) Fla. Stat. (2013).
[2] More information about the specific procedures and conditions on eligibility without a final judgment can be found at: §475.483(1) Fla. Stat. (2013).
[3] This is the definition of a Real Estate Broker in Florida. It is the base standard for what is and is not real estate activity in Florida. § 475.01(1) Fla. Stat. (2013).
[4] “Was dealing for the licensee’s own account” is a particularly broad element. If the activities of the Broker were in fact for his or her own benefit and not a third party, it is unlikely that the claimant will be qualified to recover.
[5] § 475.482(2) Fla. Stat. (2013).