COMMERCIAL REAL ESTATE COMMISSION LIENS CAN ATTACH TO REAL PROPERTY

The Commercial Real Estate Sales Commission Lien Act gives a broker who is a procuring cause of a sale a lien on the seller’s proceeds from the sale, and not on the real estate itself, provided the prescribed statutory steps are followed. Recent cases have interpreted and weakened the protection afforded by the lien law by allowing a broker’s lien to attach to the real property in certain circumstances. Clearly this gives a broker much more leverage and can jeopardize commercial real estate closings. The applicable statute requires a broker to disclose to the seller at or before the execution of the brokerage agreement that this law creates lien rights for a commission that cannot be waived before the commission is earned by the broker. Failure to deliver the requisite notice to the seller and closing agent before disbursement of the seller’s net proceeds negates the broker’s right to assert and enforce a lien against such proceeds. Brokers need to make sure that their commission agreements are properly drafted in order to protect themselves fully. Sellers need to make sure that any closing affidavits they sign at closing are factually correct. Attorneys and title agents need to make sure they do not insure over any broker’s liens. There are comparable provisions for leasing commissions, which are not addressed here. If we can be of assistance in protecting your rights, whether you are a broker or seller of real estate, please call Wendy Anderson at (407) 628-9081, ext. 111.