1-1 AN ACT 1-2 relating to creating a real estate broker's and appraiser's lien on 1-3 commercial real estate; providing a penalty. 1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS: 1-5 SECTION 1. Subtitle B, Title 5, Property Code, is amended by 1-6 adding Chapter 62 to read as follows: 1-7 CHAPTER 62. BROKER'S AND APPRAISER'S LIEN ON COMMERCIAL 1-8 REAL ESTATE 1-9 SUBCHAPTER A. GENERAL PROVISIONS 1-10 Sec. 62.001. SHORT TITLE. This chapter may be cited as the 1-11 Broker's and Appraiser's Lien on Commercial Real Estate Act. 1-12 Sec. 62.002. APPLICABILITY. (a) This chapter applies only 1-13 to real estate that is commercial real estate on the date the 1-14 notice of lien is filed under this chapter. 1-15 (b) This chapter does not apply to: 1-16 (1) a transaction involving a claim for a commission 1-17 of $2,500 or less in the aggregate; or 1-18 (2) a transaction for the sale of commercial real 1-19 estate involving a claim for a commission of $5,000 or less in the 1-20 aggregate if the commercial real estate: 1-21 (A) is the principal place of business of the 1-22 record title owner; 1-23 (B) is occupied by more than one and fewer than 1-24 five tenants; and 2-1 (C) is improved with 7,500 square feet or less 2-2 of total gross building area. 2-3 Sec. 62.003. DEFINITIONS. In this chapter: 2-4 (1) "Broker" means a person who: 2-5 (A) is licensed as a real estate broker under 2-6 The Real Estate License Act (Article 6573a, Vernon's Texas Civil 2-7 Statutes) and is not acting as a residential rental locator as 2-8 defined by Section 24, The Real Estate License Act (Article 6573a, 2-9 Vernon's Texas Civil Statutes); or 2-10 (B) is licensed or certified as a real estate 2-11 appraiser under the Texas Appraiser Licensing and Certification Act 2-12 (Article 6573a.2, Vernon's Texas Civil Statutes). 2-13 (2) "Commercial real estate" means all real estate 2-14 except: 2-15 (A) real estate improved with one to four 2-16 residential units; 2-17 (B) a single-family residential unit, including 2-18 a condominium, townhouse, or home in a subdivision, if the unit is 2-19 sold, leased, or otherwise conveyed on a unit-by-unit basis and 2-20 regardless of whether the unit is part of a larger building or 2-21 located on real estate containing more than four residential units; 2-22 (C) real estate that is or includes on the real 2-23 estate a person's homestead; 2-24 (D) real estate that is not improved with a 2-25 structure and is: 2-26 (i) zoned for single-family residential 2-27 use; or 3-1 (ii) restricted for single-family use 3-2 under restrictive covenants that will remain in effect for at least 3-3 the next two years; or 3-4 (E) real estate that: 3-5 (i) is primarily used for farming and 3-6 ranching purposes; 3-7 (ii) will continue to be used primarily 3-8 for farming and ranching purposes; and 3-9 (iii) is located more than three miles 3-10 from the corporate boundaries of any municipality. 3-11 (3) "Commission" includes a fee or other valuable 3-12 consideration. 3-13 (4) "Commission agreement" means a written instrument 3-14 that: 3-15 (A) entitles a broker to a commission; 3-16 (B) is signed by the person obligated to pay the 3-17 commission or that person's authorized agent; 3-18 (C) references the commission amount or 3-19 describes the formula used to determine the commission amount; and 3-20 (D) contains a description legally sufficient 3-21 for identification of the real estate interest that is the subject 3-22 of the agreement if the person obligated to pay the commission is a 3-23 seller or lessor. 3-24 (5) "Deferred commission" means a commission that is 3-25 earned and is not yet payable. 3-26 (6) "Real estate" has the meaning assigned by Section 3-27 2, The Real Estate License Act (Article 6573a, Vernon's Texas Civil 4-1 Statutes). 4-2 Sec. 62.004. PAYABLE COMMISSION AND EARNED COMMISSION. (a) 4-3 A commission is payable at the time provided in the commission 4-4 agreement. If payment of the commission is conditioned on the 4-5 occurrence of an event and that event does not occur, the person 4-6 obligated to pay the commission is not required to pay the 4-7 commission. 4-8 (b) Except as provided by Subsection (c), a commission is 4-9 earned on the earlier of the date that: 4-10 (1) an event occurs that, under the commission 4-11 agreement, defines when the commission is earned; or 4-12 (2) the person obligated to pay the commission enters 4-13 into a purchase contract or a lease during the period prescribed by 4-14 the commission agreement for all or part of the commercial real 4-15 estate if the purchase contract or lease is contemplated by the 4-16 commission agreement and if the parties to the purchase contract or 4-17 lease are contemplated by the commission agreement. 4-18 (c) If a broker has earned a commission under a commission 4-19 agreement relating to a lease transaction and the commission 4-20 agreement provides that the broker may receive an additional 4-21 commission when the lease is modified to expand the lease space or 4-22 renewed, the additional commission is earned when: 4-23 (1) the broker performs all the additional services 4-24 relating to the lease modification or renewal expressly prescribed 4-25 by the commission agreement; or 4-26 (2) the broker first earned a commission under the 4-27 commission agreement if the commission agreement does not expressly 5-1 require the broker to perform additional services relating to a 5-2 lease modification or renewal. 5-3 Sec. 62.005. BROKER'S ADDRESS FOR RECEIPT OF NOTICE. A 5-4 seller, lessor, buyer, or tenant shall send any notice required to 5-5 be sent to the broker under this chapter to the broker: 5-6 (1) at the broker's address as reflected in the 5-7 records of the Texas Real Estate Commission; and 5-8 (2) at the broker's last address that the broker 5-9 furnished the seller, lessor, buyer, or tenant by certified mail, 5-10 return receipt requested, if the broker's license is expired. 5-11 (Sections 62.006-62.020 reserved for expansion) 5-12 SUBCHAPTER B. BROKER'S LIEN 5-13 Sec. 62.021. PERSON ENTITLED TO LIEN. (a) A broker has a 5-14 lien on a seller's or lessor's commercial real estate interest in 5-15 the amount specified by the commission agreement if: 5-16 (1) the broker has earned a commission under a 5-17 commission agreement signed by the seller or lessor of the 5-18 commercial real estate interest or the seller's or lessor's 5-19 authorized agent; and 5-20 (2) a notice of lien is recorded and indexed as 5-21 provided by Section 62.024. 5-22 (b) A broker has a lien on the commercial real estate 5-23 interest purchased by a prospective buyer in the amount specified 5-24 by the commission agreement if: 5-25 (1) the broker has earned a commission under a 5-26 commission agreement signed by the prospective buyer of the 5-27 commercial real estate interest or the prospective buyer's 6-1 authorized agent; and 6-2 (2) a notice of lien is recorded and indexed as 6-3 provided by Section 62.024. 6-4 (c) A broker has a lien on the leasehold interest in the 6-5 commercial real estate that a prospective tenant leases in the 6-6 amount specified by the commission agreement if: 6-7 (1) the broker has earned a commission under a 6-8 commission agreement signed by the prospective tenant of the 6-9 commercial real estate interest or the prospective tenant's 6-10 authorized agent; and 6-11 (2) a notice of lien is recorded and indexed as 6-12 provided by Section 62.024. 6-13 (d) A lien described by this section is available only to 6-14 the broker named in the commission agreement. The lien is not 6-15 available to an employee or independent contractor of the broker. 6-16 (e) The broker's right to claim a lien based on the 6-17 commission agreement must be disclosed in the commission agreement. 6-18 Sec. 62.022. WAIVER, RELEASE, OR DISCHARGE OF LIEN; 6-19 ASSUMPTION OF COMMISSION OBLIGATION. (a) Except as provided by 6-20 Subsection (b), the waiver of a broker's right to a lien under this 6-21 chapter, or a release given for the purpose of releasing the 6-22 broker's lien before the commission is satisfied or forgiven, is 6-23 void. 6-24 (b) A broker's entitlement to a lien on the interest of an 6-25 owner or tenant in commercial real estate shall be automatically 6-26 waived if: 6-27 (1) the commission is earned and payable for services 7-1 provided relating to a lease transaction; and 7-2 (2) the commission agreement is included as a 7-3 provision of the lease agreement. 7-4 (c) A lien under this chapter is discharged by: 7-5 (1) a court order discharging the lien; 7-6 (2) paying the commission to the broker named in the 7-7 commission agreement; or 7-8 (3) establishing an escrow account described by 7-9 Subchapter F. 7-10 (d) A person who assumes an owner's or tenant's commercial 7-11 real estate interest is bound by a commission agreement included in 7-12 a lease agreement unless an escrow account is established under 7-13 Subchapter F or a bond is provided under Subchapter G. 7-14 (e) This section does not affect the rights of a mortgagee 7-15 who forecloses on commercial real estate and does not assume the 7-16 lease on which a commission agreement is based. 7-17 Sec. 62.023. AFFIDAVIT IDENTIFYING BROKER. If requested by 7-18 the buyer, the buyer's authorized agent, or the escrow agent for 7-19 the commercial real estate transaction, the seller of commercial 7-20 real estate and the broker representing the seller shall provide to 7-21 the requesting party before the closing of the transaction a 7-22 written affidavit identifying each broker with whom the affiant 7-23 knows or believes the seller or the seller's authorized agent has 7-24 signed a commission agreement under which a commission is claimed 7-25 or earned and has not been paid. 7-26 Sec. 62.024. FILING OF NOTICE OF LIEN. (a) A broker 7-27 claiming a lien under this chapter may not file a notice of lien 8-1 unless the commission on which the lien is based is earned. 8-2 (b) A broker claiming a lien under this chapter must file a 8-3 notice of lien as provided by Subchapter C with the county clerk of 8-4 the county in which the commercial real estate is located. 8-5 (c) The county clerk shall record the notice of lien in 8-6 records kept for that purpose and shall index and cross-index the 8-7 notice of lien in the names of the broker, each person obligated to 8-8 pay the commission under the commission agreement, and each person 8-9 who owns an interest in the commercial real estate if the broker 8-10 claims a lien on that interest. 8-11 Sec. 62.025. CONTENTS OF NOTICE OF LIEN. The notice of lien 8-12 must be signed by the broker or by a person authorized to sign on 8-13 behalf of the broker and must contain the following: 8-14 (1) a sworn statement of the nature and amount of the 8-15 claim, including: 8-16 (A) the commission amount or the formula used to 8-17 determine the commission; 8-18 (B) the type of commission at issue, including a 8-19 deferred commission; and 8-20 (C) the month and year in which the commission 8-21 was earned; 8-22 (2) the name of the broker and the real estate license 8-23 number of the broker; 8-24 (3) the name as reflected in the broker's records of 8-25 any person who the broker believes is obligated to pay the 8-26 commission under the commission agreement; 8-27 (4) the name as reflected in the broker's records of 9-1 any person the broker believes to be an owner of the commercial 9-2 real estate interest on which the lien is claimed; 9-3 (5) a description legally sufficient for 9-4 identification of the commercial real estate interest sought to be 9-5 charged with the lien; 9-6 (6) the name of any cooperating broker or principal in 9-7 the transaction with whom the broker intends to share the 9-8 commission and the dollar or percentage amount to be shared; and 9-9 (7) a copy of the commission agreement on which the 9-10 lien is based. 9-11 Sec. 62.026. NOTICE OF FILING. (a) In this section, 9-12 "business day" means a day other than a Saturday, Sunday, or 9-13 holiday recognized by this state. 9-14 (b) Not later than one business day after the date the 9-15 broker files a notice of lien, the broker shall mail a copy of the 9-16 notice of lien by certified mail, return receipt requested, or 9-17 registered mail to: 9-18 (1) the owner of record of the commercial real estate 9-19 interest on which the lien is claimed or the owner's authorized 9-20 agent; and 9-21 (2) the prospective buyer or tenant and any escrow 9-22 agent named in a contract for the sale or lease of the commercial 9-23 real estate interest on which the lien is claimed if: 9-24 (A) a binding written contract for the sale or 9-25 lease of the commercial real estate interest is in effect between 9-26 the owner and the prospective buyer or tenant in a transaction that 9-27 is the basis for the commission; and 10-1 (B) the binding written contract was executed by 10-2 the owner and the prospective buyer or tenant before the date the 10-3 notice of lien is filed. 10-4 (c) Service of the notice under Subsection (b) is complete 10-5 when the notice is deposited in the United States mail, postage 10-6 prepaid, and addressed to the persons entitled to receive the 10-7 notice under this section. 10-8 (d) If the broker has actual knowledge of the identity of 10-9 the escrow agent named in the contract for the sale or lease of the 10-10 commercial real estate interest on which the broker claims a lien 10-11 or of the escrow agent otherwise closing the sale or lease of the 10-12 commercial real estate interest, the broker, before the first 10-13 business day before the date that the sale or lease is closed on 10-14 commercial real estate for which a notice of lien is filed, shall 10-15 deliver a file-stamped copy or transmit a facsimile of a 10-16 file-stamped copy of the notice of lien to each escrow agent at the 10-17 office in which the closing of the sale or lease will occur for use 10-18 during the closing of the sale or lease. The broker shall deliver 10-19 the copy or transmit the facsimile directly to the individual 10-20 escrow agent responsible for closing the sale or lease if the 10-21 broker knows that person's name. 10-22 (e) If the escrow agent receives the notice of lien, the 10-23 escrow agent and other parties to the sale or lease may not close 10-24 the transaction unless the lien is released, the prospective buyer 10-25 or tenant purchases or leases the property subject to the lien, the 10-26 funds are held in escrow as provided by Subchapter F, or a bond is 10-27 filed as provided by Subchapter G. 11-1 (f) If the broker fails to comply with this section, the 11-2 notice of lien is void. 11-3 Sec. 62.027. INCEPTION OF BROKER'S LIEN. (a) A broker's 11-4 lien attaches to the commercial real estate interest owned by the 11-5 person obligated to pay the commission on the date the notice of 11-6 lien is recorded as provided by this chapter. The lien does not 11-7 relate back to the date of the commission agreement. 11-8 (b) A notice of lien for amounts earned by the broker under 11-9 an installment contract or under a commission agreement for a 11-10 deferred commission is enforceable only to the extent that the 11-11 installment or commission has become payable. 11-12 Sec. 62.028. PRIORITY. (a) A recorded lien, mortgage, or 11-13 other encumbrance on commercial real estate, including a recorded 11-14 lien securing revolving credit and future advances for a loan, 11-15 recorded before the date a broker's lien is recorded has priority 11-16 over the broker's lien. 11-17 (b) A broker's lien on the commercial real estate interest 11-18 of a person obligated to pay a commission is not valid or 11-19 enforceable against a grantee, buyer, lessee, or transferee of the 11-20 interest of the person obligated to pay the commission if the deed, 11-21 lease, or instrument transferring the interest is recorded before 11-22 the notice of the broker's lien is recorded. 11-23 (c) A purchase-money mortgage lien executed by the buyer of 11-24 the commercial real estate interest has priority over a broker's 11-25 lien claimed for the commission owed by the buyer against the 11-26 commercial real estate interest purchased by the buyer. 11-27 (d) A mechanic's lien that is recorded after a broker's lien 12-1 and that relates back to a date before the date the broker's lien 12-2 is recorded has priority over the broker's lien. 12-3 Sec. 62.029. SUBORDINATION. (a) If the person obligated to 12-4 pay the commission sells that person's commercial real estate 12-5 interest, the broker's lien is subordinate to a recorded 12-6 purchase-money first lien authorized by the buyer if the buyer: 12-7 (1) executes and files with the county clerk of the 12-8 county in which the broker's lien is filed a memorandum that 12-9 evidences the buyer's acknowledgment of the existence of the 12-10 broker's lien; and 12-11 (2) sends the broker, by certified mail, return 12-12 receipt requested, or registered mail, a copy of the recorded 12-13 memorandum required by this subsection. 12-14 (b) If the person obligated to pay the commission refinances 12-15 a recorded first lien secured by that person's commercial real 12-16 estate interest, the broker's lien is subordinate to the recorded 12-17 refinanced first lien, regardless of the amount of the first lien 12-18 after refinancing, if the person obligated to pay the commission: 12-19 (1) executes and files with the county clerk of the 12-20 county in which the broker's lien is filed a memorandum that 12-21 evidences the person's acknowledgment of the existence of the 12-22 broker's lien; and 12-23 (2) sends the broker, by certified mail, return 12-24 receipt requested, or registered mail, a copy of the recorded 12-25 memorandum required by this subsection. 12-26 (c) If the person obligated to pay the commission obtains an 12-27 extension of credit secured by that person's commercial real estate 13-1 interest, the broker's lien is subordinate to the lien securing the 13-2 extension of credit if, according to the loan documents, the 13-3 extension of credit is made only for the purpose of: 13-4 (1) repairing or renovating the commercial real 13-5 estate; or 13-6 (2) completing construction or providing additional 13-7 improvements on the commercial real estate. 13-8 (d) If the person obligated to pay the commission furnishes 13-9 a subordination agreement as provided by this section to be 13-10 executed by the broker, the broker must: 13-11 (1) execute and acknowledge the subordination 13-12 agreement before a notary public; and 13-13 (2) return the subordination agreement to the person 13-14 not later than the seventh day after the date the broker receives 13-15 the subordination agreement and other documents the broker 13-16 reasonably requests in order to determine that the subordination 13-17 agreement complies with this section. 13-18 Sec. 62.030. MIXED-USE REAL ESTATE. If real estate is zoned 13-19 or restricted for more than one use, the broker's lien attaches 13-20 only to the portions of the real estate that constitute commercial 13-21 real estate. 13-22 Sec. 62.031. CHANGE IN USE OF REAL ESTATE. (a) Except as 13-23 provided by Subsection (b), any change in the use of the real 13-24 estate does not affect a broker's lien if the notice of the lien 13-25 was filed when the real estate was commercial real estate. 13-26 (b) The broker's lien is extinguished if: 13-27 (1) not later than the 360th day after the date on 14-1 which the broker's commission is payable, the commercial real 14-2 estate interest on which a broker claims a lien is zoned for 14-3 single-family use or restricted for single-family use under 14-4 recorded restrictive covenants; and 14-5 (2) the zoning ordinances or restrictive covenants for 14-6 single-family use are in effect until at least the second 14-7 anniversary of the date the commission is payable. 14-8 (Sections 62.032-62.040 reserved for expansion 14-9 SUBCHAPTER C. TIME FOR FILING NOTICE OF LIEN 14-10 Sec. 62.041. TIME TO FILE. (a) If a broker has earned a 14-11 commission under a commission agreement signed by a seller or the 14-12 seller's authorized agent, a broker must record a notice of lien: 14-13 (1) after the commission is earned; and 14-14 (2) before the conveyance of the commercial real 14-15 estate interest on which the broker is claiming a lien. 14-16 (b) If a broker has earned a commission under a commission 14-17 agreement signed by a prospective buyer or a prospective buyer's 14-18 authorized agent, the broker must record a notice of lien: 14-19 (1) after the buyer acquires legal title to the 14-20 commercial real estate interest on which the broker is claiming a 14-21 lien; and 14-22 (2) before the buyer conveys the buyer's commercial 14-23 real estate interest on which the broker is claiming a lien. 14-24 (c) If the lien is based on a lease transaction, the broker 14-25 must record a notice of lien after the commission is earned and 14-26 before the earlier of: 14-27 (1) the 91st day after the date the event for which 15-1 the commission becomes payable occurs; or 15-2 (2) the date the person obligated to pay the 15-3 commission records a subsequent conveyance of that person's 15-4 commercial real estate interest after executing the lease agreement 15-5 relating to the lease transaction for which the lien is claimed. 15-6 (d) If a notice of lien is not filed within the time 15-7 required by this section, the lien is void. 15-8 (Sections 62.042-62.060 reserved for expansion 15-9 SUBCHAPTER D. ENFORCEMENT OF LIEN 15-10 Sec. 62.061. SUIT TO FORECLOSE LIEN. (a) A broker may not 15-11 bring a suit to foreclose a lien under this chapter unless the 15-12 commission is earned and payable. A broker may bring a suit to 15-13 foreclose a lien in any district court for the county in which the 15-14 commercial real estate is located by filing a sworn complaint 15-15 stating that the notice of lien has been recorded. 15-16 (b) A complaint in a suit filed under this section must 15-17 contain: 15-18 (1) a brief description of the commission agreement 15-19 that is the basis for the lien, including: 15-20 (A) a description of the disclosure of the 15-21 broker's right to the lien contained in the commission agreement; 15-22 (B) the date on which the commission agreement 15-23 was executed; 15-24 (C) the event for which a commission is 15-25 considered to be earned; and 15-26 (D) the event for which a commission is 15-27 considered to be payable; 16-1 (2) a description of the services performed by the 16-2 broker; 16-3 (3) the amount of the payable commission that is 16-4 unpaid; 16-5 (4) a description of the commercial real estate to 16-6 which the lien attaches; and 16-7 (5) other facts necessary for a full understanding of 16-8 the rights of the parties. 16-9 (c) The broker must include as a defendant in a suit brought 16-10 under this subchapter each person the broker believes to have an 16-11 interest in the commercial real estate that is subordinate to or 16-12 encumbered by the broker's lien. 16-13 (d) If the broker and a person against whom the broker 16-14 claims a commission use alternative dispute resolution procedures 16-15 to resolve a dispute concerning entitlement to the broker's 16-16 commission, the broker's lien remains valid, and any suit to 16-17 foreclose the lien is stayed until the alternative dispute 16-18 resolution process is completed. 16-19 Sec. 62.062. STATUTE OF LIMITATIONS. (a) Except as 16-20 provided by this section, a broker claiming a lien under this 16-21 chapter must bring a suit to foreclose the lien on or before the 16-22 second anniversary of the date the notice of lien is recorded. 16-23 (b) A broker claiming a lien to collect a deferred 16-24 commission must bring a suit to foreclose the lien on or before the 16-25 earlier of: 16-26 (1) the second anniversary of the date on which the 16-27 commission is payable; or 17-1 (2) the 10th anniversary of the date the lien is 17-2 recorded or the 10th anniversary of the date the broker records a 17-3 subsequent notice of the lien as a renewal of the broker's right to 17-4 the lien, whichever date is later. 17-5 (c) A renewal of a notice of lien must state that it is a 17-6 renewal of the broker's lien and must be recorded after the ninth 17-7 anniversary after the date the original notice of lien or last 17-8 renewal notice is recorded and on or before the 10th anniversary of 17-9 the date the original notice of lien or last renewal notice is 17-10 recorded. 17-11 (d) A broker claiming a lien for a commission that is 17-12 payable must bring a suit to foreclose the lien not later than the 17-13 30th day after the date the broker receives a written demand to 17-14 bring a suit to foreclose the lien from the owner of the commercial 17-15 real estate interest on which the lien is claimed. 17-16 (e) If a suit to foreclose the lien is not brought within 17-17 the period prescribed by this section, the lien is void. 17-18 Sec. 62.063. ASSESSMENT OF COSTS, FEES, AND INTEREST. The 17-19 prevailing party in a suit brought under this subchapter is 17-20 entitled to court costs, reasonable attorney's fees, and 17-21 prejudgment interest from the date the commission becomes payable 17-22 or the date the damage accrues. 17-23 (Sections 62.064-62.080 reserved for expansion 17-24 SUBCHAPTER E. RELEASE OF LIEN 17-25 Sec. 62.081. RELEASE OF LIEN. (a) Not later than the fifth 17-26 day after the date a broker receives a written request from the 17-27 owner of a commercial real estate interest on which a lien is 18-1 claimed, the broker shall furnish to the owner a release of 18-2 indebtedness and any lien claimed if: 18-3 (1) the debt that is the basis for the lien is 18-4 satisfied; or 18-5 (2) the lien is discharged under Section 62.022, 18-6 rendered void under Section 62.026 or 62.062, or extinguished under 18-7 Section 62.031. 18-8 (b) When a condition occurs that would preclude the broker 18-9 from receiving a commission under the terms of the commission 18-10 agreement that is the basis for the lien, the broker shall, not 18-11 later than the 10th day after the date the broker receives a 18-12 written request from the owner of the commercial real estate 18-13 interest on which the lien is claimed, furnish to the owner a 18-14 release of indebtedness and any lien claimed. 18-15 (c) Not later than the 10th day after the date a broker 18-16 receives a written request for the release of the broker's lien 18-17 from the escrow agent responsible for closing the purchase and 18-18 sale of a commercial real estate interest on which the lien is 18-19 claimed, the broker shall furnish to the escrow agent a release of 18-20 indebtedness and any lien claimed if: 18-21 (1) the commercial real estate interest to which the 18-22 lien attaches is subject to a contract for purchase and sale; 18-23 (2) the release of indebtedness and any lien claimed 18-24 is conditioned on the closing of the transaction; and 18-25 (3) the broker would otherwise be obligated to release 18-26 the indebtedness and any lien claimed under Subsection (a) or (b) 18-27 on the closing of the transaction. 19-1 (d) A release of lien must be in a form that permits the 19-2 instrument to be filed of record. 19-3 (Sections 62.082-62.100 reserved for expansion 19-4 SUBCHAPTER F. ESCROW OF DISPUTED AMOUNTS 19-5 Sec. 62.101. ESCROW ACCOUNT. If a claim for a lien under a 19-6 recorded notice of lien is not paid or assumed at the closing of a 19-7 sale, lease, or mortgage of the commercial real estate interest 19-8 subject to the lien and would prevent the closing of the 19-9 transaction or conveyance or if a claim for a lien under a recorded 19-10 notice of lien does not survive the closing, any person named in 19-11 the notice of lien as obligated to pay the commission shall, on the 19-12 date of the closing: 19-13 (1) establish an escrow account from any net proceeds 19-14 of the transaction or conveyance in an amount equal to the amount 19-15 sufficient to satisfy the lien plus 15 percent of that amount; or 19-16 (2) file a bond to indemnify against the lien as 19-17 provided by Subchapter G. 19-18 Sec. 62.102. NAMED ESCROW AGENT. If an escrow agent is 19-19 named in the contract on which the transaction or conveyance is 19-20 based, the escrow account shall be established with the named 19-21 escrow agent. 19-22 Sec. 62.103. COSTS OF INTERPLEADER. Related costs for any 19-23 interpleader action may be deducted from the escrow account by the 19-24 person maintaining the escrow account. 19-25 Sec. 62.104. REFUSAL TO ESTABLISH ESCROW ACCOUNT OR BOND. 19-26 (a) A party may not refuse to close a transaction because of the 19-27 requirement to establish an escrow account or bond as provided by 20-1 Section 62.101 if: 20-2 (1) the broker provides a copy of the notice of lien 20-3 that complies with Sections 62.025 and 62.026; 20-4 (2) sufficient proceeds will result from the proposed 20-5 transaction for the payment of the commission and costs of the 20-6 interpleader; and 20-7 (3) the broker executes and delivers a full release 20-8 of the broker's lien in a recordable form. 20-9 (b) A prospective buyer of a commercial real estate interest 20-10 may not refuse to close the purchase solely because a broker's lien 20-11 is filed after the date a title commitment or abstract of title 20-12 relating to the interest is issued if an escrow account is 20-13 established as provided by this subchapter or a bond is filed as 20-14 provided by Subchapter G. 20-15 Sec. 62.105. TERM OF ESCROW ACCOUNT. The amount held in 20-16 escrow shall be held in escrow until: 20-17 (1) the rights of the parties claiming the amount in 20-18 escrow are determined by a written agreement of the parties, a 20-19 court order, or an alternative dispute resolution process agreed to 20-20 by the parties; 20-21 (2) the broker's lien is no longer enforceable; or 20-22 (3) the funds are interpled into a district court for 20-23 the county in which the commercial real estate is located. 20-24 Sec. 62.106. EXTINGUISHMENT OF LIEN UPON ESCROW. When the 20-25 escrow account is established under this subchapter, the broker's 20-26 lien against the commercial real estate is extinguished and becomes 20-27 a lien on the proceeds in the escrow account. 21-1 (Sections 62.107-62.120 reserved for expansion 21-2 SUBCHAPTER G. BOND TO INDEMNIFY AGAINST LIEN 21-3 Sec. 62.121. BOND. (a) If a lien is fixed or is attempted 21-4 to be fixed by a recorded instrument under this chapter, any 21-5 person may file a bond to indemnify against the lien. 21-6 (b) The bond shall be filed with the county clerk of the 21-7 county in which the commercial real estate subject to the lien is 21-8 located. 21-9 Sec. 62.122. BOND REQUIREMENTS. The bond must: 21-10 (1) describe the commercial real estate on which the 21-11 lien is claimed; 21-12 (2) refer to the lien claimed in a manner sufficient 21-13 to identify it; 21-14 (3) be in an amount that is double the amount of the 21-15 lien referred to in the bond as of the date of execution of the 21-16 bond by the surety, unless the total amount claimed in the lien 21-17 exceeds $40,000, in which case the bond must be in an amount that 21-18 is 1-1/2 times the amount of the lien; 21-19 (4) be payable to the party claiming the lien; 21-20 (5) be executed by: 21-21 (A) the party filing the bond as principal; and 21-22 (B) a corporate surety licensed by this state to 21-23 execute the bond as surety; 21-24 (6) be conditioned substantially that the principal 21-25 and sureties will pay the named obligees or their assignees the 21-26 amount that the named obligees would have been entitled to recover 21-27 if their claim had been proved to be valid and enforceable liens on 22-1 the commercial real estate; and 22-2 (7) identify the last known mailing address of the 22-3 person claiming the lien. 22-4 Sec. 62.123. NOTICE OF BOND. (a) After the bond is filed, 22-5 the county clerk shall issue notice of the bond to all named 22-6 obligees. 22-7 (b) A copy of the bond must be attached to the notice. 22-8 (c) The notice must be served on each obligee by mailing a 22-9 copy of the notice and the bond to the obligee by certified mail, 22-10 return receipt requested, addressed to the claimant at the address 22-11 stated in the bond for the obligee. 22-12 Sec. 62.124. RECORDING OF BOND AND NOTICE. (a) The county 22-13 clerk shall record the bond, the notice, and a certificate of 22-14 mailing in the real property records. 22-15 (b) In acquiring an interest in or insuring title to the 22-16 commercial real estate, a buyer, insurer of title, or lender may 22-17 rely on and is absolutely protected by the record of the bond and 22-18 the notice to the same extent as if the lien claimant had filed a 22-19 release of lien in the real property records. 22-20 Sec. 62.125. ACTION ON BOND. (a) A party making or holding 22-21 a lien claim may not sue on the bond later than the last date on 22-22 which a person may bring a suit to foreclose the lien under Section 22-23 62.062. 22-24 (b) The bond is not exhausted by one action against it. 22-25 Each named obligee or assignee of an obligee may maintain a 22-26 separate suit on the bond in any district court for the county in 22-27 which the commercial real estate is located. 23-1 (Sections 62.126-62.140 reserved for expansion 23-2 SUBCHAPTER H. REMEDIES 23-3 Sec. 62.141. OWNER'S OR TENANT'S REMEDIES. (a) An owner or 23-4 tenant may file suit against a broker under this chapter. 23-5 (b) In an action filed under this section, the court shall 23-6 discharge a broker's lien if the broker: 23-7 (1) failed to mail a copy of the notice of lien within 23-8 the period prescribed by Section 62.026; 23-9 (2) failed to execute, acknowledge, and return a 23-10 subordination agreement within the period prescribed by Section 23-11 62.029(d); 23-12 (3) failed to record the notice of lien within the 23-13 period prescribed by Section 62.041; or 23-14 (4) failed to release a lien within the period 23-15 prescribed by Section 62.081. 23-16 (c) A broker is liable to an owner or tenant for damages as 23-17 provided by Subsection (d) if: 23-18 (1) the broker recorded a lien on the commercial real 23-19 estate interest of the owner or tenant; 23-20 (2) the broker failed to: 23-21 (A) execute, acknowledge, and return a 23-22 subordination agreement within the period prescribed by Section 23-23 62.029(d); or 23-24 (B) release a lien within the period prescribed 23-25 by Section 62.081; 23-26 (3) the owner, tenant, or escrow agent mailed to the 23-27 broker by certified mail, return receipt requested, a copy of this 24-1 section and a notice requesting the broker to execute, acknowledge, 24-2 and return the subordination agreement or release the lien not 24-3 later than the 10th day after the date the broker receives the 24-4 notice; and 24-5 (4) the broker failed to comply with the owner's, 24-6 tenant's, or escrow agent's written notice within the prescribed 24-7 period. 24-8 (d) If the court finds that a broker is liable to an owner 24-9 or tenant under Subsection (c), the court may award the owner or 24-10 tenant: 24-11 (1) actual damages, including attorney's fees and 24-12 court costs, incurred by the owner or tenant that are proximately 24-13 caused by the broker's failure to execute, acknowledge, and return 24-14 the subordination agreement or release the lien; and 24-15 (2) a civil penalty in an amount not to exceed three 24-16 times the amount of the claimed commission if the court finds that 24-17 the broker acted with gross negligence or acted in bad faith in 24-18 violation of The Real Estate License Act (Article 6573a, Vernon's 24-19 Texas Civil Statutes). 24-20 (e) This section does not prevent: 24-21 (1) a person from filing a complaint with the Texas 24-22 Real Estate Commission against a broker who fails to comply with 24-23 this chapter; or 24-24 (2) the Texas Real Estate Commission at any time from 24-25 investigating or initiating a disciplinary proceeding against a 24-26 broker who fails to comply with this chapter. 24-27 Sec. 62.142. BROKER'S REMEDIES. (a) A broker may file suit 25-1 against an owner or tenant to enforce a commission agreement. 25-2 (b) If the court finds that the broker waived the right to 25-3 file a lien under Section 62.022 and that the owner or tenant 25-4 violated the commission agreement, the court may award to the 25-5 broker: 25-6 (1) actual damages, including attorney's fees and 25-7 court costs, that are proximately caused by the owner's or tenant's 25-8 failure to comply with the commission agreement; and 25-9 (2) a civil penalty in an amount not to exceed three 25-10 times the amount of the claimed commission if the court finds that 25-11 the owner or tenant acted with gross negligence or in bad faith. 25-12 SECTION 2. The change in law made by Chapter 62, Property 25-13 Code, as added by this Act, applies only to an agreement to 25-14 compensate a licensed real estate broker or appraiser that is 25-15 entered into on or after the effective date of this Act. _______________________________ _______________________________ President of the Senate Speaker of the House I certify that H.B. No. 1052 was passed by the House on April 27, 1999, by a non-record vote; and that the House concurred in Senate amendments to H.B. No. 1052 on May 27, 1999, by a non-record vote. _______________________________ Chief Clerk of the House I certify that H.B. No. 1052 was passed by the Senate, with amendments, on May 24, 1999, by a viva-voce vote. _______________________________ Secretary of the Senate APPROVED: _____________________ Date _____________________ Governor