Asserting your broker lien

We receive a lot of Legal Hotline calls regarding broker liens. It’s always helpful to remember some of the key legal criteria about asserting liens.

To assert a commercial broker lien against a seller, the lien must be recorded before title transfers to the buyer. If asserted after the title transfers, the lien is only effective against the buyer who, if he/she has no legal obligation to pay the commission, may now have a claim of slander of title against the broker who filed the lien. If the buyer is obligated to pay the commission by virtue of a written agreement signed by the buyer, then the lien can be asserted when the commission is due or, in the words of the Commercial Broker Lien Law, when the broker “becomes entitled to compensation.” Placing a lien on the title after settlement clouds the title and will prevent the buyer from refinancing, selling or doing anything that requires clean title.

What is less obvious, and what has left some brokers flatfooted, is knowing when a lien can be filed against an owner who owes a commission under a listing for lease agreement. In the case of a lease, the notice of lien shall be recorded within 90 days of a default by the owner or successors in interest under the terms of the compensation agreement. Is clear that the lien better be recorded within 90 days of its due date under the agreement/amended agreement or no lien can be asserted. This does not mean you lose your right to the commission. To enforce payment, however, suit will have to be filed; a judgment entered; and traditional enforcement via attachment, levy and sheriff sale will have to follow.

Asserting a lien in a timely manner is critical. Remember, in the case of a sale, the lien must be preceded by serving a notice on the seller and buyer at least three days before the lien may be recorded. In the case of recording a lien against an owner for failure to pay a commission on a listing for lease, the lien must be recorded no later than 90 days after the commission is due.