The Florida Real Estate Recovery Fund: A System of Relief for Citizens, but With High Costs

The Florida Real Estate Recovery Fund: A System of Relief for Citizens, but With High Costs

written by Alfredo Dally & Matthew Akiba.

Florida has one of the largest communities of real estate brokers and sales agents in the nation, 1 which is unsurprising given the popularity of Florida’s real estate market. 2 With the many opportunities that the Florida real estate market provides, there will inevitably be those who take advantage of eager homebuyers. The Florida Real Estate Commission (“FREC”) created the Real Estate Recovery Fund to alleviate the damages inflicted on both individuals and companies stemming from the wrongful acts of a real estate broker. Unfortunately, seeking relief through the Real Estate Recovery Fund is not a simple process. If you are a buyer seeking a reimbursement for the wrongful acts of a real estate licensee, there are a few hurdles that need to be cleared before the FREC approves the reimbursement.

The aim of the Recovery Fund is to provide “for the reimbursement of persons who suffer monetary losses because of the unscrupulous acts of licensed brokers or salespersons.” 3 The Recovery Fund can reimburse damaged homebuyers up to $50,000, or an amount equal to an unsatisfied portion of a claimant’s judgment against the licensed broker or salesperson, whichever is less. 4 To be eligible for recovery, the claimant must have received a final judgment in a Florida court of competent civil jurisdiction against the individual broker or sales associate in an action based on the real estate brokerage transaction. However, the FREC may waive the requirement for a final judgment. 5 Furthermore, the claimant must have provided the commission with notice of the action within two (2) years of the time of the act giving rise to the claim or within two years from the time the act is discovered or should have been discovered with the exercise of due diligence.

This reimbursement is only recoverable under Florida Statute § 475.482(1) if the claimant was damaged as a result of any real estate brokerage transaction by someone who was: (1) a holder of a current and active real estate license in Florida; (2) was neither the seller, buyer, landlord, or tenant, and; (3) was acting solely in the capacity of a real estate licensee in the transaction. The claimant must also show that the real estate licensee violated either Fla Stat. § 475.25 or Fla. Stat. § 475.42 when acting in their capacity as a real estate licensee. 6 Both statutes look to protect the claimant from misleading, deceptive, or fraudulent misrepresentations by a licensee related to the practice of the real estate licensee’s profession. 7 Claimants may have difficulty establishing that the real estate licensee was acting solely within their capacity as a licensee in the transaction. There is no clear definition of what the

FREC considers “acting solely in the capacity of a real estate licensee.” 8 However, some courts have attempted to define what would fall under this third requirement, determining that a licensee was acting solely within their capacity if the sole purpose of the connection between a homebuyer and the real estate licensee was for the purpose of executing the purchase agreement, taking tours of the property 9 , or even collecting rent and tenant security deposits for the homeowner. 10 Because the determination of whether the real estate broker or salesperson meets the statutory criteria is in the FREC’s discretion, a decision by the FREC that the criteria was not met can be appealed to an appellate district under Fla Stat. §120.68 11 , adding further costs to the already damaged claimant.

Lastly, even with the all the hurdles required to receive reimbursement from the Recovery Fund, the last hurdle may simply be the costs it takes to obtain FREC approval of the reimbursement. The Florida legislature has not provided claimants who were damaged by the act of a broker or sales associate as part of a real estate brokerage transaction any right to attorney’s fees. 12 With the volatility of the Florida real estate market, a right to attorney’s fees may well dissuade potential further abuses by Florida Real Estate licenses. An addition of an attorney’s fees provision to the Florida Real Estate Recovery Fund statutes allows for claimants under the statute to recover without the concern that their attorney’s fees will outweigh any reimbursement they receive from the fund. Without an attorney’s fee provision, the Florida Real Estate Recovery Fund will fail to efficiently achieve it purpose—to be a remedy to citizens damaged by abuse in the real estate system.

1 See For Relators, By Realtors: Who We Are and What We Do, Florida Realtors (Sept. 23, 2021)
https://www.floridarealtors.org/about (“Florida Realtors® has grown to become the largest professional trade association in the state with about 200,000 members and the largest Realtor organization in the country.”).
2 See Terry Walsh, The Florida Real Estate Market Is Going Bonkers – Again!, Yahoo! Finance (Mar. 26, 2021), https://finance.yahoo.com/news/florida-real-estate-market-going-130000200.html (“Real estate agents throughout Florida, especially for South Florida ocean-area condos and single-family homes and Orlando homes and Disney- area condos, are reporting brisk business and sales of almost any home that is in good condition and reasonably priced.”).
3 Hendricks v. Dep't of Bus. & Prof'l Regulation, 183 So. 3d 1172, 1173 (Fla. 5th DCA 2016).
4 Fla. Stat. § 475.484(1).
5 Fla. Stat. § 475.483(1).
6 Fla. Stat. § 475.482(1)(c).
7 See generally Fla. Stat. §§ 475.25; 475.42.
8 Hendricks v. Dept. of Bus. & Prof. Regulation, 183 So. 3d 1172, 1174 (5th DCA 2016).
9 See id.
10 See Rollas v. Dep't of Bus. & Prof'l Reg., 243 So. 3d 474, 477-78 (Fla. 5th DCA 2018).
11 Id.
12 See Fla. Stat. § 475.484(1)(a).