HBA-NLM H.B. 1052 76(R) BILL ANALYSIS
Office of House Bill AnalysisH.B. 1052
By: Brimer
Business & Industry
2/25/1999
Introduced
BACKGROUND AND PURPOSE
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 adds a chapter to Subtitle
B (Liens), Property Code, to permit a real estate broker to secure the
payment of the broker's commission arising from a commercial real estate
transaction by obtaining a lien on the property involved. This bill sets
out procedures to entitle a broker to a lien under certain conditions, and
a specified statute of limitations.
RULEMAKING AUTHORITY
It is the opinion of the Office of House Bill Analysis that this bill does
not expressly delegate any additional rulemaking authority to a state
officer, department, agency, or institution.
SECTION BY SECTION ANALYSIS
SECTION 1. Amends Subtitle B, Title 5, Property Code, by adding Chapter 62,
as follows:
CHAPTER 62. BROKER'S LIEN ON COMMERCIAL REAL ESTATE
SUBCHAPTER A. GENERAL PROVISIONS
Sec. 62.001. SHORT TITLE. Provides that this chapter may be cited as the
Broker's Lien on Commercial Real Estate Act.
Sec. 62.002. APPLICABILITY. Applies this chapter only to real estate that
is commercial real estate on the date the notice of lien is filed under
this chapter.
Sec. 62.003. DEFINITIONS. Defines "broker," "commercial real estate,"
"commission," "commission agreement," "deferred commission," and "real
estate."
Sec. 62.004. EARNED COMMISSION AND PAYABLE COMMISSION. Provides that a
commission is earned at the time the broker presents to the seller or
lessor a ready, willing, and able buyer or tenant to purchase or lease all
or part of the commercial real estate on the seller's or lessor's terms, if
a broker enters into a commission agreement with a seller or lessor of
commercial real estate. Provides that a commission is earned at the time
the broker presents to the prospective buyer or tenant a property suitable
for purchase or lease on the buyer's or tenant's terms, if a broker enters
into a commission agreement with a prospective buyer or tenant of
commercial real estate. Provides that a commission is payable at the time
provided by the commission agreement.
SUBCHAPTER B. BROKER'S LIEN
Sec. 62.021. PERSON ENTITLED TO LIEN. (a) Provides that a broker has a
lien on commercial real estate in the amount specified by the commission
agreement if the broker has earned a commission under a commission
agreement signed by the seller or lessor of the commercial real estate or
the seller's or lessor's authorized agent, and a notice of lien is
recorded and indexed as provided by Section 62.024.
(b) Provides that a broker has a lien on the interest in commercial real
estate that a prospective buyer purchases in the amount specified by the
commission agreement if the broker has earned a commission under a
commission agreement signed by the prospective buyer of the commercial real
estate or the prospective buyer's authorized agent, and a notice of lien is
recorded and indexed as provided by Section 62.024.
(c) Provides that a broker has a lien on the leasehold interest in
commercial real estate of a prospective tenant in the amount specified by
the commission agreement if the broker has earned a commission under a
commission agreement signed by the prospective tenant of the commercial
real estate or the prospective tenant's authorized agent, and a notice of
lien is recorded and indexed as provided by Section 62.024.
(d) Provides that a lien described by this section is available only to
the broker named in the commission agreement and that the lien is not
available to an employee or independent contractor of the broker.
(e) Provides that a broker's right to claim a lien based on the commission
agreement must be disclosed in the commission agreement.
Sec. 62.022. WAIVER OR RELEASE AND DISCHARGE OF LIEN. Establishes that a
waiver of a broker's entitlement to a lien under this chapter, or the
release of a lien given for the purpose of releasing a broker's lien before
the commission is satisfied or forgiven, is void. Provides that a lien
under this chapter is discharged by paying the commission to the broker
named in the commission agreement or by establishing an escrow account
described by Subchapter F.
Sec. 62.023. AFFIDAVIT IDENTIFYING BROKER. Provides that if requested by
the buyer, the buyer's authorized agent, or the escrow agent for the
commercial real estate transaction, the seller of commercial real estate
may and the broker representing the seller shall provide to the requesting
party before the closing of the transaction a written affidavit identifying
each broker with whom 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. Provides that a broker claiming a
lien under this chapter must file a notice of lien as provided by
Subchapter C with the county clerk of the county in which the commercial
real estate is located. Requires the county clerk to record the notice of
lien in records kept for that purpose and to index and cross-index the
notice of lien in the names of the broker, each person obligated to pay the
commission under the commission agreement, and each owner of the interest
in the commercial real estate on which the lien is claimed.
Sec. 62.025. CONTENTS OF NOTICE OF LIEN. Provides that the notice of
lien must be signed by the broker or by a person authorized to sign on
behalf of the broker and must contain:
_a sworn statement of the nature and amount of the claim, including the
commission amount or the formula used to determine the commission and the
type of commission at issue;
_the name of the broker and the real estate license number of the broker;
_the name as reflected in the broker's records of any person who the broker
believes is obligated to pay the commission under the commission agreement;
_the name as reflected in the broker's records of any person the broker
believes to be an owner of the interest in the real estate on which the
lien is claimed;
_a description legally sufficient for identification of the interest in the
commercial real estate sought to be charged with the lien; and
_a copy of the commission agreement.
Sec. 62.026. NOTICE OF FILING. (a) Defines "business day" for the
purposes of this section.
(b) Requires the broker to mail a copy of the notice of lien by certified
mail, return receipt requested, or registered mail, no later than one
business day after the date the broker files a notice of lien, to the owner
of record of the interest in the commercial real estate on which the lien
is claimed or the owner's authorized agent, and the prospective buyer or
tenant and any escrow agent named in a contract for the sale or lease of
the interest in the commercial real estate on which the lien is claimed if:
_a binding written contract for the sale or lease of the interest in the
commercial real estate is in effect between the owner and the prospective
buyer or tenant in a transaction that is the basis for the commission; and
_the binding written contract was executed by the owner and the prospective
buyer or tenant before the date the notice of lien is filed.
(c) Provides that service of the notice under Subsection (b) is complete
when the notice is deposited in the United States mail, postage prepaid,
and addressed to the persons entitled to receive the notice under this
section.
(d) Requires the broker to deliver a file-stamped copy or transmit a
facsimile of a filestamped copy of the notice of lien to each escrow agent,
by the first business day before the date that the sale or lease is closed,
at the agent's closing office for use during the closing of the sale or
lease, if the broker has actual knowledge of the identity of the escrow
agent named in the contract for the sale or lease of the interest in the
commercial real estate on which the broker claims a lien or of the escrow
agent otherwise closing the sale or lease of the interest in the commercial
real estate.
(e) Provides that if the escrow agent receives the notice of lien, the
escrow agent and other parties to the sale or lease are prohibited from
closing the transaction unless the lien is released or the funds are held
in escrow as provided by Subchapter F.
(f) Provides that the notice of lien is void if the broker fails to comply
with this section.
Sec. 62.027. INCEPTION OF BROKER'S LIEN. Provides that a broker's lien
attaches to the interest in the commercial real estate owned by the person
obligated to pay the commission on the date the notice of lien is recorded
as provided by this chapter and 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. (a) Provides that a recorded lien, mortgage, or
other encumbrance on commercial real estate, including a recorded lien
securing revolving credit and future advances for a loan, recorded before
the date a broker's lien is recorded has priority over the broker's lien.
(b) Provides that if a deed, lease, or instrument transferring interest is
recorded before the broker's lien is recorded, a broker's lien on the
interest in commercial real estate of a person obligated to pay a
commission is not valid or enforceable against a grantee, buyer, lessee, or
transferee of the interest of the person obligated to pay the commission.
(c) Provides that a purchase-money mortgage lien executed by the buyer of
the interest in the commercial real estate has priority over a broker's
lien claimed against the prospective buyer for the commission owed by that
buyer.
(d) Provides that a mechanic's lien that is recorded after a broker's lien
and that relates back to a date before the date the broker's lien is
recorded has priority over the broker's lien.
Sec. 62.029. SUBORDINATION. (a) Provides that if the person obligated to
pay the commission sells that person's interest in the commercial real
estate, the broker's lien is subordinate to a recorded purchase-money first
lien authorized by the buyer if the buyer:
(1) executes and files with the county clerk of the county in which the
broker's lien is filed a memorandum that evidences the buyer's ratification
of the broker's lien and the buyer's assumption of the obligation to pay
the broker the commission as provided by the commission agreement that is
the basis for the lien; and
(2) sends the broker, by certified mail, return receipt requested, or
registered mail, a copy of the recorded memorandum required by this
subsection.
(b) Provides that if the person obligated to pay the commission refinances
a recorded first lien secured by that person's interest in the commercial
real estate, 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:
(1) executes and files with the county clerk of the county in which the
broker's lien is filed a memorandum that evidences the person's
ratification of the broker's lien and the person's obligation to pay the
broker the commission as provided by the commission agreement that is the
basis for the lien; and
(2) sends the broker, by certified mail, return receipt requested, or
registered mail, a copy of the recorded memorandum required by this
subsection.
(c) Provides that if the person obligated to pay the commission obtains an
extension of credit secured by that person's interest in the commercial
real estate, the broker's lien is subordinate to the lien securing the
extension of credit if, according to the lien documents, the extension of
credit is made only for the purpose of:
(1) repairing or renovating the commercial real estate; or
(2) completing construction or providing additional improvements on the
commercial real estate.
(d) Provides that if the person obligated to pay the commission furnishes
a subordination agreement as provided by this section to be executed by the
broker, the broker must:
(1) execute and acknowledge the subordination agreement before a notary
public; and
(2) return the subordination agreement to the person by the seventh day
after the date the broker receives the subordination agreement and other
requested documents in order to determine that the subordination agreement
complies with this section.
Sec. 62.030. MIXED-USE REAL ESTATE. Provides that if real estate is
zoned or restricted for more than one use, the broker's lien attaches only
to the portions of the real estate zoned or restricted for commercial use.
Sec. 62.031. CHANGE IN USE OF REAL ESTATE. Provides that any change in
the 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.
Provides an exception under Subsection(b). Establishes that the broker's
lien is extinguished if:
_no later than the 180th day after the date on which the broker's
commission is payable, the commercial real estate on which a broker claims
a lien is zoned or restricted for single-family use under recorded
restrictive covenants that remain in effect for at least 20 years after the
date the restrictions are recorded in the real property records of the
county in which the real estate is located; and
_the zoning ordinances or restrictive covenants for single-family use are
in effect until at least the second anniversary of the date the commission
is payable.
SUBCHAPTER C. TIME FOR FILING NOTICE OF LIEN
Sec. 62.041. TIME TO FILE. (a) Provides that a broker must record notice
of lien after the commission is earned and before the conveyance of the
interest in the commercial real estate on which the broker is claiming a
lien if a broker has earned a commission under a commission agreement
signed by a seller or the seller's authorized agent.
(b) Provides that a broker must record notice of lien after the buyer
acquires legal title to the interest in the commercial real estate on which
the broker is claiming a lien and before the buyer conveys the buyer's
interest in the commercial real estate on which the broker is claiming a
lien if a broker has earned a commission under a commission agreement
signed by a prospective buyer or a prospective buyer's authorized agent.
(c) Provides that a broker must record a notice of lien, if the lien is
based on a lease transaction, after the commission is earned and before the
earlier of the 91st day after the date the event for which the commission
becomes payable occurs or the date the person obligated to pay the
commission records a conveyance of that person's interest in the commercial
real estate after executing the lease agreement relating to the lease
transaction for which the lien is claimed.
(d) Provides that the lien is void if a notice of lien is not filed within
the time required by this section.
SUBCHAPTER D. ENFORCEMENT OF LIEN
Sec. 62.061. SUIT TO FORECLOSE LIEN. Prohibits a broker from bringing a
suit to foreclose a lien under this chapter unless the lien is earned and
payable. Authorizes a broker to bring 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. Provides that a complaint in a suit filed under this
section must contain a brief description of the commission agreement that
is the basis for the lien, including:
_a description of the disclosure of the broker's right to the lien
contained in the commission agreement;
_the date of the execution of the commission agreement;
_the event for which a commission is considered to be earned; and
_the event for which a commission is considered to be payable.
Provides that a complaint must also contain a description of the services
performed by the broker, the amount of the payable commission that is
unpaid, a description of the commercial real estate to which the lien
attaches and other facts necessary for a full understanding of the right of
the parties. Provides that a broker must include as a defendant in a suit
brought under this subchapter 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. Provides that the broker's lien remains valid if the
broker and a person against whom the broker claims a commission use
alternative dispute resolution procedures to resolve a dispute concerning
entitlement to the broker's commission. Provides that any suit to
foreclose the lien is stayed until an alternative dispute resolution
process is completed.
Sec. 62.062. STATUTE OF LIMITATIONS. (a) Provides that a broker claiming
a lien under this chapter must bring suit to foreclose the lien by the
second anniversary of the date the notice of lien is recorded, except as
provided by this section.
(b) Provides that a broker claiming a lien to collect a deferred commission
must bring a suit to foreclose the lien by the earlier of the second
anniversary of the date on which the commission is payable, or whichever is
the later date of the 10th anniversary of the date the lien is recorded or
the 10th anniversary of the date the broker records a subsequent notice of
the lien as a renewal of the broker's entitlement to the lien.
(c) Specifies that a renewal of a notice of lien must state that it is a
renewal of the broker's lien. Provides that the renewal of notice must be
recorded after the ninth anniversary after the date the original notice of
lien or last renewal notice is recorded and on or before the 10th
anniversary of the date the original notice of lien or last renewal notice
is recorded.
(d) Provides that a broker claiming a lien for a commission that is
payable must bring a suit to foreclose the lien not later than the 30th day
after the date the broker receives a written demand to bring a suit to
foreclose the lien from the owner of the interest in the commercial real
estate on which the lien is claimed.
(e) Provides that the lien is void if a suit to foreclose the lien is not
brought within the time required by this section.
Sec. 62.063. ASSESSMENT OF COSTS, FEES, AND INTEREST. Entitles the
prevailing party in a suit brought under this subchapter to court costs,
reasonable attorney's fees, and prejudgment interest.
SUBCHAPTER E. RELEASE OF LIEN
Sec. 62.081. RELEASE OF LIEN. Requires the broker to furnish to the
owner by the fifth day after the date the broker receives a written request
from the owner when a debt that is the basis for a lien under this chapter
is satisfied a release of indebtedness and any lien claimed of the interest
in the commercial real estate on which the lien is claimed. Requires the
broker to furnish to the owner a release of indebtedness and any lien
claimed by the 10th day after the date the broker receives a written
request from the owner of the interest in the commercial real estate on
which the lien is claimed, when a condition occurs that would preclude the
broker from receiving compensation under the terms of the commission
agreement that is the basis for the lien. Provides that a release of lien
must be in a form that permits the instrument to be filed of record.
SUBCHAPTER F. ESCROW OF DISPUTED AMOUNTS
Sec. 62.101. ESCROW ACCOUNT. Requires any person named in the notice of
lien as obligated to pay the commission to, before closing:
_establish an escrow account from the proceeds of the transaction or
conveyance in an amount sufficient to satisfy the lien and related costs in
an amount not less than 15 percent of the amout of the lien for any
interpleader action brought by the person maintaining the escrow account;
or
_file a bond to indemnify against the lien as provided by Subchapter G;
if a claim for a lien under a recorded notice of lien is not paid or
assumed at the closing of a sale, lease, or mortgage of the commercial real
estate subject to the lien and would prevent the closing of the
transaction or conveyance.
Sec. 62.102. NAMED ESCROW AGENT. Requires that the escrow account be
established with the named escrow agent in the contract on which the
transaction or conveyance is based.
Sec. 62.103. COSTS OF INTERPLEADER. Authorizes the person maintaining
the escrow account to deduct related costs for any interpleader action.
Sec. 62.104. REFUSAL TO ESTABLISH AN ESCROW ACCOUNT. Prohibits a party
from refusing to close a transaction because of the requirement to
establish an escrow account as provided by this section if:
(1) the broker provides a copy of the notice of lien that complies with
Section 62.026;
(2) sufficient proceeds exist in the proposed transaction for the payment
of the commission and costs of the interpleader; and
(3) the broker executes and delivers a full release of the broker's lien
in a recordable form.
Sec. 62.105. TERM OF ESCROW ACCOUNT. Requires the escrow amount to be
held until:
(1) the rights of the parties claiming the amount in escrow are determined
by a written agreement of the parties, a court order, or an alternative
dispute resolution process agreed to by the parties;
(2) the broker's lien is no longer enforceable; or
(3) the funds are interpled into a district court for the county in which
the commercial real estate is located.
Sec. 62.106. EXTINGUISHMENT OF LIEN UPON ESCROW. Provides that the
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 under this section.
SUBCHAPTER G. BOND TO INDEMNIFY AGAINST LIEN
Sec. 62.121. BOND. Provides that any person may file a bond to
indemnify against the lien if a lien is fixed or is attempted to be fixed
by a recorded instrument under this chapter. 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. Provides that the bonds must:
(1) describe the commercial real estate on which the lien is claimed;
(2) refer to the lien claimed in a manner sufficient to identify it;
(3) be in an amount that is double the amount of the lien referred to in
the bond as of the date of execution of the bond by the surety, unless the
total amount claimed in the lien exceeds $40,000, in which case the bond
must be in an amount that is 1-1/2 times the amount of the lien;
(4) be payable to the party claiming the lien;
(5) be executed by the party filing the bond as principal and a state
licensed corporate surety to execute the bond as surety;
(6) be conditioned substantially that the principal and sureties will pay
the named obligees or their assignees the amount that the named obligees
would have been entitled to recover if their claim had been proved to be
valid and enforceable liens on the commercial real estate; and
(7) identify the last known mailing address of the person claiming the
lien.
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. Provides that a
copy of the bond must be attached to the notice. Provides that the notice
must be served on each obligee by mailing a copy of the notice and the bond
to the obligee by certified mail, return receipt requested, addressed 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. Provides that a buyer, insurer of title, or lender, in
acquiring an interest in or insuring title to the commercial real estate,
may rely on and is 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 or holding a lien
claim from suing on the bond later than the second anniversary of the date
on which the underlying lien claim becomes payable. Provides that the bond
is exhausted by one action against it. Authorizes each named 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.
SECTION 2. Effective date: September 1, 1999.
Makes application of this Act prospective.
SECTION 3. Emergency clause.