75(R) SB 573 Senate committee report

 1-1     By:  Wentworth                                         S.B. No. 573

 1-2           (In the Senate - Filed February 12, 1997; February 18, 1997,

 1-3     read first time and referred to Committee on State Affairs;

 1-4     April 11, 1997, reported adversely, with favorable Committee

 1-5     Substitute by the following vote:  Yeas 13, Nays 0; April 11, 1997,

 1-6     sent to printer.)

 1-7     COMMITTEE SUBSTITUTE FOR S.B. No. 573                   By:  Carona

 1-8                            A BILL TO BE ENTITLED

 1-9                                   AN ACT

1-10     relating to creating a commercial real estate broker's lien.

1-11           BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

1-12           SECTION 1.  Subtitle B, Title 5, Property Code, is amended by

1-13     adding Chapter 62 to read as follows:

1-14            CHAPTER 62.  BROKER'S LIEN ON COMMERCIAL REAL ESTATE

1-15                      SUBCHAPTER A.  GENERAL PROVISIONS

1-16           Sec. 62.001.  SHORT TITLE.  This chapter may be cited as the

1-17     Broker's Lien on Commercial Real Estate Act.

1-18           Sec. 62.002.  APPLICABILITY.  This chapter applies only to

1-19     real estate that is commercial real estate on the date the notice

1-20     of lien is filed under this chapter.  If real estate is zoned or

1-21     restricted for more than one use, the broker's lien attaches only

1-22     to the commercial portion of the real estate.

1-23           Sec. 62.003.  DEFINITIONS.  In this chapter:

1-24                 (1)  "Broker" means a person who:

1-25                       (A)  is licensed as a real estate broker under

1-26     The Real Estate License Act (Article 6573a, Vernon's Texas Civil

1-27     Statutes) and is not acting as a residential rental locator as

1-28     defined by Section 24, The Real Estate License Act (Article 6573a,

1-29     Vernon's Texas Civil Statutes); or

1-30                       (B)  is licensed or certified as a real estate

1-31     appraiser under the Texas Appraiser Licensing and Certification Act

1-32     (Article 6573a.2, Vernon's Texas Civil Statutes).

1-33                 (2)  "Commercial real estate" means all real estate

1-34     except:

1-35                       (A)  real estate improved with one to four

1-36     residential units;

1-37                       (B)  a single-family residential unit, including

1-38     a condominium, townhouse, or home in a subdivision, if the unit is

1-39     sold, leased, or otherwise conveyed on a unit-by-unit basis and

1-40     regardless of whether the unit is part of a larger building or

1-41     located on real estate containing more than four residential units;

1-42                       (C)  real estate that is a person's homestead; or

1-43                       (D)  real estate that is not improved with a

1-44     structure and is:

1-45                             (i)  zoned for single-family residential

1-46     use; or

1-47                             (ii)  restricted for single-family use

1-48     under restrictive covenants that provide that the restrictive

1-49     covenants are to remain in effect for at least 20 years after the

1-50     date the notice of lien is filed and recorded in the county in

1-51     which the real estate is located.

1-52                 (3)  "Commission" includes a fee or other valuable

1-53     consideration.

1-54                 (4)  "Commission agreement" means a written instrument

1-55     that:

1-56                       (A)  entitles a broker to a commission;

1-57                       (B)  is signed by the person obligated to pay the

1-58     commission or the person's authorized agent;

1-59                       (C)  references the commission amount or

1-60     describes the formula used to determine the commission amount; and

1-61                       (D)  contains a description legally sufficient

1-62     for identification of the real estate that is the subject of the

1-63     agreement.

1-64                 (5)  "Future commission" means a commission based on

 2-1     the occurrence of a future event, including a commission for:

 2-2                       (A)  the exercise of an option to expand leased

 2-3     premises, renew or extend a lease, or purchase real estate;

 2-4                       (B)  the execution of a new lease;

 2-5                       (C)  the expiration of a period of time; or

 2-6                       (D)  any other future event specified in a

 2-7     commission agreement.

 2-8                 (6)  "Real estate" has the meaning assigned by Section

 2-9     2, The Real Estate License Act (Article 6573a, Vernon's Texas Civil

2-10     Statutes).

2-11               (Sections 62.004-62.020 reserved for expansion

2-12                        SUBCHAPTER B.  BROKER'S LIEN

2-13           Sec. 62.021.  PERSON ENTITLED TO LIEN.  (a)  If a broker is

2-14     entitled to a commission under a commission agreement signed by the

2-15     owner of commercial real estate or the owner's authorized agent,

2-16     the broker has a lien on the commercial real estate in the amount

2-17     specified by the commission agreement.

2-18           (b)  If a broker is entitled to a commission under a

2-19     commission agreement signed by a prospective buyer of commercial

2-20     real estate or the prospective buyer's authorized agent, the broker

2-21     has a lien on the interest, if any, of the commercial real estate

2-22     that the prospective buyer purchases in the amount specified by the

2-23     commission agreement.

2-24           (c)  If a broker is entitled to a commission under a

2-25     commission agreement signed by a prospective tenant of commercial

2-26     real estate or the prospective tenant's authorized agent, the

2-27     broker has a lien on the interest, if any, of the commercial real

2-28     estate that the prospective tenant leases in the amount specified

2-29     by the commission agreement.

2-30           (d)  A lien described by this section is available only to

2-31     the broker named in the commission agreement.  The lien is not

2-32     available to an employee or independent contractor of the broker.

2-33           (e)  The broker's right to claim a lien based on the

2-34     commission agreement must be disclosed in the commission agreement.

2-35           Sec. 62.022.  WAIVER OR RELEASE.  The waiver of a broker's

2-36     entitlement to a lien under this chapter or the release of a lien

2-37     given for the purpose of releasing a broker's lien before the

2-38     commission is satisfied or forgiven is void.

2-39           Sec. 62.023.  FILING OF NOTICE OF LIEN.  (a)  A broker

2-40     claiming a lien under this chapter must file a notice of lien as

2-41     provided by Subchapter C with the county clerk of the county in

2-42     which the commercial real estate is located.

2-43           (b)  The county clerk shall record the notice of lien in

2-44     records kept for that purpose and shall index and cross-index the

2-45     notice of lien in the names of the broker and the owner of the

2-46     interest in the real estate on which the lien is claimed.

2-47           Sec. 62.024.  CONTENTS OF NOTICE OF LIEN.  The notice of lien

2-48     must be signed by the broker or by a person authorized to sign on

2-49     behalf of the broker and must contain the following:

2-50                 (1)  a sworn statement of the claim, substantially

2-51     including the commission amount or the formula used to determine

2-52     the commission amount and the date or the occurrence of the event

2-53     when the commission is due;

2-54                 (2)  the name of the broker and the real estate license

2-55     number of the broker;

2-56                 (3)  substantially the name of the owner and any other

2-57     person who the broker knows is obligated to pay the commission;

2-58                 (4)  a description legally sufficient for

2-59     identification of the commercial real estate sought to be charged

2-60     with the lien;

2-61                 (5)  a description of the interest in the commercial

2-62     real estate sought to be charged with the lien; and

2-63                 (6)  a copy of the applicable commission agreement.

2-64           Sec. 62.025.  NOTICE OF FILING.  (a)  Not later than one

2-65     business day after the date the broker files a notice of lien, the

2-66     broker shall mail a copy of the notice of lien by certified mail,

2-67     return receipt requested, or registered mail to:

2-68                 (1)  the owner of record of the interest in the

2-69     commercial real estate on which the lien is claimed or the owner's

 3-1     authorized agent; and

 3-2                 (2)  the prospective purchaser or tenant and any escrow

 3-3     agent named in a contract for the sale or lease of the interest in

 3-4     the commercial real estate on which the lien is claimed if:

 3-5                       (A)  a binding written contract for the sale or

 3-6     lease of the interest of the commercial real estate on which the

 3-7     lien is claimed is in effect between the owner and the prospective

 3-8     purchaser or tenant in a transaction that is the basis for the

 3-9     commission; and

3-10                       (B)  the binding written contract in the

3-11     transaction that is the basis for the commission is executed by the

3-12     owner and prospective purchaser or tenant before the date the

3-13     notice of lien is filed.

3-14           (b)  Service of the notice under this section is complete

3-15     when the notice is deposited in the United States mail, postage

3-16     prepaid, and addressed to the persons entitled to receive the

3-17     notice under this section.

3-18           Sec. 62.026.  INCEPTION OF BROKER'S LIEN.  A broker's lien

3-19     attaches to the interest in the commercial real estate owned by the

3-20     person obligated to pay the commission on the date the notice of

3-21     lien is recorded as provided by this chapter.  The lien does not

3-22     relate back to the date of the commission agreement.  A notice of

3-23     lien for amounts due to the broker under an installment contract or

3-24     under a commission agreement for a future commission is enforceable

3-25     only to the extent that the installment or future commission is

3-26     due.

3-27           Sec. 62.027.  PRIORITY.  (a)  A recorded lien, mortgage, or

3-28     other encumbrance, including a recorded lien securing revolving

3-29     credit and future advances for a construction loan, recorded before

3-30     the date a broker's lien is recorded has priority over the broker's

3-31     lien.  A broker's lien against the interest of a person owing the

3-32     commission is not valid or enforceable against a grantee,

3-33     purchaser, lessee, or transferee of an interest in the commercial

3-34     real estate from the person owing the commission if the deed,

3-35     lease, or instrument transferring the interest is recorded before

3-36     the broker's lien is recorded.

3-37           (b)  A mechanic's lien that is recorded after a broker's lien

3-38     and that relates back to a date before the date the broker's lien

3-39     is recorded has priority over the broker's lien.

3-40           Sec. 62.028.  SUBORDINATION.  (a)  If the owner of the

3-41     commercial real estate sells the commercial real estate, the

3-42     broker's lien is subordinate to a recorded purchase-money first

3-43     lien authorized by the purchaser if the purchaser:

3-44                 (1)  executes and files with the county clerk of the

3-45     county in which the broker's lien is filed a memorandum that

3-46     evidences the purchaser's ratification of the broker's lien and the

3-47     purchaser's assumption of the obligation to pay the broker the

3-48     commission as provided by the commission agreement that is the

3-49     basis for the lien; and

3-50                 (2)  sends the broker, by certified mail, return

3-51     receipt requested, or registered mail, a copy of the recorded

3-52     memorandum required by this subsection.

3-53           (b)  If the owner of the commercial real estate refinances a

3-54     recorded first lien secured by the commercial real estate, the

3-55     broker's lien is subordinate to the recorded refinanced first lien,

3-56     regardless of the amount of the first lien after refinancing, if

3-57     the owner:

3-58                 (1)  executes and files with the county clerk of the

3-59     county in which the broker's lien is filed a memorandum that

3-60     evidences the owner's ratification of the broker's lien and the

3-61     owner's obligation to pay the broker the commission as provided by

3-62     the commission agreement that is the basis for the lien; and

3-63                 (2)  sends the broker, by certified mail, return

3-64     receipt requested, or registered mail, a copy of the recorded

3-65     memorandum required by this subsection.

3-66           (c)  If the owner of the commercial real estate obtains an

3-67     extension of credit secured by the commercial real estate, the

3-68     broker's lien is subordinate to the lien securing the extension of

3-69     credit if, according to the lien documents, the extension of credit

 4-1     is made only for the purpose of:

 4-2                 (1)  repairing or renovating the commercial real

 4-3     estate; or

 4-4                 (2)  completing construction or providing additional

 4-5     improvements as requested by a tenant leasing the commercial real

 4-6     estate.

 4-7           Sec. 62.029.  CHANGE IN USE OF REAL ESTATE.  (a)  Except as

 4-8     provided by Subsection (b), any change in the use of the real

 4-9     estate does not affect a broker's lien if the notice of the lien

4-10     was filed when the real estate was commercial real estate.

4-11           (b)  The broker's lien is extinguished if:

4-12                 (1)  not later than the 180th day after the date on

4-13     which the broker's commission is due, the commercial real estate on

4-14     which a broker claims a lien is zoned for single-family use or

4-15     restricted for single-family use under recorded restrictive

4-16     covenants that provide that the restrictive covenants are to remain

4-17     in effect for at least 20 years; and

4-18                 (2)  the zoning or restrictive covenants for

4-19     single-family use are effective for at least two years after the

4-20     date the commission is due.

4-21               (Sections 62.030-62.040 reserved for expansion

4-22                SUBCHAPTER C.  TIME FOR FILING NOTICE OF LIEN

4-23           Sec. 62.041.  TIME TO FILE.  (a)  Except as provided by

4-24     Subsection (b), a broker must record a notice of lien:

4-25                 (1)  after the commission agreement is signed by the

4-26     person who is obligated to pay the commission or the person's

4-27     authorized agent; and

4-28                 (2)  before the conveyance of the commercial real

4-29     estate on which the broker is claiming a lien.

4-30           (b)  If the lien is based on a lease transaction, the broker

4-31     must record a notice of lien before:

4-32                 (1)  the 91st day after the date the event for which

4-33     the commission becomes payable occurs; and

4-34                 (2)  the date that the person who is obligated to pay

4-35     the commission records the future conveyance of the interest in the

4-36     commercial real estate on which the lien is claimed.

4-37               (Sections 62.042-62.060 reserved for expansion

4-38                     SUBCHAPTER D.  ENFORCEMENT OF LIEN

4-39           Sec. 62.061.  SUIT TO FORECLOSE LIEN.  (a)  A broker may

4-40     bring suit to foreclose a lien in any district court for the county

4-41     in which the commercial real estate is located by filing a sworn

4-42     complaint stating that the notice of lien has been recorded.

4-43           (b)  A complaint in a suit filed under this section must

4-44     contain:

4-45                 (1)  a brief description of the commission agreement

4-46     that is the basis for the lien, including a description of the

4-47     disclosure of the broker's right to the lien contained in the

4-48     commission agreement;

4-49                 (2)  the date on which the commission agreement was

4-50     executed;

4-51                 (3)  a description of the services performed by the

4-52     broker;

4-53                 (4)  the amount due and unpaid;

4-54                 (5)  a description of the commercial real estate to

4-55     which the lien attaches; and

4-56                 (6)  other facts necessary for a full understanding of

4-57     the rights of the parties.

4-58           (c)  The broker must include as a defendant in a suit brought

4-59     under this subchapter each person whom the broker knows to have an

4-60     interest in the commercial real estate that is subordinate to or

4-61     encumbered by the broker's lien.

4-62           (d)  If the broker and a person against whom the broker

4-63     claims a commission use alternative dispute resolution procedures

4-64     to resolve a dispute concerning entitlement to the broker's

4-65     commission, the broker's lien remains valid, and any suit to

4-66     foreclose the lien is stayed until the alternative dispute

4-67     resolution process is completed.

4-68           Sec. 62.062.  STATUTE OF LIMITATIONS.  (a)  Except as

4-69     provided by this section, a broker claiming a lien under this

 5-1     chapter must bring a suit to foreclose the lien on or before the

 5-2     second anniversary of the date the notice of lien is recorded.

 5-3           (b)  A broker claiming a lien to collect a future commission

 5-4     must bring a suit to foreclose the lien on or before the second

 5-5     anniversary of the date on which the commission is due.

 5-6           (c)  A broker claiming a lien for a commission that is due

 5-7     must bring a suit to foreclose the lien not later than the 30th day

 5-8     after the date the broker receives a written demand to bring a suit

 5-9     to foreclose the lien from the owner of the interest in the

5-10     commercial real estate on which the lien is claimed.

5-11           (d)  If a suit to foreclose the lien is not brought within

5-12     the time required by this section, the lien is void.

5-13           (e)  A broker claiming a lien to collect a commission must

5-14     bring suit to foreclose the lien on or before:

5-15                 (1)  the 10th anniversary of the date the lien is

5-16     recorded; or

5-17                 (2)  the 10th anniversary of the date the broker

5-18     records a subsequent notice of lien as a renewal of the broker's

5-19     entitlement to the lien.

5-20           Sec. 62.063.  ASSESSMENT OF COSTS, FEES, AND INTEREST.  The

5-21     prevailing party in a suit brought under this subchapter is

5-22     entitled to court costs, reasonable attorney's fees, and

5-23     prejudgment interest.

5-24               (Sections 62.064-62.080 reserved for expansion

5-25                       SUBCHAPTER E.  RELEASE OF LIEN

5-26           Sec. 62.081.  RELEASE OF LIEN.  (a)  When a debt that is the

5-27     basis for a lien under this chapter is satisfied, the broker shall,

5-28     not later than the fifth day after the date the broker receives a

5-29     written request from the owner of the interest in the commercial

5-30     real estate on which the lien is claimed, furnish to the owner a

5-31     release of indebtedness and any lien claimed to the extent of the

5-32     indebtedness paid.

5-33           (b)  When a condition occurs that would preclude the broker

5-34     from receiving compensation under the terms of the commission

5-35     agreement that is the basis for the lien, the broker shall, not

5-36     later than the 10th day after the date the broker receives a

5-37     written request from the owner of the interest in the commercial

5-38     real estate on which the lien is claimed, furnish to the owner a

5-39     release of indebtedness and any lien claimed.

5-40           (c)  A release of lien must be in a form that permits the

5-41     instrument to be filed of record.

5-42               (Sections 62.082-62.100 reserved for expansion

5-43                  SUBCHAPTER F.  ESCROW OF DISPUTED AMOUNTS

5-44           Sec. 62.101.  ESCROW ACCOUNT.  (a)  If a claim for a lien

5-45     described by this chapter is not paid or assumed at the closing of

5-46     a sale, lease, or mortgage of the commercial real estate subject to

5-47     the lien and would prevent the closing of the transaction or

5-48     conveyance, the person named in the notice of lien as obligated to

5-49     pay the commission shall establish an escrow account from the

5-50     proceeds of the transaction or conveyance in an amount sufficient

5-51     to satisfy the lien and related costs for any interpleader action

5-52     brought by the person maintaining the escrow account.  Related

5-53     costs for any interpleader action may be deducted from the escrow

5-54     account by the person maintaining the escrow account.  If an escrow

5-55     agent is named in the contract on which the transaction or

5-56     conveyance is based, the escrow account shall be established with

5-57     the named escrow agent.

5-58           (b)  A party may not refuse to close a transaction because of

5-59     the requirement to establish an escrow account as provided by this

5-60     section provided that the broker executes and delivers a release of

5-61     the broker's lien in a recordable form for the amount of the

5-62     commission that is due.

5-63           (c)  The amount held in escrow shall be held in escrow until:

5-64                 (1)  the rights of the parties claiming the amount in

5-65     escrow are determined by a written agreement of the parties, a

5-66     court of law, or an alternative dispute resolution process agreed

5-67     to by the parties;

5-68                 (2)  the broker's lien is no longer enforceable; or

5-69                 (3)  the funds are interpled into a court of competent

 6-1     jurisdiction.

 6-2           (d)  When the escrow account is established under this

 6-3     section, the broker's lien against the commercial real estate is

 6-4     extinguished and becomes a lien on the proceeds in the escrow

 6-5     account.

 6-6           SECTION 2.  This Act takes effect September 1, 1997.  The

 6-7     change in law made by this Act applies only to an agreement to

 6-8     compensate a licensed real estate broker that is entered into on or

 6-9     after the effective date of this Act.

6-10           SECTION 3.  The importance of this legislation and the

6-11     crowded condition of the calendars in both houses create an

6-12     emergency and an imperative public necessity that the

6-13     constitutional rule requiring bills to be read on three several

6-14     days in each house be suspended, and this rule is hereby suspended.

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