Commercial Real Estate Broker’s Liens
Posted on July 31, 2013 byI am consistently asked about liens. Who can file a lien? How can I file one? What are my rights? These are all common questions I hear from real estate brokers, contractors, landlords and others. For the next few months, I will discuss different industries that have the right to file a lien against real estate. In all these industries, the right to lien arises when services or goods provided go unpaid. I will also briefly outline the legal process for perfecting these liens and the necessary next steps. To begin, I discuss real estate broker’s liens, specifically commercial real estate brokers and the Commercial Real Estate Broker Lien Act.[1]
Licensed commercial real estate brokers have the right to file a lien for services rendered, which are not paid. There is no lien statute for residential real estate brokers. Commercial brokers have the right to file a lien for virtually all compensation that has been agreed to. This includes commissions and compensation for sales, leasing, property management, consulting services and auctions.
Commercial brokers have the right to file a lien against commercial property only. Commercial property is defined as all real estate other than: (1) “real estate containing one to four residential units;” (2) vacant land which “is not zoned for nor available for commercial, multifamily, or retail use;” or (3) agricultural land.[2] Again, there is no right for a real estate broker to file a lien against residential real estate.
Commercial brokers must file a lien within ninety days or the broker waives his right to file. The ninety-day clock commences at different points for different transactions. For instance, when a broker is to be paid in a lump sum, then the clock begins upon closing of the sale or when a tenant takes possession under a lease. If the broker is to be paid in installments, then the ninety-day clock begins when the debtor misses the first payment.
The purpose of filing a lien, from the broker’s perspective, is to secure payment and hopefully, accelerate it. However, if a lien does not produce a quick settlement, then a broker must file suit to protect its position. This must happen within either six months or one year, depending upon the transaction. The general timeframe is six months for leases and options to purchase and, for all other matters, one year. The good news is that the law allows for recovery of expenses and legal fees for brokers if they prevail in their suit.[3]
Filing a commercial broker’s real estate lien is something that should be done with caution and by an attorney with experience in this area. An inappropriate or improper filing could lead to an unenforceable lien. It also could lead to liability against the commercial broker for slander of title, among other things.
Disclaimer: The information contained in this article is for informational purposes only and is not legal advice or a substitute for legal counsel. It does not constitute advertising or solicitation. The information in this article may or may not reflect the most current legal developments; accordingly, this article is not guaranteed to be complete, and should not be considered an indication of future results.
Jon David Huffman is a litigation attorney specializing in real estate disputes, business disputes and commercial collections. With more than a decade of experience managing small businesses before attending Emory Law School, he brings a business owner’s perspective to the practice of law.
