SRC-MAX C.S.S.B. 573 75(R)BILL ANALYSIS


Senate Research CenterC.S.S.B. 573
By: Wentworth
State Affairs
4-9-97
Committee Report (Substituted)


DIGEST 

Currently, a real estate broker may not obtain a lien on  real property to
secure the payment of the broker's commission arising from a commercial
real estate transaction. For many years, the brokerage community has
favored a statutory lien in order to secure payment of brokerage
commission obligations.  This bill creates a commercial real estate
broker's lien. 

PURPOSE

As proposed, C.S.S.B. 573 creates a commercial real estate broker's lien.

RULEMAKING AUTHORITY

This bill does not grant any additional rulemaking authority to a state
officer, institution, or agency. 

SECTION BY SECTION ANALYSIS

SECTION 1. Amends Title 5B, Property Code, by adding Chapter 62, as
follows: 

CHAPTER 62.  BROKER'S LIEN ON COMMERCIAL REAL ESTATE 

SUBCHAPTER A.  GENERAL PROVISIONS

Sec.  62.001.  SHORT TITLE: Broker's Lien on Commercial Real Estate Act. 

Sec.  62.002.  APPLICABILITY.  Provides that this chapter applies to real
estate that is commercial real estate on the date the notice of lien is
filed under this chapter.  Provides that the broker's lien attaches only
to the commercial portion of the real estate under certain conditions. 

Sec.  62.003.  DEFINITION. Defines "broker," "commercial real estate,"
"commission," "commission agreement," "future commission," and "real
estate." 

SUBCHAPTER B.  BROKER'S LIEN 

Sec.  62.021.  PERSON ENTITLED TO LIEN.  Provides that a broker is
entitled to a commission under a certain commission agreement under
certain conditions.  Provides that a lien is available only to the broker
named in the commission agreement.  Provides that the lien is not
available to an employee or independent contractor of the broker.
Requires the broker's right to claim a lien based on the commission
agreement to be disclosed in the commission agreement.   
 
Sec.  62.022.  WAIVER OR RELEASE.  Provides that the waiver of a broker's
entitlement to a lien under this chapter or the release of a lien given
for the purpose of releasing a broker's lien before the commission is
satisfied or forgiven is void. 

Sec.  62.023.  FILING OF NOTICE OF LIEN.  Requires a broker claiming a
lien under this chapter to file a notice of lien as provided by Subchapter
C with the county clerk of the county in which the commercial real estate
is located.  Requires the county clerk to record  the notice of lien in
records kept for that purpose and to index and cross-index the notice of
lien in the names of the broker and the owner of the interest in the real
estate on which the lien is claimed.  

Sec.  62.024.  CONTENTS OF NOTICE OF LIEN.  Requires the notice of lien to
be signed by the broker or by a person authorized to sign on behalf of the
broker and to contain certain information.  

Sec.  62.025.  NOTICE OF FILING.  Requires the broker to mail a copy of
the notice of lien by registered or certified mail to certain persons,
before a certain date.  Provides that service of the notice is complete
when the notice is deposited in the United States mail, postage prepaid,
and addressed to the person entitled to receive the notice under this
section.  

Sec.  62.026.  INCEPTION OF BROKER'S LIEN.  Provides that a broker's lien
attaches to the interest in the commercial real estate owned by the person
obligated to pay the commission on the date the notice of lien is
recorded.  Provides that the lien does not relate back to the date of the
commission agreement.  Provides that a notice of lien for certain amounts
is enforceable only to the extent that the installment of future
commission is due. 

Sec.  62.027.  PRIORITY.  Provides that a recorded lien, mortgage, or
other encumbrance, including a recorded lien securing revolving credit and
future advances for a construction loan, recorded before the date a
broker's lien is recorded has priority over the broker's lien. Provides
that a broker's lien against the interest of a person owing the commission
is not valid or enforceable against certain persons before the broker's
lien is recorded.  Provides that a mechanic's lien that is recorded after
a broker's lien and that relates back to a date before the date the
broker's lien is recorded has priority over the broker's lien. 

Sec.  62.028.  SUBORDINATION.  Provides that the broker's lien is
subordinate to a recorded purchase-money first lien authorized by the
purchaser under certain conditions. Provides that the broker's lien is
subordinate to the recorded refinanced first lien, regardless of the
amount of the first lien after refinancing under certain conditions.
Provides that the broker's lien is subordinate to the lien securing the
extension of credit, according to the lien documents, the extension of
credit is made for only certain purposes.  

Sec.  62.029.  CHANGE IN USE OF REAL ESTATE.  Provides that any change in
the use of the real estate does not affect a broker lien if the notice of
the lien was filed when the real estate was commercial real estate.
Provides that the broker's lien is extinguished under certain conditions. 

SUBCHAPTER C.  TIME FOR FILING NOTICE OF LIEN

Sec.  62.041.  TIME TO FILE.  Requires a broker to record a notice of lien
under certain conditions. 

SUBCHAPTER D.  ENFORCEMENT OF LIEN

Sec.  62.061.  SUIT TO FORECLOSE LIEN.  Authorizes a broker to bring suit
to foreclose a lien in any district court in the county in which the
commercial real estate is located by filing a sworn complaint stating that
the lien has been recorded.  Requires a complaint in a suit to be filed
under this section to contain certain information.  Requires the broker to
include as a defendant in a suit brought under this subchapter each person
who the broker knows has an interest in the commercial real estate this is
subordinate to or encumbered by the broker's lien.  Provides that the
broker's lien remains valid under certain conditions.   

Sec.  62.062.  STATUTE OF LIMITATIONS.  Requires a broker claiming a lien
under this chapter to bring a suit to foreclose the lien on or before the
second anniversary of the date the notice of lien is recorded. Requires a
broker claiming a lien to collect a future commission to bring a suit to
foreclose the lien on or before the second anniversary of the date on
which the commission is due.  Provides that a lien is void if a suit to
foreclose the  lien is not brought within the time required by this
section.  Requires a broker claiming a lien for a commission due to bring
a suit to foreclose the lien from the owner of the interest. Requires a
broker claiming a lien to collect a commission to bring suit to foreclose
the lien on or before a certain date. 

Sec.  62.063.  ASSESSMENT OF COSTS, FEES, AND INTEREST.  Provides that the
prevailing party in a suit brought under this subchapter is entitles to
court costs, attorney's fees, and prejudgements interest. 

SUBCHAPTER E.  RELEASE OF LIEN

Sec.  62.081.  RELEASE OF LIEN.  Requires the broker, not later than the
fifth day after the date the broker receives a written request from the
owner of the interest in the commercial real estate on which the lien is
claimed, to furnish to the owner a release of indebtedness and any lien
claimed to the extent of the indebtedness paid when the debt that is the
basis for a lien is satisfied.  Requires the broker, not later than the
10th day after the date the broker receives a written request from the
owner of the interest in the commercial real estate on which the lien is
claimed, to furnish the owner a release of indebtedness and any lien
claimed under certain conditions.  Requires a release of lien to be in a
form that permits the instrument to be filed of record. 

SUBCHAPTER F.  ESCROW OF DISPUTED AMOUNTS

Sec.  62.101.  ESCROW ACCOUNT.   Requires a person named in the notice of
lien as obligated to pay the commission to establish an escrow account
from the proceeds of the transaction or conveyance in a certain amount.
Authorizes related costs for an interpleader action to be deducted from
the escrow account by the person maintaining the escrow account. Requires
the escrow account to be established with the named escrow agent.
Prohibits a party from refusing to close a transaction because of the
requirement to establish an escrow account as provided by this section
provided that the broker executes and delivers a release of the broker's
lien in a recordable form for the amount of the commission that is due.
Requires an amount held in escrow to be held in escrow until a certain
time.  Provides that a broker's lien against the commercial real estate is
extinguished and becomes a lien on the proceeds in the escrow account when
the escrow account is established.  

SECTION 2. Effective date:  September 1, 1997.
  Makes application of this Act prospective.

SECTION 3. Emergency clause.
    



SUMMARY OF COMMITTEE CHANGES

SECTION 1. 

Amends Chapter 62, Property Code, to amend the heading and short title.  

Amends Section 62.002, Property Code,  by adding the heading
"APPLICABILITY." Deletes proposed Subsection (b), which provided that this
chapter did not apply in certain instances. 

Amends Section 62.003, Property Code,  to redefine "broker" and define
"commercial real estate," "commission," "commission agreement," and
"future commission." 

Amends Section 62.021, Property Code, regarding persons entitled to liens.

Amends Section 62.022, Property Code, regarding a waiver or release.
 
Amends Section 62.023, Property Code, regarding the filing of notices of
liens. 

Amends Section 62.024, Property Code, to provide that the notice of lien
must contain certain information not required under the proposed version.
Deletes Subsection (b), which provides that a broker is not required to
mail a copy of this notice of lien under certain conditions.  

Amends Section 62.025, Property Code, to require a notice of lien to be
mailed to certain persons under certain conditions.   

Adds Section 62.029, Property Code, relating to subordination.

Adds Section 62.029, Property Code, relating to a change in use of real
estate.  

Amends Section 62.041, Property Code, to provide a new heading:  "TIME TO
FILE. " Requires a broker to record a notice of lien under certain
conditions.  Deletes proposed Sections 62.042 through 62.045.  

Amends Section 62.061, Property Code, to require a complaint in a suit
filed under this section to contain certain information.  Provides
conditions under which a broker's lien remains valid.   

Amends Section 62.062, Property Code, to delete proposed Subsections
(c)-(e) and to add new Subsections (c)-(e).  Requires a broker claiming a
lien for a commission that is due to foreclose the lien by a certain date.
Provides that the lien is void under certain conditions. Requires a broker
claiming a lien to collect a commission to bring suit to foreclose on the
lien on or before a certain date.  Makes nonsubstantive changes. 

Amends Section 62.081, Property Code, to require a broker to complete
certain tasks not later than the fifth day after the date the broker
received a written request from the owner of the interest in the
commercial real estate on which the lien is claimed.  Makes conforming
changes. 

Deletes proposed Section 62.101, Property Code, and replaces with new
Subsection 62.101 regarding escrow accounts.