By: Wentworth S.B. No. 573
A BILL TO BE ENTITLED
AN ACT
1-1 relating to creating a commercial real estate broker's lien.
1-2 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-3 SECTION 1. Subtitle B, Title 5, Property Code, is amended by
1-4 adding Chapter 62 to read as follows:
1-5 CHAPTER 62. BROKER'S LIEN ON COMMERCIAL REAL ESTATE
1-6 SUBCHAPTER A. GENERAL PROVISIONS
1-7 Sec. 62.001. SHORT TITLE. This chapter may be cited as the
1-8 Broker's Lien on Commercial Real Estate Act.
1-9 Sec. 62.002. APPLICABILITY. This chapter applies only to
1-10 real estate that is commercial real estate on the date the notice
1-11 of lien is filed under this chapter. If real estate is zoned or
1-12 restricted for more than one use, the broker's lien attaches only
1-13 to the commercial portion of the real estate.
1-14 Sec. 62.003. DEFINITIONS. In this chapter:
1-15 (1) "Broker" means a person who:
1-16 (A) is licensed as a real estate broker under
1-17 The Real Estate License Act (Article 6573a, Vernon's Texas Civil
1-18 Statutes) and is not acting as a residential rental locator as
1-19 defined by Section 24, The Real Estate License Act (Article 6573a,
1-20 Vernon's Texas Civil Statutes); or
1-21 (B) is licensed or certified as a real estate
1-22 appraiser under the Texas Appraiser Licensing and Certification Act
1-23 (Article 6573a.2, Vernon's Texas Civil Statutes).
1-24 (2) "Commercial real estate" means all real estate
2-1 except:
2-2 (A) real estate improved with one to four
2-3 residential units;
2-4 (B) a single-family residential unit, including
2-5 a condominium, townhouse, or home in a subdivision, if the unit is
2-6 sold, leased, or otherwise conveyed on a unit-by-unit basis and
2-7 regardless of whether the unit is part of a larger building or
2-8 located on real estate containing more than four residential units;
2-9 (C) real estate that is a person's homestead; or
2-10 (D) real estate that is not improved with a
2-11 structure and is:
2-12 (i) zoned for single-family residential
2-13 use; or
2-14 (ii) restricted for single-family use
2-15 under restrictive covenants that provide that the restrictive
2-16 covenants are to remain in effect for at least 20 years after the
2-17 date the notice of lien is filed and recorded in the county in
2-18 which the real estate is located.
2-19 (3) "Commission" includes a fee or other valuable
2-20 consideration.
2-21 (4) "Commission agreement" means a written instrument
2-22 that:
2-23 (A) entitles a broker to a commission;
2-24 (B) is signed by the person obligated to pay the
2-25 commission or the person's authorized agent;
2-26 (C) references the commission amount or
2-27 describes the formula used to determine the commission amount; and
3-1 (D) contains a description legally sufficient
3-2 for identification of the real estate that is the subject of the
3-3 agreement.
3-4 (5) "Future commission" means a commission based on
3-5 the occurrence of a future event, including a commission for:
3-6 (A) the exercise of an option to expand leased
3-7 premises, renew or extend a lease, or purchase real estate;
3-8 (B) the execution of a new lease;
3-9 (C) the expiration of a period of time; or
3-10 (D) any other future event specified in a
3-11 commission agreement.
3-12 (6) "Real estate" has the meaning assigned by Section
3-13 2, The Real Estate License Act (Article 6573a, Vernon's Texas Civil
3-14 Statutes).
3-15 (Sections 62.004-62.020 reserved for expansion
3-16 SUBCHAPTER B. BROKER'S LIEN
3-17 Sec. 62.021. PERSON ENTITLED TO LIEN. (a) If a broker is
3-18 entitled to a commission under a commission agreement signed by the
3-19 owner of commercial real estate or the owner's authorized agent,
3-20 the broker has a lien on the commercial real estate in the amount
3-21 specified by the commission agreement.
3-22 (b) If a broker is entitled to a commission under a
3-23 commission agreement signed by a prospective buyer of commercial
3-24 real estate or the prospective buyer's authorized agent, the broker
3-25 has a lien on the interest, if any, of the commercial real estate
3-26 that the prospective buyer purchases in the amount specified by the
3-27 commission agreement.
4-1 (c) If a broker is entitled to a commission under a
4-2 commission agreement signed by a prospective tenant of commercial
4-3 real estate or the prospective tenant's authorized agent, the
4-4 broker has a lien on the interest, if any, of the commercial real
4-5 estate that the prospective tenant leases in the amount specified
4-6 by the commission agreement.
4-7 (d) A lien described by this section is available only to
4-8 the broker named in the commission agreement. The lien is not
4-9 available to an employee or independent contractor of the broker.
4-10 (e) The broker's right to claim a lien based on the
4-11 commission agreement must be disclosed in the commission agreement.
4-12 Sec. 62.022. WAIVER OR RELEASE. The waiver of a broker's
4-13 entitlement to a lien under this chapter or the release of a lien
4-14 given for the purpose of releasing a broker's lien before the
4-15 commission is satisfied or forgiven is void.
4-16 Sec. 62.023. FILING OF NOTICE OF LIEN. (a) A broker
4-17 claiming a lien under this chapter must file a notice of lien as
4-18 provided by Subchapter C with the county clerk of the county in
4-19 which the commercial real estate is located.
4-20 (b) The county clerk shall record the notice of lien in
4-21 records kept for that purpose and shall index and cross-index the
4-22 notice of lien in the names of the broker and the owner of the
4-23 interest in the real estate on which the lien is claimed.
4-24 Sec. 62.024. CONTENTS OF NOTICE OF LIEN. The notice of lien
4-25 must be signed by the broker or by a person authorized to sign on
4-26 behalf of the broker and must contain the following:
4-27 (1) a sworn statement of the claim, substantially
5-1 including the commission amount or the formula used to determine
5-2 the commission amount and the date or the occurrence of the event
5-3 when the commission is due;
5-4 (2) the name of the broker and the real estate license
5-5 number of the broker;
5-6 (3) substantially the name of the owner and any other
5-7 person who the broker knows is obligated to pay the commission;
5-8 (4) a description legally sufficient for
5-9 identification of the commercial real estate sought to be charged
5-10 with the lien;
5-11 (5) a description of the interest in the commercial
5-12 real estate sought to be charged with the lien; and
5-13 (6) a copy of the applicable commission agreement.
5-14 Sec. 62.025. NOTICE OF FILING. (a) Not later than one
5-15 business day after the date the broker files a notice of lien, the
5-16 broker shall mail a copy of the notice of lien by certified mail,
5-17 return receipt requested, or registered mail to:
5-18 (1) the owner of record of the interest in the
5-19 commercial real estate on which the lien is claimed or the owner's
5-20 authorized agent; and
5-21 (2) the prospective purchaser or tenant and any escrow
5-22 agent named in a contract for the sale or lease of the interest in
5-23 the commercial real estate on which the lien is claimed if:
5-24 (A) a binding written contract for the sale or
5-25 lease of the interest of the commercial real estate on which the
5-26 lien is claimed is in effect between the owner and the prospective
5-27 purchaser or tenant in a transaction that is the basis for the
6-1 commission; and
6-2 (B) the binding written contract in the
6-3 transaction that is the basis for the commission is executed by the
6-4 owner and prospective purchaser or tenant before the date the
6-5 notice of lien is filed.
6-6 (b) Service of the notice under this section is complete
6-7 when the notice is deposited in the United States mail, postage
6-8 prepaid, and addressed to the persons entitled to receive the
6-9 notice under this section.
6-10 Sec. 62.026. INCEPTION OF BROKER'S LIEN. A broker's lien
6-11 attaches to the interest in the commercial real estate owned by the
6-12 person obligated to pay the commission on the date the notice of
6-13 lien is recorded as provided by this chapter. The lien does not
6-14 relate back to the date of the commission agreement. A notice of
6-15 lien for amounts due to the broker under an installment contract or
6-16 under a commission agreement for a future commission is enforceable
6-17 only to the extent that the installment or future commission is
6-18 due.
6-19 Sec. 62.027. PRIORITY. (a) A recorded lien, mortgage, or
6-20 other encumbrance, including a recorded lien securing revolving
6-21 credit and future advances for a construction loan, recorded before
6-22 the date a broker's lien is recorded has priority over the broker's
6-23 lien. A broker's lien against the interest of a person owing the
6-24 commission is not valid or enforceable against a grantee,
6-25 purchaser, lessee, or transferee of an interest in the commercial
6-26 real estate from the person owing the commission if the deed,
6-27 lease, or instrument transferring the interest is recorded before
7-1 the broker's lien is recorded.
7-2 (b) A mechanic's lien that is recorded after a broker's lien
7-3 and that relates back to a date before the date the broker's lien
7-4 is recorded has priority over the broker's lien.
7-5 Sec. 62.028. SUBORDINATION. (a) If the owner of the
7-6 commercial real estate sells the commercial real estate, the
7-7 broker's lien is subordinate to a recorded purchase-money first
7-8 lien authorized by the purchaser if the purchaser:
7-9 (1) executes and files with the county clerk of the
7-10 county in which the broker's lien is filed a memorandum that
7-11 evidences the purchaser's ratification of the broker's lien and the
7-12 purchaser's assumption of the obligation to pay the broker the
7-13 commission as provided by the commission agreement that is the
7-14 basis for the lien; and
7-15 (2) sends the broker, by certified mail, return
7-16 receipt requested, or registered mail, a copy of the recorded
7-17 memorandum required by this subsection.
7-18 (b) If the owner of the commercial real estate refinances a
7-19 recorded first lien secured by the commercial real estate, the
7-20 broker's lien is subordinate to the recorded refinanced first lien,
7-21 regardless of the amount of the first lien after refinancing, if
7-22 the owner:
7-23 (1) executes and files with the county clerk of the
7-24 county in which the broker's lien is filed a memorandum that
7-25 evidences the owner's ratification of the broker's lien and the
7-26 owner's obligation to pay the broker the commission as provided by
7-27 the commission agreement that is the basis for the lien; and
8-1 (2) sends the broker, by certified mail, return
8-2 receipt requested, or registered mail, a copy of the recorded
8-3 memorandum required by this subsection.
8-4 (c) If the owner of the commercial real estate obtains an
8-5 extension of credit secured by the commercial real estate, the
8-6 broker's lien is subordinate to the lien securing the extension of
8-7 credit if, according to the lien documents, the extension of credit
8-8 is made only for the purpose of:
8-9 (1) repairing or renovating the commercial real
8-10 estate; or
8-11 (2) completing construction or providing additional
8-12 improvements as requested by a tenant leasing the commercial real
8-13 estate.
8-14 Sec. 62.029. CHANGE IN USE OF REAL ESTATE. (a) Except as
8-15 provided by Subsection (b), any change in the use of the real
8-16 estate does not affect a broker's lien if the notice of the lien
8-17 was filed when the real estate was commercial real estate.
8-18 (b) The broker's lien is extinguished if:
8-19 (1) not later than the 180th day after the date on
8-20 which the broker's commission is due, the commercial real estate on
8-21 which a broker claims a lien is zoned for single-family use or
8-22 restricted for single-family use under recorded restrictive
8-23 covenants that provide that the restrictive covenants are to remain
8-24 in effect for at least 20 years; and
8-25 (2) the zoning or restrictive covenants for
8-26 single-family use are effective for at least two years after the
8-27 date the commission is due.
9-1 (Sections 62.030-62.040 reserved for expansion
9-2 SUBCHAPTER C. TIME FOR FILING NOTICE OF LIEN
9-3 Sec. 62.041. TIME TO FILE. (a) Except as provided by
9-4 Subsection (b), a broker must record a notice of lien:
9-5 (1) after the commission agreement is signed by the
9-6 person who is obligated to pay the commission or the person's
9-7 authorized agent; and
9-8 (2) before the conveyance of the commercial real
9-9 estate on which the broker is claiming a lien.
9-10 (b) If the lien is based on a lease transaction, the broker
9-11 must record a notice of lien before:
9-12 (1) the 91st day after the date the event for which
9-13 the commission becomes payable occurs; and
9-14 (2) the date that the person who is obligated to pay
9-15 the commission records the future conveyance of the interest in the
9-16 commercial real estate on which the lien is claimed.
9-17 (Sections 62.042-62.060 reserved for expansion
9-18 SUBCHAPTER D. ENFORCEMENT OF LIEN
9-19 Sec. 62.061. SUIT TO FORECLOSE LIEN. (a) A broker may
9-20 bring suit to foreclose a lien in any district court for the county
9-21 in which the commercial real estate is located by filing a sworn
9-22 complaint stating that the notice of lien has been recorded.
9-23 (b) A complaint in a suit filed under this section must
9-24 contain:
9-25 (1) a brief description of the commission agreement
9-26 that is the basis for the lien, including a description of the
9-27 disclosure of the broker's right to the lien contained in the
10-1 commission agreement;
10-2 (2) the date on which the commission agreement was
10-3 executed;
10-4 (3) a description of the services performed by the
10-5 broker;
10-6 (4) the amount due and unpaid;
10-7 (5) a description of the commercial real estate to
10-8 which the lien attaches; and
10-9 (6) other facts necessary for a full understanding of
10-10 the rights of the parties.
10-11 (c) The broker must include as a defendant in a suit brought
10-12 under this subchapter each person whom the broker knows to have an
10-13 interest in the commercial real estate that is subordinate to or
10-14 encumbered by the broker's lien.
10-15 (d) If the broker and a person against whom the broker
10-16 claims a commission use alternative dispute resolution procedures
10-17 to resolve a dispute concerning entitlement to the broker's
10-18 commission, the broker's lien remains valid, and any suit to
10-19 foreclose the lien is stayed until the alternative dispute
10-20 resolution process is completed.
10-21 Sec. 62.062. STATUTE OF LIMITATIONS. (a) Except as
10-22 provided by this section, a broker claiming a lien under this
10-23 chapter must bring a suit to foreclose the lien on or before the
10-24 second anniversary of the date the notice of lien is recorded.
10-25 (b) A broker claiming a lien to collect a future commission
10-26 must bring a suit to foreclose the lien on or before the second
10-27 anniversary of the date on which the commission is due.
11-1 (c) A broker claiming a lien for a commission that is due
11-2 must bring a suit to foreclose the lien not later than the 30th day
11-3 after the date the broker receives a written demand to bring a suit
11-4 to foreclose the lien from the owner of the interest in the
11-5 commercial real estate on which the lien is claimed.
11-6 (d) If a suit to foreclose the lien is not brought within
11-7 the time required by this section, the lien is void.
11-8 (e) A broker claiming a lien to collect a commission must
11-9 bring suit to foreclose the lien on or before:
11-10 (1) the 10th anniversary of the date the lien is
11-11 recorded; or
11-12 (2) the 10th anniversary of the date the broker
11-13 records a subsequent notice of lien as a renewal of the broker's
11-14 entitlement to the lien.
11-15 Sec. 62.063. ASSESSMENT OF COSTS, FEES, AND INTEREST. The
11-16 prevailing party in a suit brought under this subchapter is
11-17 entitled to court costs, reasonable attorney's fees, and
11-18 prejudgment interest.
11-19 (Sections 62.064-62.080 reserved for expansion
11-20 SUBCHAPTER E. RELEASE OF LIEN
11-21 Sec. 62.081. RELEASE OF LIEN. (a) When a debt that is the
11-22 basis for a lien under this chapter is satisfied, the broker shall,
11-23 not later than the fifth day after the date the broker receives a
11-24 written request from the owner of the interest in the commercial
11-25 real estate on which the lien is claimed, furnish to the owner a
11-26 release of indebtedness and any lien claimed to the extent of the
11-27 indebtedness paid.
12-1 (b) When a condition occurs that would preclude the broker
12-2 from receiving compensation under the terms of the commission
12-3 agreement that is the basis for the lien, the broker shall, not
12-4 later than the 10th day after the date the broker receives a
12-5 written request from the owner of the interest in the commercial
12-6 real estate on which the lien is claimed, furnish to the owner a
12-7 release of indebtedness and any lien claimed.
12-8 (c) A release of lien must be in a form that permits the
12-9 instrument to be filed of record.
12-10 (Sections 62.082-62.100 reserved for expansion
12-11 SUBCHAPTER F. ESCROW OF DISPUTED AMOUNTS
12-12 Sec. 62.101. ESCROW ACCOUNT. (a) If a claim for a lien
12-13 described by this chapter is not paid or assumed at the closing of
12-14 a sale, lease, or mortgage of the commercial real estate subject to
12-15 the lien and would prevent the closing of the transaction or
12-16 conveyance, the person named in the notice of lien as obligated to
12-17 pay the commission shall establish an escrow account from the
12-18 proceeds of the transaction or conveyance in an amount sufficient
12-19 to satisfy the lien and related costs for any interpleader action
12-20 brought by the person maintaining the escrow account. Related
12-21 costs for any interpleader action may be deducted from the escrow
12-22 account by the person maintaining the escrow account. If an escrow
12-23 agent is named in the contract on which the transaction or
12-24 conveyance is based, the escrow account shall be established with
12-25 the named escrow agent.
12-26 (b) A party may not refuse to close a transaction because of
12-27 the requirement to establish an escrow account as provided by this
13-1 section provided that the broker executes and delivers a release of
13-2 the broker's lien in a recordable form for the amount of the
13-3 commission that is due.
13-4 (c) The amount held in escrow shall be held in escrow until:
13-5 (1) the rights of the parties claiming the amount in
13-6 escrow are determined by a written agreement of the parties, a
13-7 court of law, or an alternative dispute resolution process agreed
13-8 to by the parties;
13-9 (2) the broker's lien is no longer enforceable; or
13-10 (3) the funds are interpled into a court of competent
13-11 jurisdiction.
13-12 (d) When the escrow account is established under this
13-13 section, the broker's lien against the commercial real estate is
13-14 extinguished and becomes a lien on the proceeds in the escrow
13-15 account.
13-16 SECTION 2. This Act takes effect September 1, 1997. The
13-17 change in law made by this Act applies only to an agreement to
13-18 compensate a licensed real estate broker that is entered into on or
13-19 after the effective date of this Act.
13-20 SECTION 3. The importance of this legislation and the
13-21 crowded condition of the calendars in both houses create an
13-22 emergency and an imperative public necessity that the
13-23 constitutional rule requiring bills to be read on three several
13-24 days in each house be suspended, and this rule is hereby suspended.