By Wentworth S.B. No. 573 75R2204 PAM-F A BILL TO BE ENTITLED 1-1 AN ACT 1-2 relating to creating a commercial real estate broker's lien. 1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-4 SECTION 1. Subtitle B, Title 5, Property Code, is amended by 1-5 adding Chapter 62 to read as follows: 1-6 CHAPTER 62. COMMERCIAL REAL ESTATE BROKER'S LIEN 1-7 SUBCHAPTER A. GENERAL PROVISIONS 1-8 Sec. 62.001. SHORT TITLE. This chapter may be cited as the 1-9 Commercial Real Estate Broker's Lien Act. 1-10 Sec. 62.002. (a) This chapter applies to commercial real 1-11 estate. 1-12 (b) This chapter does not apply to: 1-13 (1) real estate improved with one to four residential 1-14 units; 1-15 (2) a single-family residential unit, including a 1-16 condominium, townhouse, or home in a subdivision, if the unit is 1-17 sold, leased, or otherwise conveyed on a unit-by-unit basis and 1-18 regardless of whether the unit is part of a larger building or 1-19 located on real estate containing more than four residential 1-20 units; 1-21 (3) real estate that is not improved with a structure 1-22 and is zoned for single-family residential use; or 1-23 (4) real estate that is a person's homestead. 1-24 Sec. 62.003. DEFINITIONS. In this chapter: 2-1 (1) "Broker" means a person who is licensed as a real 2-2 estate broker under The Real Estate License Act (Article 6573a, 2-3 Vernon's Texas Civil Statutes). 2-4 (2) "Real estate" has the meaning assigned by Section 2-5 2, The Real Estate License Act (Article 6573a, Vernon's Texas Civil 2-6 Statutes). 2-7 (Sections 62.004-62.020 reserved for expansion 2-8 SUBCHAPTER B. BROKER'S LIEN 2-9 Sec. 62.021. PERSON ENTITLED TO LIEN. (a) A broker has a 2-10 lien on commercial real estate in an amount that the broker is owed 2-11 under a written instrument signed by: 2-12 (1) the owner of the commercial real estate or the 2-13 owner's authorized agent; or 2-14 (2) a prospective buyer or prospective tenant or that 2-15 person's authorized agent relating to the purchase, lease, or other 2-16 conveyance of an interest in the commercial real estate. 2-17 (b) A lien described by this section is available only to 2-18 the broker named in the signed instrument. The lien is not 2-19 available to an employee or independent contractor of the broker. 2-20 Sec. 62.022. FILING OF NOTICE OF LIEN. (a) A broker 2-21 claiming a lien under this chapter must file a notice of lien as 2-22 provided by Subchapter C with the county clerk of the county in 2-23 which the commercial real estate is located. 2-24 (b) The county clerk shall record the notice of lien in 2-25 records kept for that purpose and shall index and cross-index the 2-26 notice of lien in the names of the broker and the owner. Failure 2-27 of the county clerk to properly record or index a filed notice of 3-1 lien does not invalidate the lien. 3-2 Sec. 62.023. CONTENTS OF NOTICE OF LIEN. (a) The notice of 3-3 lien must be signed by the broker or by a person authorized to sign 3-4 on behalf of the broker and must contain substantially: 3-5 (1) a sworn statement of the claim, including the 3-6 amount; 3-7 (2) the name of the broker and the real estate license 3-8 number of the broker; 3-9 (3) the name of the owner; and 3-10 (4) a description of the commercial real estate sought 3-11 to be charged with the lien. 3-12 (b) The broker may attach to the notice of lien a copy of 3-13 the applicable written agreement. 3-14 Sec. 62.024. NOTICE OF FILING TO OWNER. (a) Except as 3-15 provided by Subsection (b), not later than the 10th day after the 3-16 date the broker files a notice of lien, the broker shall mail a 3-17 copy of the notice of lien by registered or certified mail to the 3-18 owner of record of the commercial real estate or the owner's 3-19 authorized agent. Service of the notice under this section is 3-20 complete when the notice is deposited in the United States mail, 3-21 postage prepaid, and addressed to the owner. 3-22 (b) If a notice of lien is recorded within the 10 days 3-23 preceding the date a transaction that would entitle a broker to 3-24 payment occurs, the broker is not required to mail a copy of the 3-25 notice of lien. 3-26 Sec. 62.025. INCEPTION OF BROKER'S LIEN. A broker's lien 3-27 attaches on the date the notice of lien is recorded as provided by 4-1 this chapter. 4-2 Sec. 62.026. PRIORITY. (a) A recorded lien, mortgage, or 4-3 other encumbrance, including a recorded lien securing revolving 4-4 credit and future advances for a construction loan, recorded before 4-5 the date a broker's lien is recorded has priority over the broker's 4-6 lien. 4-7 (b) A mechanic's lien that is recorded after a broker's lien 4-8 and that relates back to a date before the date the broker's lien 4-9 is recorded has priority over the broker's lien. 4-10 (Sections 62.027-62.040 reserved for expansion 4-11 SUBCHAPTER C. TIME FOR FILING NOTICE OF LIEN 4-12 Sec. 62.041. LIEN BASED ON GENERAL CONTRACT. Except as 4-13 provided by this subchapter, a broker must record a notice of lien: 4-14 (1) after the written instrument that entitles the 4-15 broker to payment is signed; and 4-16 (2) before the conveyance of the commercial real 4-17 estate against which the broker is claiming a lien. 4-18 Sec. 62.042. LIEN BASED ON INSTALLMENT CONTRACT. (a) If a 4-19 payment to a broker is owed in installments, a portion of which is 4-20 due after the conveyance of the commercial real estate, the broker: 4-21 (1) may record a notice of lien for the installment 4-22 payments due after the conveyance at any time after the conveyance; 4-23 and 4-24 (2) must record the notice of lien before the date the 4-25 payment is due. 4-26 (b) A notice of lien recorded before the conveyance of 4-27 commercial real estate for the entire amount owed to the broker 5-1 under an installment contract is not enforceable to the extent of 5-2 installment payments owed after the conveyance of the real estate. 5-3 Sec. 62.043. LIEN BASED ON FUTURE COMMISSIONS. (a) If a 5-4 broker is entitled to a commission based on the occurrence of a 5-5 future event, including a commission owed as the result of the 5-6 exercise of an option to expand leased premises, renew or extend a 5-7 lease, or purchase the real estate, the broker may record the 5-8 notice of lien any time after the written instrument relating to 5-9 the commission is executed. 5-10 (b) A broker must record a lien for a commission described 5-11 by this section not later than the 90th day after the date the 5-12 event for which the commission is owed occurs. 5-13 Sec. 62.044. LIEN BASED ON LEASE. (a) Except as provided 5-14 by Subsection (b), if a lien is claimed based on a lease contract, 5-15 the broker must record the notice of lien not later than the 90th 5-16 day after the date the tenant takes possession of the leased 5-17 premises. 5-18 (b) If the owner of the real estate to be leased provides 5-19 written notice to the broker entitled to claim a lien not later 5-20 than the 10th day before the date the lease is to be executed 5-21 informing the broker of the intended execution of the lease, the 5-22 broker must record the notice of lien before the date indicated in 5-23 the notice for the execution of the lease. 5-24 Sec. 62.045. LIEN BASED ON FUTURE CONVEYANCE. If a broker 5-25 has a written agreement with a prospective buyer or tenant, the 5-26 broker must record the notice of lien not later than the 90th day 5-27 after the date the conveyance occurs. 6-1 (Sections 62.046-62.060 reserved for expansion 6-2 SUBCHAPTER D. ENFORCEMENT OF LIEN 6-3 Sec. 62.061. SUIT TO FORECLOSE LIEN. (a) A broker may 6-4 bring suit to foreclose a lien in any district court in the county 6-5 in which the commercial real estate is located by filing a sworn 6-6 complaint stating that the lien has been recorded. 6-7 (b) A complaint in a suit filed under this section must 6-8 contain: 6-9 (1) a brief description of the agreement on which the 6-10 lien is based; 6-11 (2) the date on which the agreement was executed; 6-12 (3) a description of the services performed by the 6-13 broker; 6-14 (4) the amount due and unpaid; 6-15 (5) a description of the commercial real estate to 6-16 which the lien attaches; and 6-17 (6) other facts necessary for a full understanding of 6-18 the rights of the parties. 6-19 (c) The broker must include as a defendant in a suit brought 6-20 under this subchapter each person who the broker knows has an 6-21 interest in the commercial real estate. 6-22 Sec. 62.062. STATUTE OF LIMITATIONS. (a) Except as 6-23 provided by this section, a broker claiming a lien under this 6-24 chapter must bring a suit to foreclose the lien on or before the 6-25 second anniversary of the date the lien is recorded. 6-26 (b) A broker claiming a lien to collect a future commission 6-27 must bring a suit to foreclose the lien on or before the second 7-1 anniversary of the date the transaction on which the commission is 7-2 claimed occurs. 7-3 (c) A broker claiming a lien based on an option to purchase 7-4 or lease must bring a suit to foreclose the lien not later than six 7-5 months after the date of the conveyance of the commercial real 7-6 estate under the exercise of the option to purchase or lease. 7-7 Sec. 62.063. ASSESSMENT OF COSTS, FEES, AND INTEREST. The 7-8 prevailing party in a suit brought under this subchapter is 7-9 entitled to court costs, attorney's fees, and prejudgment interest. 7-10 (Sections 62.064-62.080 reserved for expansion 7-11 SUBCHAPTER E. RELEASE OF LIEN 7-12 Sec. 62.081. RELEASE OF LIEN. (a) When a debt that is the 7-13 basis for a lien filed under this chapter is satisfied, the broker 7-14 shall, not later than the fifth day after the date the broker 7-15 receives a written request from the owner of the commercial real 7-16 estate, furnish to the owner a release of indebtedness and any lien 7-17 claimed to the extent of the indebtedness paid. 7-18 (b) When a condition occurs that would preclude the broker 7-19 from receiving compensation under the terms of the written 7-20 agreement on which the lien is based, the broker shall, not later 7-21 than the 10th day after the date the broker receives a written 7-22 request from the owner of the commercial real estate, furnish to 7-23 the owner a release of indebtedness and any lien claimed. 7-24 (c) A release of lien must be in a form that permits the 7-25 instrument to be filed of record. 8-1 (Sections 62.082-62.100 reserved for expansion 8-2 SUBCHAPTER F. ESCROW OF DISPUTED AMOUNTS 8-3 Sec. 62.101. ESCROW ACCOUNT. (a) If a claim for a lien 8-4 filed as provided by this chapter would prevent the closing of a 8-5 transaction or conveyance, an escrow account shall be established 8-6 from the proceeds of the transaction or conveyance in an amount 8-7 sufficient to satisfy the lien. 8-8 (b) A party may not refuse to close a transaction because of 8-9 the requirement to establish an escrow account as provided by this 8-10 section. 8-11 SECTION 2. This Act takes effect September 1, 1997. The 8-12 change in law made by this Act applies only to an agreement to 8-13 compensate a licensed real estate broker that is entered into on or 8-14 after the effective date of this Act. 8-15 SECTION 3. The importance of this legislation and the 8-16 crowded condition of the calendars in both houses create an 8-17 emergency and an imperative public necessity that the 8-18 constitutional rule requiring bills to be read on three several 8-19 days in each house be suspended, and this rule is hereby suspended.