Commercial Broker May File Lien to Enforce Commission
An unfortunate reality of real estate brokerage is that some sellers and landlords loathe paying commissions.
Sometimes this aversion arises from the belief that a broker (and, by extension, her agents) earns huge commissions for very little work. Other times, the reluctance results from simple finance — a seller or landlord can’t make the deal work with a commission in the equation. This happens where margins are thin, or the property doesn’t sell or lease for as much as expected.
Whatever the motivation, almost every real estate broker has a horror story about being stiffed on a hard-earned commission they were counting on receiving. Losing this revenue can be particularly painful on a commercial transaction, where commissions are typically larger than in residential deals.
Fortunately, Texas law assists commercial real estate brokers in collecting earned commissions by granting them power to file liens in some circumstances. The applicable statute — aptly titled the “Broker’s and Appraiser’s Lien on Commercial Real Estate Act” — is located at Chapter 62 of the Texas Property Code.
The Act is limited to commercial real property, and there is no analogous provision allowing lien placement on residential properties.
In order to maintain a lien under the Act, a Broker must file a signed statement establishing very specific facts demonstrating the nature, scope and amount of the earned commission. This statement must be filed with the county clerk of the county in which the commercial property is located. Additionally, the lien must be mailed to the party against whom the lien is asserted within one (1) business day of filing.
Liens that do not contain at least the following information are void:
(1) a sworn statement of the nature and amount of the claim, including:
(A) the commission amount or the formula used to determine the commission;
(B) the type of commission at issue, including a deferred commission; and
(C) the month and year in which the commission was earned;
(2) the name of the broker and the real estate license number of the broker;
(3) the name as reflected in the broker’s records of any person who the broker believes is obligated to pay the commission under the commission agreement;
(4) the name as reflected in the broker’s records of any person the broker believes to be an owner of the commercial real estate interest on which the lien is claimed;
(5) a description legally sufficient for identification of the commercial real estate interest sought to be charged with the lien;
(6) the name of any cooperating broker or principal in the transaction with whom the broker intends to share the commission and the dollar or percentage amount to be shared; and
(7) a copy of the commission agreement on which the lien is based.
Disputes over unpaid commissions are often high-stakes for the parties. The validity of a broker’s lien claim turns on strict compliance with the Act. A broker’s failure to file and provide notice of a lien claim in accordance with all mandatory provisions of the Act can be a costly mistake.