1-1 By: Brimer, Reyna of Bexar, Keel H.B. No. 1052 1-2 (Senate Sponsor - Wentworth) 1-3 (In the Senate - Received from the House April 28, 1999; 1-4 April 29, 1999, read first time and referred to Committee on State 1-5 Affairs; May 14, 1999, reported favorably by the following vote: 1-6 Yeas 8, Nays 0; May 14, 1999, sent to printer.) 1-7 A BILL TO BE ENTITLED 1-8 AN ACT 1-9 relating to creating a real estate broker's and appraiser's lien on 1-10 commercial real estate; providing a penalty. 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 AND APPRAISER'S LIEN ON COMMERCIAL 1-15 REAL ESTATE 1-16 SUBCHAPTER A. GENERAL PROVISIONS 1-17 Sec. 62.001. SHORT TITLE. This chapter may be cited as the 1-18 Broker's and Appraiser's Lien on Commercial Real Estate Act. 1-19 Sec. 62.002. APPLICABILITY. This chapter applies only to 1-20 real estate that is commercial real estate on the date the notice 1-21 of lien is filed under this chapter. To reduce the potential 1-22 adverse impact on small businesses, this chapter does not apply to 1-23 commercial property that: 1-24 (1) is the property owner's primary place of business 1-25 or contains fewer than five tenants; and 1-26 (2) is less than 10,000 gross commercial square feet 1-27 or less than 20,000 gross industrial square feet. 1-28 Sec. 62.003. DEFINITIONS. In this chapter: 1-29 (1) "Broker" means a person who: 1-30 (A) is licensed as a real estate broker under 1-31 The Real Estate License Act (Article 6573a, Vernon's Texas Civil 1-32 Statutes) and is not acting as a residential rental locator as 1-33 defined by Section 24, The Real Estate License Act (Article 6573a, 1-34 Vernon's Texas Civil Statutes); or 1-35 (B) is licensed or certified as a real estate 1-36 appraiser under the Texas Appraiser Licensing and Certification Act 1-37 (Article 6573a.2, Vernon's Texas Civil Statutes). 1-38 (2) "Commercial real estate" means all real estate 1-39 except: 1-40 (A) real estate improved with one to four 1-41 residential units; 1-42 (B) a single-family residential unit, including 1-43 a condominium, townhouse, or home in a subdivision, if the unit is 1-44 sold, leased, or otherwise conveyed on a unit-by-unit basis and 1-45 regardless of whether the unit is part of a larger building or 1-46 located on real estate containing more than four residential units; 1-47 (C) real estate that is a person's homestead; 1-48 (D) real estate that is not improved with a 1-49 structure and is: 1-50 (i) zoned for single-family residential 1-51 use; or 1-52 (ii) restricted for single-family use 1-53 under restrictive covenants that will remain in effect for at least 1-54 the next two years; or 1-55 (E) real estate that is primarily used for and 1-56 will continue to be used for farming or ranching. 1-57 (3) "Commission" includes a fee or other valuable 1-58 consideration. 1-59 (4) "Commission agreement" means a written instrument 1-60 that: 1-61 (A) entitles a broker to a commission; 1-62 (B) is signed by the broker or the broker's 1-63 authorized agent and the person obligated to pay the commission or 1-64 that person's authorized agent; 2-1 (C) references the commission amount or 2-2 describes the formula used to determine the commission amount; and 2-3 (D) contains a description legally sufficient 2-4 for identification of the real estate interest that is the subject 2-5 of the agreement if the person obligated to pay the commission is a 2-6 seller or lessor. 2-7 (5) "Deferred commission" means a commission that is 2-8 earned and is not yet payable. 2-9 (6) "Real estate" has the meaning assigned by Section 2-10 2, The Real Estate License Act (Article 6573a, Vernon's Texas Civil 2-11 Statutes). 2-12 Sec. 62.004. PAYABLE COMMISSION AND EARNED COMMISSION. (a) 2-13 A commission is payable at the time provided in the commission 2-14 agreement. If payment of the commission is conditioned on the 2-15 occurrence of an event and that event does not occur, the person 2-16 obligated to pay the commission is not required to pay the 2-17 commission. 2-18 (b) Except as provided by Subsection (c), a commission is 2-19 earned on the earlier of the date that: 2-20 (1) the event described by the commission agreement 2-21 occurs; or 2-22 (2) the person obligated to pay the commission enters 2-23 into a purchase contract or a lease during the period prescribed by 2-24 the commission agreement for all or part of the commercial real 2-25 estate. 2-26 (c) If a broker has earned a commission under a commission 2-27 agreement relating to a lease transaction and the commission 2-28 agreement provides that the broker may receive an additional 2-29 commission when the lease is modified to expand the lease space or 2-30 renewed, the additional commission is earned when: 2-31 (1) the broker performs all the additional services 2-32 relating to the lease modification or renewal expressly prescribed 2-33 by the commission agreement; or 2-34 (2) the broker first earned a commission under the 2-35 commission agreement if the commission agreement does not expressly 2-36 require the broker to perform additional services relating to a 2-37 lease modification or renewal. 2-38 Sec. 62.005. BROKER'S ADDRESS FOR RECEIPT OF NOTICE. A 2-39 seller, lessor, buyer, or tenant shall send any notice required to 2-40 be sent to the broker under this chapter to the broker at: 2-41 (1) the broker's last known address as reflected in 2-42 the person's records; and 2-43 (2) the broker's address as reflected in the records 2-44 of the Texas Real Estate Commission. 2-45 (Sections 62.006-62.020 reserved for expansion) 2-46 SUBCHAPTER B. BROKER'S LIEN 2-47 Sec. 62.021. PERSON ENTITLED TO LIEN. (a) A broker has a 2-48 lien on a seller's or lessor's commercial real estate interest in 2-49 the amount specified by the commission agreement if: 2-50 (1) the broker has earned a commission under a 2-51 commission agreement signed by the seller or lessor of the 2-52 commercial real estate interest or the seller's or lessor's 2-53 authorized agent; and 2-54 (2) a notice of lien is recorded and indexed as 2-55 provided by Section 62.024. 2-56 (b) A broker has a lien on the commercial real estate 2-57 interest purchased by a prospective buyer in the amount specified 2-58 by the commission agreement if: 2-59 (1) the broker has earned a commission under a 2-60 commission agreement signed by the prospective buyer of the 2-61 commercial real estate interest or the prospective buyer's 2-62 authorized agent; and 2-63 (2) a notice of lien is recorded and indexed as 2-64 provided by Section 62.024. 2-65 (c) A broker has a lien on the prospective tenant's 2-66 leasehold interest in commercial real estate in the amount 2-67 specified by the commission agreement if: 2-68 (1) the broker has earned a commission under a 2-69 commission agreement signed by the prospective tenant of the 3-1 commercial real estate interest or the prospective tenant's 3-2 authorized agent; and 3-3 (2) a notice of lien is recorded and indexed as 3-4 provided by Section 62.024. 3-5 (d) A lien described by this section is available only to 3-6 the broker named in the commission agreement. The lien is not 3-7 available to an employee or independent contractor of the broker. 3-8 (e) The broker's right to claim a lien based on the 3-9 commission agreement must be disclosed in the commission agreement. 3-10 Sec. 62.022. WAIVER, RELEASE, OR DISCHARGE OF LIEN; 3-11 ASSUMPTION OF COMMISSION OBLIGATION. (a) Except as provided by 3-12 Subsection (b), the waiver of a broker's right to a lien under this 3-13 chapter, or a release given for the purpose of releasing the 3-14 broker's lien before the commission is satisfied or forgiven, is 3-15 void. 3-16 (b) A broker's entitlement to a lien on the interest of an 3-17 owner or tenant in commercial real estate shall be automatically 3-18 waived if: 3-19 (1) the commission is earned and payable for services 3-20 provided relating to a lease transaction; and 3-21 (2) the commission agreement is included as a 3-22 provision of the lease agreement. 3-23 (c) A lien under this chapter is discharged by: 3-24 (1) a court order discharging the lien; 3-25 (2) paying the commission to the broker named in the 3-26 commission agreement; or 3-27 (3) establishing an escrow account described by 3-28 Subchapter F. 3-29 (d) A person who assumes an owner's or tenant's commercial 3-30 real estate interest is bound by a commission agreement included in 3-31 a lease agreement unless an escrow account is established under 3-32 Subchapter F or a bond is provided under Subchapter G. 3-33 (e) This section does not affect the rights of a mortgagee 3-34 who forecloses on commercial real estate and does not assume the 3-35 lease on which a commission agreement is based. 3-36 Sec. 62.023. AFFIDAVIT IDENTIFYING BROKER. If requested by 3-37 the buyer, the buyer's authorized agent, or the escrow agent for 3-38 the commercial real estate transaction, the seller of commercial 3-39 real estate and the broker representing the seller shall provide to 3-40 the requesting party before the closing of the transaction a 3-41 written affidavit identifying each broker with whom the affiant 3-42 knows or believes the seller or the seller's authorized agent has 3-43 signed a commission agreement. 3-44 Sec. 62.024. FILING OF NOTICE OF LIEN. (a) A broker 3-45 claiming a lien under this chapter may not file a notice of lien 3-46 unless the commission on which the lien is based is earned. 3-47 (b) A broker claiming a lien under this chapter must file a 3-48 notice of lien as provided by Subchapter C with the county clerk of 3-49 the county in which the commercial real estate is located. 3-50 (c) The county clerk shall record the notice of lien in 3-51 records kept for that purpose and shall index and cross-index the 3-52 notice of lien in the names of the broker, each person obligated to 3-53 pay the commission under the commission agreement, and each person 3-54 who has an interest in the commercial real estate if the broker 3-55 claims a lien on that interest. 3-56 Sec. 62.025. CONTENTS OF NOTICE OF LIEN. The notice of lien 3-57 must be signed by the broker or by a person authorized to sign on 3-58 behalf of the broker and must contain the following: 3-59 (1) a sworn statement of the nature and amount of the 3-60 claim, including: 3-61 (A) the commission amount or the formula used to 3-62 determine the commission; 3-63 (B) the type of commission at issue, including a 3-64 deferred commission; and 3-65 (C) the month and year in which the commission 3-66 was earned; 3-67 (2) the name of the broker and the real estate license 3-68 number of the broker; 3-69 (3) the name as reflected in the broker's records of 4-1 any person who the broker believes is obligated to pay the 4-2 commission under the commission agreement; 4-3 (4) the name as reflected in the broker's records of 4-4 any person the broker believes to be an owner of the commercial 4-5 real estate interest on which the lien is claimed; 4-6 (5) a description legally sufficient for 4-7 identification of the commercial real estate interest sought to be 4-8 charged with the lien; 4-9 (6) the name of any broker or other person with whom 4-10 the broker intends to share the commission and the dollar or 4-11 percentage amount to be shared; and 4-12 (7) a copy of the commission agreement. 4-13 Sec. 62.026. NOTICE OF FILING. (a) In this section, 4-14 "business day" means a day other than a Saturday, Sunday, or 4-15 holiday recognized by this state. 4-16 (b) Not later than one business day after the date the 4-17 broker files a notice of lien, the broker shall mail a copy of the 4-18 notice of lien by certified mail, return receipt requested, or 4-19 registered mail to: 4-20 (1) the owner of record of the commercial real estate 4-21 interest on which the lien is claimed or the owner's authorized 4-22 agent; and 4-23 (2) the prospective buyer or tenant and any escrow 4-24 agent named in a contract for the sale or lease of the commercial 4-25 real estate interest on which the lien is claimed if: 4-26 (A) a binding written contract for the sale or 4-27 lease of the commercial real estate interest is in effect between 4-28 the owner and the prospective buyer or tenant in a transaction that 4-29 is the basis for the commission; and 4-30 (B) the binding written contract was executed by 4-31 the owner and the prospective buyer or tenant before the date the 4-32 notice of lien is filed. 4-33 (c) Service of the notice under Subsection (b) is complete 4-34 when the notice is deposited in the United States mail, postage 4-35 prepaid, and addressed to the persons entitled to receive the 4-36 notice under this section. 4-37 (d) If the broker has actual knowledge of the identity of 4-38 the escrow agent named in the contract for the sale or lease of the 4-39 commercial real estate interest on which the broker claims a lien 4-40 or of the escrow agent otherwise closing the sale or lease of the 4-41 commercial real estate interest, the broker, before the first 4-42 business day before the date that the sale or lease is closed, 4-43 shall deliver a file-stamped copy or transmit a facsimile of a 4-44 file-stamped copy of the notice of lien to each escrow agent at the 4-45 office in which the closing of the sale or lease will occur for use 4-46 during the closing of the sale or lease. The broker shall deliver 4-47 the copy or transmit the facsimile directly to the individual 4-48 escrow agent responsible for closing the sale or lease if the 4-49 broker knows that person's name. 4-50 (e) If the escrow agent receives the notice of lien, the 4-51 escrow agent and other parties to the sale or lease may not close 4-52 the transaction unless the lien is released, the funds are held in 4-53 escrow as provided by Subchapter F, or a bond is filed as provided 4-54 by Subchapter G. 4-55 (f) If the broker fails to comply with this section, the 4-56 notice of lien is void. 4-57 Sec. 62.027. INCEPTION OF BROKER'S LIEN. (a) A broker's 4-58 lien attaches to the commercial real estate interest owned by the 4-59 person obligated to pay the commission on the date the notice of 4-60 lien is recorded as provided by this chapter. The lien does not 4-61 relate back to the date of the commission agreement. 4-62 (b) A notice of lien for amounts earned by the broker under 4-63 an installment contract or under a commission agreement for a 4-64 deferred commission is enforceable only to the extent that the 4-65 installment or commission has become payable. 4-66 Sec. 62.028. PRIORITY. (a) A recorded lien, mortgage, or 4-67 other encumbrance on commercial real estate, including a recorded 4-68 lien securing revolving credit and future advances for a loan, 4-69 recorded before the date a broker's lien is recorded has priority 5-1 over the broker's lien. 5-2 (b) A broker's lien on the commercial real estate interest 5-3 of a person obligated to pay a commission is not valid or 5-4 enforceable against a grantee, buyer, lessee, or transferee of the 5-5 interest of the person obligated to pay the commission if the deed, 5-6 lease, or instrument transferring the interest is recorded before 5-7 the notice of the broker's lien is recorded. 5-8 (c) A purchase-money mortgage lien executed by the buyer of 5-9 the commercial real estate interest has priority over a broker's 5-10 lien claimed against the prospective buyer for the commission owed 5-11 by that buyer. 5-12 (d) A mechanic's lien that is recorded after a broker's lien 5-13 and that relates back to a date before the date the broker's lien 5-14 is recorded has priority over the broker's lien. 5-15 Sec. 62.029. SUBORDINATION. (a) If the person obligated to 5-16 pay the commission sells that person's commercial real estate 5-17 interest, the broker's lien is subordinate to a recorded 5-18 purchase-money first lien authorized by the buyer if the buyer: 5-19 (1) executes and files with the county clerk of the 5-20 county in which the broker's lien is filed a memorandum that 5-21 evidences the buyer's ratification of the broker's lien and the 5-22 buyer's assumption of the obligation to pay the broker the 5-23 commission as provided by the commission agreement that is the 5-24 basis for the lien; and 5-25 (2) sends the broker, by certified mail, return 5-26 receipt requested, or registered mail, a copy of the recorded 5-27 memorandum required by this subsection. 5-28 (b) If the person obligated to pay the commission refinances 5-29 a recorded first lien secured by that person's commercial real 5-30 estate interest, the broker's lien is subordinate to the recorded 5-31 refinanced first lien, regardless of the amount of the first lien 5-32 after refinancing, if the person obligated to pay the commission: 5-33 (1) executes and files with the county clerk of the 5-34 county in which the broker's lien is filed a memorandum that 5-35 evidences the person's ratification of the broker's lien and the 5-36 person's obligation to pay the broker the commission as provided by 5-37 the commission agreement that is the basis for the lien; and 5-38 (2) sends the broker, by certified mail, return 5-39 receipt requested, or registered mail, a copy of the recorded 5-40 memorandum required by this subsection. 5-41 (c) If the person obligated to pay the commission obtains an 5-42 extension of credit secured by that person's commercial real estate 5-43 interest, the broker's lien is subordinate to the lien securing the 5-44 extension of credit if, according to the lien documents, the 5-45 extension of credit is made only for the purpose of: 5-46 (1) repairing or renovating the commercial real 5-47 estate; or 5-48 (2) completing construction or providing additional 5-49 improvements on the commercial real estate. 5-50 (d) If the person obligated to pay the commission furnishes 5-51 a subordination agreement as provided by this section to be 5-52 executed by the broker, the broker must: 5-53 (1) execute and acknowledge the subordination 5-54 agreement before a notary public; and 5-55 (2) return the subordination agreement to the person 5-56 not later than the seventh day after the date the broker receives 5-57 the subordination agreement and other documents the broker 5-58 reasonably requests in order to determine that the subordination 5-59 agreement complies with this section. 5-60 Sec. 62.030. MIXED-USE REAL ESTATE. If real estate is zoned 5-61 or restricted for more than one use, the broker's lien attaches 5-62 only to the portions of the real estate that constitute commercial 5-63 real estate. 5-64 Sec. 62.031. CHANGE IN USE OF REAL ESTATE. (a) Except as 5-65 provided by Subsection (b), any change in the use of the real 5-66 estate does not affect a broker's lien if the notice of the lien 5-67 was filed when the real estate was commercial real estate. 5-68 (b) The broker's lien is extinguished if: 5-69 (1) not later than the 360th day after the date on 6-1 which the broker's commission is payable, the commercial real 6-2 estate interest on which a broker claims a lien is zoned for 6-3 single-family use or restricted for single-family use under 6-4 recorded restrictive covenants; and 6-5 (2) the zoning ordinances or restrictive covenants for 6-6 single-family use are in effect until at least the second 6-7 anniversary of the date the commission is payable. 6-8 (Sections 62.032-62.040 reserved for expansion 6-9 SUBCHAPTER C. TIME FOR FILING NOTICE OF LIEN 6-10 Sec. 62.041. TIME TO FILE. (a) If a broker has earned a 6-11 commission under a commission agreement signed by a seller or the 6-12 seller's authorized agent, a broker must record a notice of lien: 6-13 (1) after the commission is earned; and 6-14 (2) before the conveyance of the commercial real 6-15 estate interest on which the broker is claiming a lien. 6-16 (b) If a broker has earned a commission under a commission 6-17 agreement signed by a prospective buyer or a prospective buyer's 6-18 authorized agent, the broker must record a notice of lien: 6-19 (1) after the buyer acquires legal title to the 6-20 commercial real estate interest on which the broker is claiming a 6-21 lien; and 6-22 (2) before the buyer conveys the buyer's commercial 6-23 real estate interest on which the broker is claiming a lien. 6-24 (c) If the lien is based on a lease transaction, the broker 6-25 must record a notice of lien after the commission is earned and 6-26 before the earlier of: 6-27 (1) the 91st day after the date the event for which 6-28 the commission becomes payable occurs; or 6-29 (2) the date the person obligated to pay the 6-30 commission records a conveyance of that person's commercial real 6-31 estate interest after executing the lease agreement relating to the 6-32 lease transaction for which the lien is claimed. 6-33 (d) If a notice of lien is not filed within the time 6-34 required by this section, the lien is void. 6-35 (Sections 62.042-62.060 reserved for expansion 6-36 SUBCHAPTER D. ENFORCEMENT OF LIEN 6-37 Sec. 62.061. SUIT TO FORECLOSE LIEN. (a) A broker may not 6-38 bring a suit to foreclose a lien under this chapter unless the 6-39 commission is earned and payable. A broker may bring a suit to 6-40 foreclose a lien in any district court for the county in which the 6-41 commercial real estate is located by filing a sworn complaint 6-42 stating that the notice of lien has been recorded. 6-43 (b) A complaint in a suit filed under this section must 6-44 contain: 6-45 (1) a brief description of the commission agreement 6-46 that is the basis for the lien, including: 6-47 (A) a description of the disclosure of the 6-48 broker's right to the lien contained in the commission agreement; 6-49 (B) the date on which the commission agreement 6-50 was executed; 6-51 (C) the event for which a commission is 6-52 considered to be earned; and 6-53 (D) the event for which a commission is 6-54 considered to be payable; 6-55 (2) a description of the services performed by the 6-56 broker; 6-57 (3) the amount of the payable commission that is 6-58 unpaid; 6-59 (4) a description of the commercial real estate to 6-60 which the lien attaches; and 6-61 (5) other facts necessary for a full understanding of 6-62 the rights of the parties. 6-63 (c) The broker must include as a defendant in a suit brought 6-64 under this subchapter each person the broker believes to have an 6-65 interest in the commercial real estate that is subordinate to or 6-66 encumbered by the broker's lien. 6-67 (d) If the broker and a person against whom the broker 6-68 claims a commission use alternative dispute resolution procedures 6-69 to resolve a dispute concerning entitlement to the broker's 7-1 commission, the broker's lien remains valid, and any suit to 7-2 foreclose the lien is stayed until the alternative dispute 7-3 resolution process is completed. 7-4 Sec. 62.062. STATUTE OF LIMITATIONS. (a) Except as 7-5 provided by this section, a broker claiming a lien under this 7-6 chapter must bring a suit to foreclose the lien on or before the 7-7 second anniversary of the date the notice of lien is recorded. 7-8 (b) A broker claiming a lien to collect a deferred 7-9 commission must bring a suit to foreclose the lien on or before the 7-10 earlier of: 7-11 (1) the second anniversary of the date on which the 7-12 commission is payable; or 7-13 (2) the 10th anniversary of the date the lien is 7-14 recorded or the 10th anniversary of the date the broker records a 7-15 subsequent notice of the lien as a renewal of the broker's right to 7-16 the lien, whichever date is later. 7-17 (c) A renewal of a notice of lien must state that it is a 7-18 renewal of the broker's lien and must be recorded after the ninth 7-19 anniversary after the date the original notice of lien or last 7-20 renewal notice is recorded and on or before the 10th anniversary of 7-21 the date the original notice of lien or last renewal notice is 7-22 recorded. 7-23 (d) A broker claiming a lien for a commission that is 7-24 payable must bring a suit to foreclose the lien not later than the 7-25 30th day after the date the broker receives a written demand to 7-26 bring a suit to foreclose the lien from the owner of the commercial 7-27 real estate interest on which the lien is claimed. 7-28 (e) If a suit to foreclose the lien is not brought within 7-29 the period prescribed by this section, the lien is void. 7-30 Sec. 62.063. ASSESSMENT OF COSTS, FEES, AND INTEREST. The 7-31 prevailing party in a suit brought under this subchapter is 7-32 entitled to court costs, reasonable attorney's fees, and 7-33 prejudgment interest. 7-34 (Sections 62.064-62.080 reserved for expansion 7-35 SUBCHAPTER E. RELEASE OF LIEN 7-36 Sec. 62.081. RELEASE OF LIEN. (a) Not later than the fifth 7-37 day after the date a broker receives a written request from the 7-38 owner of a commercial real estate interest on which a lien is 7-39 claimed, the broker shall furnish to the owner a release of 7-40 indebtedness and any lien claimed if: 7-41 (1) the debt that is the basis for the lien is 7-42 satisfied; or 7-43 (2) the lien is discharged under Section 62.022, 7-44 rendered void under Section 62.026 or 62.062, or extinguished under 7-45 Section 62.031. 7-46 (b) When a condition occurs that would preclude the broker 7-47 from receiving a commission under the terms of the commission 7-48 agreement that is the basis for the lien, the broker shall, not 7-49 later than the 10th day after the date the broker receives a 7-50 written request from the owner of the commercial real estate 7-51 interest on which the lien is claimed, furnish to the owner a 7-52 release of indebtedness and any lien claimed. 7-53 (c) A release of lien must be in a form that permits the 7-54 instrument to be filed of record. 7-55 (Sections 62.082-62.100 reserved for expansion 7-56 SUBCHAPTER F. ESCROW OF DISPUTED AMOUNTS 7-57 Sec. 62.101. ESCROW ACCOUNT. If a claim for a lien under a 7-58 recorded notice of lien is not paid or assumed at the closing of a 7-59 sale, lease, or mortgage of the commercial real estate interest 7-60 subject to the lien and would prevent the closing of the 7-61 transaction or conveyance, any person named in the notice of lien 7-62 as obligated to pay the commission shall, on the date of the 7-63 closing: 7-64 (1) establish an escrow account from any net proceeds 7-65 of the transaction or conveyance in an amount equal to the amount 7-66 sufficient to satisfy the lien plus 15 percent of that amount; or 7-67 (2) file a bond to indemnify against the lien as 7-68 provided by Subchapter G. 7-69 Sec. 62.102. NAMED ESCROW AGENT. If an escrow agent is 8-1 named in the contract on which the transaction or conveyance is 8-2 based, the escrow account shall be established with the named 8-3 escrow agent. 8-4 Sec. 62.103. COSTS OF INTERPLEADER. Related costs for any 8-5 interpleader action may be deducted from the escrow account by the 8-6 person maintaining the escrow account. 8-7 Sec. 62.104. REFUSAL TO ESTABLISH ESCROW ACCOUNT OR BOND. 8-8 (a) A party may not refuse to close a transaction because of the 8-9 requirement to establish an escrow account or bond as provided by 8-10 Section 62.101 if: 8-11 (1) the broker provides a copy of the notice of lien 8-12 that complies with Sections 62.025 and 62.026; 8-13 (2) sufficient proceeds will result from the proposed 8-14 transaction for the payment of the commission and costs of the 8-15 interpleader; and 8-16 (3) the broker executes and delivers a full release 8-17 of the broker's lien in a recordable form. 8-18 (b) A prospective buyer of a commercial real estate interest 8-19 may not refuse to close the purchase solely because a broker's lien 8-20 is filed after the date a title commitment or abstract of title 8-21 relating to the interest is issued if an escrow account is 8-22 established as provided by this subchapter or a bond is filed as 8-23 provided by Subchapter G. 8-24 Sec. 62.105. TERM OF ESCROW ACCOUNT. The amount held in 8-25 escrow shall be held in escrow until: 8-26 (1) the rights of the parties claiming the amount in 8-27 escrow are determined by a written agreement of the parties, a 8-28 court order, or an alternative dispute resolution process agreed to 8-29 by the parties; 8-30 (2) the broker's lien is no longer enforceable; or 8-31 (3) the funds are interpled into a district court for 8-32 the county in which the commercial real estate is located. 8-33 Sec. 62.106. EXTINGUISHMENT OF LIEN UPON ESCROW. When the 8-34 escrow account is established under this section, the broker's lien 8-35 against the commercial real estate is extinguished and becomes a 8-36 lien on the proceeds in the escrow account. 8-37 (Sections 62.107-62.120 reserved for expansion 8-38 SUBCHAPTER G. BOND TO INDEMNIFY AGAINST LIEN 8-39 Sec. 62.121. BOND. (a) If a lien is fixed or is attempted 8-40 to be fixed by a recorded instrument under this chapter, any 8-41 person may file a bond to indemnify against the lien. 8-42 (b) The bond shall be filed with the county clerk of the 8-43 county in which the commercial real estate subject to the lien is 8-44 located. 8-45 Sec. 62.122. BOND REQUIREMENTS. The bond must: 8-46 (1) describe the commercial real estate on which the 8-47 lien is claimed; 8-48 (2) refer to the lien claimed in a manner sufficient 8-49 to identify it; 8-50 (3) be in an amount that is double the amount of the 8-51 lien referred to in the bond as of the date of execution of the 8-52 bond by the surety, unless the total amount claimed in the lien 8-53 exceeds $40,000, in which case the bond must be in an amount that 8-54 is 1-1/2 times the amount of the lien; 8-55 (4) be payable to the party claiming the lien; 8-56 (5) be executed by: 8-57 (A) the party filing the bond as principal; and 8-58 (B) a corporate surety licensed by this state to 8-59 execute the bond as surety; 8-60 (6) be conditioned substantially that the principal 8-61 and sureties will pay the named obligees or their assignees the 8-62 amount that the named obligees would have been entitled to recover 8-63 if their claim had been proved to be valid and enforceable liens on 8-64 the commercial real estate; and 8-65 (7) identify the last known mailing address of the 8-66 person claiming the lien. 8-67 Sec. 62.123. NOTICE OF BOND. (a) After the bond is filed, 8-68 the county clerk shall issue notice of the bond to all named 8-69 obligees. 9-1 (b) A copy of the bond must be attached to the notice. 9-2 (c) The notice must be served on each obligee by mailing a 9-3 copy of the notice and the bond to the obligee by certified mail, 9-4 return receipt requested, addressed to the claimant at the address 9-5 stated in the bond for the obligee. 9-6 Sec. 62.124. RECORDING OF BOND AND NOTICE. (a) The county 9-7 clerk shall record the bond, the notice, and a certificate of 9-8 mailing in the real property records. 9-9 (b) In acquiring an interest in or insuring title to the 9-10 commercial real estate, a buyer, insurer of title, or lender may 9-11 rely on and is absolutely protected by the record of the bond and 9-12 the notice to the same extent as if the lien claimant had filed a 9-13 release of lien in the real property records. 9-14 Sec. 62.125. ACTION ON BOND. (a) A party making or holding 9-15 a lien claim may not sue on the bond later than the last date on 9-16 which a person may bring a suit to foreclose the lien under Section 9-17 62.062. 9-18 (b) The bond is not exhausted by one action against it. 9-19 Each named obligee or assignee of an obligee may maintain a 9-20 separate suit on the bond in any district court for the county in 9-21 which the commercial real estate is located. 9-22 (Sections 62.126-62.140 reserved for expansion 9-23 SUBCHAPTER H. REMEDIES 9-24 Sec. 62.141. OWNER OR TENANT'S REMEDIES. (a) An owner or 9-25 tenant may file suit against a broker under this chapter. 9-26 (b) In an action filed under this section, the court shall 9-27 discharge a broker's lien if the broker: 9-28 (1) failed to mail a copy of the notice of lien within 9-29 the period prescribed by Section 62.026; 9-30 (2) failed to execute, acknowledge, and return a 9-31 subordination agreement within the period prescribed by Section 9-32 62.029(d); 9-33 (3) failed to record the notice of lien within the 9-34 period prescribed by Section 62.041; or 9-35 (4) failed to release a lien within the period 9-36 prescribed by Section 62.081. 9-37 (c) A broker is liable to an owner or tenant for damages as 9-38 provided by Subsection (d) if: 9-39 (1) the broker recorded a lien on the commercial real 9-40 estate interest of the owner or tenant; 9-41 (2) the broker failed to: 9-42 (A) execute, acknowledge, and return a 9-43 subordination agreement within the period prescribed by Section 9-44 62.029(d); or 9-45 (B) release a lien within the period prescribed 9-46 by Section 62.081; 9-47 (3) the owner or tenant mailed to the broker by 9-48 certified mail, return receipt requested, a copy of this section 9-49 and a notice requesting the owner to execute, acknowledge, and 9-50 return the subordination agreement or release the lien not later 9-51 than the 10th day after the date the broker receives the notice; 9-52 and 9-53 (4) the broker failed to comply with the owner's or 9-54 tenant's written notice within the prescribed period. 9-55 (d) If the court finds that a broker is liable to an owner 9-56 or tenant under Subsection (c), the court may award the owner or 9-57 tenant: 9-58 (1) actual damages, including attorney's fees and 9-59 court costs, incurred by the owner or tenant that are proximately 9-60 caused by the broker's failure to execute, acknowledge, and return 9-61 the subordination agreement or release the lien; and 9-62 (2) a civil penalty in an amount equal to three times 9-63 the amount of the claimed commission if the court finds that the 9-64 broker acted with gross negligence or acted in bad faith in 9-65 violation of The Real Estate License Act (Article 6573a, Vernon's 9-66 Texas Civil Statutes). 9-67 (e) An individual broker who was the designated officer of a 9-68 corporate or partnership broker at the time the corporate or 9-69 partnership broker violated this chapter is liable for any 10-1 unsatisfied damages or civil penalties awarded under Subsection (d) 10-2 if the individual broker was named as a defendant in an action 10-3 filed under this section. 10-4 (f) This section does not prevent: 10-5 (1) a person from filing a complaint with the Texas 10-6 Real Estate Commission against a broker who fails to comply with 10-7 this chapter; or 10-8 (2) the Texas Real Estate Commission at any time from 10-9 investigating or initiating a disciplinary proceeding against a 10-10 broker who fails to comply with this chapter. 10-11 Sec. 62.142. BROKER'S REMEDIES. (a) A broker may file suit 10-12 against an owner or tenant to enforce a commission agreement. 10-13 (b) If the court finds that the broker waived the right to 10-14 file a lien under Section 62.022 and that the owner or tenant 10-15 violated the commission agreement, the court may award to the 10-16 broker: 10-17 (1) actual damages, including attorney's fees and 10-18 court costs, that are proximately caused by the owner's or tenant's 10-19 failure to comply with the commission agreement; and 10-20 (2) a civil penalty in an amount equal to three times 10-21 the amount of the claimed commission if the court finds that the 10-22 owner or tenant acted with gross negligence or in bad faith. 10-23 SECTION 2. This Act takes effect September 1, 1999. The 10-24 change in law made by this Act applies only to an agreement to 10-25 compensate a licensed real estate broker or appraiser that is 10-26 entered into on or after the effective date of this Act. 10-27 SECTION 3. The importance of this legislation and the 10-28 crowded condition of the calendars in both houses create an 10-29 emergency and an imperative public necessity that the 10-30 constitutional rule requiring bills to be read on three several 10-31 days in each house be suspended, and this rule is hereby suspended. 10-32 * * * * *