SRC-JJJ H.B. 1052 76(R) BILL ANALYSIS
Senate Research Center H.B. 1052
By: Brimer (Wentworth)
State Affairs
5/4/1999
Engrossed
DIGEST
Under current law, a real estate broker may not obtain a lien on real
property to secure the payment of the broker's commission from a commercial
real estate transaction. Therefore, a commercial real estate broker does
not have security for the commission. H.B. 1052 would create a real estate
broker's and appraiser's lien on commercial real estate, and provide a
penalty.
PURPOSE
As proposed, H.B. 1052 creates a real estate broker's and appraiser's lien
on commercial real estate, and provide a penalty.
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 AND APPRAISER'S LIEN ON COMMERCIAL REAL ESTATE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 62.001. SHORT TITLE. Authorizes this chapter to be cited as the
Broker's and Appraiser's Lien on Commercial Real Estate Act.
Sec. 62.002. APPLICABILITY. Provides that this chapter applies only to
real estate that is commercial real estate on the date the notice of lien
is filed under this chapter. Sets forth property to which this chapter
does not apply, in order to reduce the potentially adverse impact on small
businesses.
Sec. 62.003. DEFINITIONS. Defines "broker," "commercial real estate,"
"commission," "commission agreement, "deferred commission," and "real
estate."
Sec. 62.004. PAYABLE COMMISSION AND EARNED COMMISSION. Establishes that a
commission is payable at the time provided in the commission agreement.
Provides that a person is not obligated to pay the commission, if certain
conditions are not met. Sets forth provisions by which the commission is
earned, providing exception of Subsection (c). Establishes that if a broker
has earned a commission under a commission agreement relating to a lease
transaction and the commission agreement provides that the broker may
receive an additional commission when the lease is modified to expand the
lease space or renewed, that the additional commission is earned when
certain conditions exist.
Sec. 62.005. BROKER'S ADDRESS FOR RECEIPT OF NOTICE. Requires a seller,
lessor, buyer, or tenant to send any notice required to be sent to the
broker under this chapter to the broker at a specific address.
SUBCHAPTER B. BROKER'S LIEN
Sec. 62.021. PERSON ENTITLED TO LIEN. Sets forth provisions by which a
broker has a lien on a seller's or lessor's commercial real estate interest
in the amount specified by the commission agreement. Sets forth provisions
by which a broker has a lien on the commercial real estate interest
purchased by a protective buyer in the amount specified by the commission
agreement. Sets forth provisions by which a broker has a lien on the
prospective tenant's leasehold interest in commercial real estate in the
amount specified by the commission agreement. Provides that a lien
described by this section is available only to the broker named in the
commission agreement. Establishes that the lien is not available to an
employee or independent contractor or 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, RELEASE, OF DISCHARGE OR LIEN; ASSUMPTION OF
COMMISSION OBLIGATION. Provides that the waiver of a broker's right to a
lien, or a release given for the purpose of releasing the broker's lien
before the commission is satisfied or forgiven, is void, except as provided
by Subsection (b). Requires a broker's entitlement to a lien on the
interest of an owner or tenant in commercial real estate to be
automatically waived if certain conditions exist. Sets forth provisions by
which a lien is discharged. Provides that a person who assumes an owner's
or tenant's commercial real estate interest is bound by a commissioner
agreement included in a lease agreement unless an escrow account is
established under Subchapter F or a bond is provided under Subchapter G.
Establishes that this section does not affect the rights of a mortgagee who
forecloses on commercial real estate and does not assume the lease on which
a commission agreement is based.
Sec. 62.023. AFFIDAVIT IDENTIFYING BROKER. Requires the seller of
commercial real estate and the seller's broker to provide to certain
requesting parties before the closing of the transaction a written
affidavit identifying each broker with whom the affidavit knows or
believes the seller or the seller's authorized agent has signed a
commission agreement.
Sec. 62.024. FILING OF NOTICE OF LIEN. Prohibits a broker claiming a lien
under this chapter from filing a notice of lien unless the commission on
which the lien is based is earned. Requires a broker claiming a lien to
file a notice of lien with the clerk of the county in which the commercial
real estate is located. Requires the clerk of the county to record the
notice of lien in records kept for that purpose and shall index and
cross-index the notice of lien in the names of the broker and, each person
obligated to pay the commission, and each person who has an interest in the
commercial real estate if the broker claims a lien on that interest.
Sec. 62.025. CONTENTS OF NOTICE OF LIEN. Sets forth required information
included in the notice of lien, as well as the required signature by the
broker or by a person authorized to sign on behalf of the broker.
Sec. 62.026. NOTICE OF FILING. Defines "business day." Requires the
broker to mail a copy of the notice of lien by certified mail, returned
receipt requested, or registered mail to certain individuals, not later
than one business day after the date the broker files a notice of lien.
Establishes that the 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. Requires the broker, before a
certain date, to deliver a file-stamped copy or transmit a facsimile of a
file-stamped copy of the notice of lien to certain individuals. Requires
the broker to deliver the copy or transmit the facsimile directly to the
individual escrow agent responsible for closing the sale or lease if the
broker knows the person's name. Prohibits closing of the transaction unless
the lien is released, if the escrow agent receives the notice of lien, the
funds are held in escrow, or a bond is filed. Provides that if the broker
fails to comply with this section, the notice of lien is void.
Sec. 62.027. INCEPTION OF BROKER'S LIEN. Establishes that a broker's lien
attaches to the commercial real estate interest 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 amounts earned by
the broker under an installment contract or under a commission agreement
for a deferred commission is enforceable only to the extent that the
installment or commission has become payable.
Sec. 62.028. PRIORITY. Provides that a recorded lien, mortgage, or other
encumbrance on commercial real estate recorded before the date a broker's
lien is recorded has priority over the broker's lien. Establishes that a
broker's lien on the commercial real estate interest of a person obligated
to pay a commission is not valid or enforceable against certain individuals
if the deed, lease, or instrument transferring the interest is recorded
before the notice of the broker's lien is recorded. Provides that a
purchase-money mortgage lien executed by the buyer has priority over a
broker's lien claimed against the prospective buyer for the commission owed
by that buyer. Establishes that a mechanic's lien that is recorded after
the broker's lien and that relates back to the date the broker's lien is
recorded has priority over the broker's lien.
Sec. 62.029. SUBORDINATION. Sets forth provisions establishing that the
broker's lien is subordinate to a recorded purchase-money first lien
authorized by the buyer, if the person obligated to pay the commission
sells that person's commercial real estate interest. Sets forth provisions
by which the broker's lien is subordinate to the recorded refinanced first
lien, regardless of the amount of the first lien after refinancing, if the
person obligated to pay the commission refinances a recorded first lien
secured by that person's commercial real estate interest. Sets forth
provisions by which the broker's lien is subordinate to the lien securing
the extension of credit, if the person obligated to pay the commission
obtains an extension of credit secured by that person's commercial real
estate interest. Sets forth requirements for the broker, if the person
obligated to pay the commission furnishes a subordination agreement to be
executed by the broker.
Sec. 62.030. MIXED-USE REAL ESTATE. Provides that the broker's lien
attaches only to the portions of the real estate that constitute commercial
real estate, if the real estate is zoned or restricted for more than one
use.
Sec. 62.031. CHANGE IN USE OF REAL ESTATE. Establishes that any change in
use of the real estate does not affect a broker's lien if the notice of
the lien was filed when the real estate was commercial real estate, except
as provided by Subsection (b). Sets forth provisions by which the broker's
lien is extinguished.
SUBCHAPTER C. TIME FOR FILING NOTICE OF LIEN
Sec. 62.041. TIME TO FILE. Sets forth a time frame required for a broker
to record a notice of lien, if the broker has earned commission. Provides
that a broker must record a notice of lien, if a broker has earned a
commission signed by a prospective buyer or a prospective buyer's
authorized agent. Sets forth the date, if the lien is based on a lease
transaction, by which the broker must record a notice of lien after the
commission is earned. Provides that the lien is void, if a notice of lien
is not filed within the required time.
SUBCHAPTER D. ENFORCEMENT OF LIEN
Sec. 62.061. SUIT TO FORECLOSE LIEN. Prohibits a broker from bringing a
suit to foreclose a lien unless the commission is earned and payable.
Authorizes a broker to bring a suit to foreclose a lien in any district
court for the county in which the commercial real estate is located by
filing a sworn complaint stating that the notice of lien has been recorded.
Sets forth information required for a complaint in a suit filed under this
section. Requires the broker to include as a defendant in a suit each
person the broker believes to have an interest in the commercial real
estate that is subordinate to or encumbered by the broker's lien.
Establishes provisions regarding the use of alternative dispute resolution.
Sec. 62.062. STATUTE OF LIMITATIONS. Requires a broker claiming a lien 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 deferred commission to bring a suit to foreclose the lien on a
certain date. Requires a renewal of a lien to state that it is a renewal
and must be recorded within a specific time frame. Requires a broker
claiming a lien for a commission that is payable to bring a suit within a
specific time frame. Provides that the lien is void, if a suit to
foreclose the lien is not brought within the prescribed period.
SUBCHAPTER E. RELEASE OF LIEN
Sec. 62.081. RELEASE OF LIEN. Requires the broker to furnish to the owner
a release of indebtedness and any lien claimed, not later than the fifth
day after the date a broker receives written request from the owner,
provided that certain conditions exist. Requires the broker within a
certain amount of time, when a condition occurs that would preclude the
broker from receiving a commission, to furnish the owner a release of
indebtedness and any lien claimed. 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. Establishes requirements if a claim for a
lien under a recorded notice of lien is not paid or assumed at the closing
of the commercial real estate interest subject to the lien and would
prevent the closing of the transaction or conveyance, than any person named
in the notice of lien shall be obligated to pay the commission on the date
of the closing, as well as fulfill certain conditions.
Sec. 62.102. NAMED ESCROW AGENT. Requires the escrow agent to be
established with the named escrow agent, if the escrow agent is named in
the contract on which the transaction or conveyance os based.
Sec. 62.103. COSTS OF INTERPLEADER. Authorizes related costs for any
interpleader action to be deducted from the escrow account by the person
maintaining the escrow account.
Sec. 62.104. REFUSAL TO ESTABLISH ESCROW ACCOUNT OR BOND. Prohibits a
party from refusing to close a transaction because of the requirement to
establish an escrow account or bond if certain conditions are fulfilled.
Prohibits a prospective buyer from a commercial real estate interest from
refusing to close the purchase solely because a broker's lien is filed
after the date a title commitment or abstract of title relating to the
interest is issued if an escrow account is established or a bond is filed.
Sec. 62.105. TERM OF ESCROW ACCOUNT. Sets forth the time frame for which
the account shall be held in escrow.
Sec. 62.106. EXTINGUISHMENT OF LIEN UPON ESCROW. 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.
SUBCHAPTER G. BOND TO INDEMNIFY AGAINST LIEN
Sec. 62.121. BOND. Authorizes a person to file a bond to indemnify
against the lien, if the lien is fixed or is attempted to be fixed by a
recorded instrument. Requires the bond to be filed with the county clerk
of the county in which the commercial real estate subject to the lien is
located.
Sec. 62.122. BOND REQUIREMENTS. Sets forth certain bond requirements.
Sec. 62.123. NOTICE OF BOND. Requires the county clerk to issue notice of
the bond to all named obligees, after the bond is filed. Requires a copy
of the bond to be attached to the notice. Requires the notice to be served
on each obligee by specifically mailing to the claimant at the address
stated in the bond for the obligee.
Sec. 62.124. RECORDING OF BOND AND NOTICE. Requires the county clerk to
record the bond, the notice, and a certificate of mailing in the real
property records. Authorizes a buyer, insurer of title, or lender to rely
on and be absolutely protected by the record of the bond and the notice to
the same extent as if the lien claimant had filed a release of lien in the
real property records.
Sec. 62.125. ACTION ON BOND. Prohibits a party making a lien claim from
suing on the bond later than the last date on which a person may bring a
suit to foreclose the lien. Provides that the bond is not exhausted by one
action against it. Authorizes each obligee or assignee of an obligee to
maintain a separate suit on the bond in any district court for the county
in which the commercial real estate is located.
SUBCHAPTER H. REMEDIES
Sec. 62.141. OWNER OR TENANT'S REMEDIES. Authorizes an owner or tenant to
file a suit against a broker. Requires the court to discharge a broker's
lien if the broker fulfills certain conditions. Sets forth provisions by
which a broker is liable to an owner or tenant for certain damages.
Provides that an individual broker who was the designated officer of a
corporate or partnership broker violated this chapter is liable for any
unsatisfied damages or civil penalties if the individual broker was named
as a defendant in an action filed under this section. Provides that this
section does not prevent certain complaint filings, investigations, or
initiation of a disciplinary proceeding.
Sec. 62.142. BROKER'S REMEDIES. Authorizes a broker to file suit against
an owner or tenant to enforce a commission agreement. Authorizes the court
to make certain awards to the broker, if the court finds that the broker
waived the right to file a lien and that the owner or tenant violated the
commission agreement.
SECTION 2. Effective date: September 1, 1999.
Makes application of this Act prospective.
SECTION 3. Emergency clause.