SENATE BILL No. 1099

 

 

February 28, 2006, Introduced by Senator BISHOP and referred to the Committee on Economic Development, Small Business and Regulatory Reform.

 

 

 

      A bill to create a lien against real property for unpaid

 

commercial real estate broker's commissions and services; and to

 

provide remedies.

 

THE PEOPLE OF THE STATE OF MICHIGAN ENACT:

 

 1        Sec. 1. This act shall be known and may be cited as the

 

 2  "commercial real estate broker's lien act".

 

 3        Sec. 2. As used in this act:

 

 4        (a) "Buyer" means a purchaser, tenant, or lessee of a legal

 

 5  or equitable interest in real estate.

 

 6        (b) "Commercial real estate" means real estate or an

 

 7  interest in real estate that is not any of the following:

 

 8        (i) Real estate zoned for single family use and on which no

 

 9  building or structure is located.

 


 1        (ii) Real estate on which 4 or fewer residential units are

 

 2  located.

 

 3        (iii) Real estate on which more than 4 residential units are

 

 4  located if the units are single-family residential units,

 

 5  including houses, condominiums, or townhouses in a subdivision or

 

 6  condominium site, that are sold, leased, or otherwise conveyed on

 

 7  a unit-by-unit basis.

 

 8        (c) "Commercial real estate broker's lien" means a lien

 

 9  created under this act.

 

10        (d) "Record" means to record with the register of deeds for

 

11  the county in which the commercial real estate is located.

 

12        (e) "Seller" means the equitable or legal owner or lessor of

 

13  an interest in real estate.

 

14        Sec. 3. A commercial real estate broker's lien is only

 

15  available to an individual licensed as a real estate broker under

 

16  article 25 of the occupational code, 1980 PA 299, MCL 339.2501 to

 

17  339.2518. A commercial real estate broker's lien is not available

 

18  to an employee, agent, subagent, or independent contractor of a

 

19  licensed real estate broker.

 

20        Sec. 4. (1) A potential lien is created on commercial real

 

21  estate owned or to be acquired by a person obligated to pay a

 

22  real estate broker's commission in the amount due to the real

 

23  estate broker for licensed services if either of the following

 

24  circumstances exists:

 

25        (a) The real estate broker has a written agreement with the

 

26  seller or the agent of the seller of the commercial real estate

 

27  for the payment of the commission and the real estate broker

 


 1  records a notice of potential lien within 10 days after the

 

 2  written agreement is signed or, if subsection (2) applies, within

 

 3  the time required by subsection (2).

 

 4        (b) The real estate broker has a written agreement with a

 

 5  prospective buyer or the agent of a prospective buyer for the

 

 6  payment of the commission.

 

 7        (2) If a potential commercial and real estate broker's lien

 

 8  arises because of the exercise of an option to extend a lease or

 

 9  expand the leased premises, a notice of potential lien shall be

 

10  recorded within 90 days after the lessee or the lessee's tenant

 

11  takes possession under the extended lease or of the expanded

 

12  premises.

 

13        (3) A notice of potential lien under this section shall be

 

14  in substantially the following form:

 

 

15 NOTICE OF POTENTIAL LIEN

 

16 [Name of Broker],          )        Notice of Potential Commercial

17                            )        Real Estate Broker's Lien

18 Broker-Claimant            )       

19                            )        In the Office of the Register

20                            )        of Deeds of _________________

21                            )        County, Michigan

 

 

22        The broker-claimant named above, whose real estate license

 

23  number is ___________________________, and whose business address

 

24  is _____________________________________________________________,

 

25  has entered into a written commission agreement with ____________

 

26  _________________________________, the (seller) (buyer) of the

 


 1  real estate described below. Under the agreement, the broker-

 

 2  claimant may in the future be entitled to a commercial real

 

 3  estate broker's lien.

 

 

[Legal description]                

Witnesses:                          [Name of Broker]

____________________________        By: ________________________

____________________________        Its Authorized Agent

 

8 Signed and sworn to before me in ______________ County, Michigan,

9 on ________________, ______[year].

 

10                                    _______________________________

11                                    [Notary's name, county, acting

12                                    in county, and date commission

13                                    expires]

14 Prepared By:                      

15 Return To:                        

 

 

16        Sec. 5. (1) A commercial real estate broker's lien attaches

 

17  to commercial real estate in favor of a real estate broker if all

 

18  of the following circumstances exist:

 

19        (a) The real estate broker has a written commission

 

20  agreement and has filed a notice of potential lien under section

 

21  4.

 

22        (b) The real estate broker is entitled to a commission under

 

23  the written commission agreement.

 

24        (c) Except as provided in subsections (2) to (5), the real

 

25  estate broker records a claim of lien within 90 days after the

 

26  actual conveyance of the commercial real estate, in which case

 


 1  the lien attaches on the date the claim of lien is recorded.

 

 2        (2) Except as provided in subsection (3), when payment of a

 

 3  real estate broker's commission is due in installments, 1 or more

 

 4  of which are due after the conveyance of the commercial real

 

 5  estate, a claim of a commercial real estate broker's lien for the

 

 6  payments due after the date of the conveyance may be recorded

 

 7  after the date of the conveyance and before the dates on which

 

 8  the payments are due. A lien under this subsection is only

 

 9  effective against the commercial real estate to the extent

 

10  payment is still owed to the seller by the buyer. A single claim

 

11  of lien claiming a commission due under an installment agreement

 

12  recorded before the conveyance of the commercial real estate is

 

13  not enforceable as to a claim for a commission due after the

 

14  conveyance. A lien under this subsection attaches on the date the

 

15  claim of lien is recorded.

 

16        (3) If a real estate broker is owed a commission because of

 

17  a lease, a claim of a real estate broker's lien shall be recorded

 

18  by the real estate broker within 90 days after the lessee or the

 

19  lessee's tenant takes possession of the leased premises or after

 

20  a modification of an existing lease is confirmed in writing. If a

 

21  real estate broker is owed a commission because of an option to

 

22  extend a lease or expand the leased premises and the real estate

 

23  broker recorded a notice of potential lien as required by section

 

24  4(2), the lien attaches when the option to extend the lease or

 

25  expand the leased premises is exercised. If written notice of the

 

26  intent to enter into a lease that includes the date on which the

 

27  lease is intended to be signed is personally served on the real

 


 1  estate broker at least 10 days before the intended date of

 

 2  signing, the real estate broker shall file the claim of lien

 

 3  before the intended date of signing and the lien attaches on the

 

 4  date the claim of lien is recorded. As used in this subsection,

 

 5  "lease" includes a lease, sublease, assignment of lease, or other

 

 6  modification of an existing lease.

 

 7        (4) If a real estate broker has a written agreement with a

 

 8  potential buyer to act as a buyer's agent, a commercial real

 

 9  estate broker's lien attaches on the buyer purchasing or

 

10  otherwise accepting the conveyance of commercial real estate if a

 

11  claim of lien is recorded within 90 days after the purchase or

 

12  conveyance.

 

13        (5) If a real estate broker is owed a commission because of

 

14  an option to purchase commercial real estate and the real estate

 

15  broker has recorded a notice of potential lien as required by

 

16  section 4(2)(c), a commercial real estate broker's lien attaches

 

17  on the transfer or conveyance of the commercial real estate or

 

18  interest in commercial real estate pursuant to the exercise of

 

19  the option to purchase.

 

20        (6) A claim of lien shall contain all of the following:

 

21        (a) The name and the license number of the claimant.

 

22        (b) The name of the owner of the commercial real estate.

 

23        (c) The amount for which the lien is claimed.

 

24        (d) As an attachment, the legal description of the

 

25  commercial real estate on which the lien is being claimed.

 

26        (e) As an attachment, a copy of the written instrument on

 

27  which the claim for commission or fee is based if the instrument

 


 1  is in the possession of the real estate broker.

 

 2        (f) If the instrument on which the claim for commission or

 

 3  fee is based is not in the possession of the real estate broker,

 

 4  a statement of that fact.

 

 5        (g) A statement that the information contained in the claim

 

 6  of lien is true and accurate to the knowledge of the signer.

 

 7        (h) The notarized signature of the real estate broker or a

 

 8  person authorized to sign on behalf of the real estate broker.

 

 9        (7) A claim of lien recorded under this section shall be

 

10  substantially in the following form:

 

 

11 CLAIM OF LIEN

 

12 [Name of Broker],          )        Claim of Commercial Real Estate

13                            )        Broker's Lien

14 Broker-Claimant            )       

15                            )        In the Office of the Register

16                            )        of Deeds of _________________

17                            )        County, Michigan

 

 

18        The broker-claimant named above, whose real estate license

 

19  number is ___________________________, and whose business address

 

20  is ________________________________________________, Michigan,

 

21  claims a commercial real estate broker's lien under section 5 of

 

22  the commercial real estate broker's lien act and states:

 

23        1. The real property ("property") against which the lien is

 

24  claimed is located at _______________________,

 

25  ___________________ County, Michigan, and is legally described on

 

26  Exhibit A attached to this claim. The record owner ("owner") of

 


 1  the property is _____________________________________________.

 

 2        2. On ___________________, the broker-claimant entered into

 

 3  a written agreement with the (owner) (buyer) obligating the

 

 4  (owner) (buyer) to pay a commission to the broker-claimant. A

 

 5  copy of the agreement is attached as Exhibit B.

 

 6        3. If Exhibit B is not attached, the broker-claimant

 

 7  represents that the written agreement referred to in paragraph 2

 

 8  has been executed, but the broker-claimant does not have a copy

 

 9  of the agreement in its possession.

 

10        4. The broker-claimant, by its agents, provided services for

 

11  the (owner) (buyer) and is in compliance with the broker-

 

12  claimant's obligations under the written agreement referred to in

 

13  paragraph 2.

 

14        5. The amount of the commission or fee to which the broker-

 

15  claimant is entitled is _____________________.

 

16        6. The broker-claimant now claims a lien on the property and

 

17  all improvements on the property and against all persons

 

18  interested in the property in the amount of $___________________.

 

19        7. The information contained in this claim of lien is true

 

20  and accurate to the best knowledge of the signer.

 

 

21 Witnesses:                          [Name of Broker]

22 ____________________________        By: ________________________

23 ____________________________        Its Authorized Agent

 

24 Signed and sworn to before me in ______________ County, Michigan,

25 on ________________, ______[year].

 

26                                    _______________________________


                                   [Notary's name, county, acting

                                   in county, and date commission

                                   expires]

 

 

 4        Note: This lien notice is void and unenforceable unless

 

 5  recorded with the register of deeds of the county in which the

 

 6  real estate is located, as required by the commercial real estate

 

 7  broker's lien act.

 

 

Prepared By:                      

Return To:                        

 

 

 

10        (8) Within 10 days of recording a claim of lien under this

 

11  section, the real estate broker shall provide notice of the claim

 

12  of lien to the owner of record of the commercial real estate and

 

13  to the party who signed the written commission agreement by

 

14  mailing a copy of the claim of lien by registered or certified

 

15  mail with return receipt requested to the address of the

 

16  commercial real estate that is the subject of the claim of lien

 

17  or by personal service. Mailing a copy of the claim of lien is

 

18  effective as notice under this subsection when deposited in a

 

19  United States mailbox with postage prepaid. The commercial real

 

20  estate broker's lien is void and unenforceable if a copy of the

 

21  claim of lien is not served within the time and in the manner

 

22  required by this subsection.

 

23        (9) A lien not recorded in compliance with this section is

 

24  void and unenforceable.

 

25        (10) A valid prior-recorded lien or mortgage on commercial


 

 1  real estate has priority over the lien under this section. A

 

 2  valid prior-recorded lien or mortgage includes, but is not

 

 3  limited to, both of the following:

 

 4        (a) A valid construction lien recorded after a lien under

 

 5  this section is recorded that relates back to a date before the

 

 6  lien under this section is recorded.

 

 7        (b) A lien securing revolving credit and future advances of

 

 8  construction loans that is recorded before the lien under this

 

 9  section is recorded.

 

10        Sec. 6. (1) If a lien recorded under section 5 would

 

11  otherwise prevent the closing of a transaction involving

 

12  commercial real estate, the parties to the transaction shall,

 

13  subject to subsection (2), establish an escrow account from the

 

14  proceeds of the transaction in an amount sufficient to satisfy

 

15  the lien. A party shall not refuse to close the transaction

 

16  because of the requirement of establishing an escrow account

 

17  under this subsection. The money shall remain in the escrow

 

18  account until the rights to the money have been determined by a

 

19  written agreement of the parties, a judgment or order by a court

 

20  of competent jurisdiction, or any other method agreeable to the

 

21  parties.

 

22        (2) An escrow account is not required under subsection (1)

 

23  if either of the following circumstances exists:

 

24        (a) Alternative procedures are available that will allow the

 

25  transaction to close and that are acceptable to all the parties

 

26  to the transaction.

 

27        (b) The proceeds from the transaction are insufficient to


 

 1  satisfy all liens against the commercial real estate under this

 

 2  act.

 

 3        (3) If an amount sufficient to satisfy a commercial real

 

 4  estate broker's lien is escrowed under subsection (1), the lien

 

 5  is extinguished and the real estate broker shall provide a

 

 6  release of lien substantially in the following form:

 

 

RELEASE OF LIEN

 

 

 8        The undersigned is the claimant under a claim of commercial

 

 9  real estate broker's lien recorded on _______________ [date] in

 

10  the office of the register of deeds of _______________ County,

 

11  Michigan, at Liber ____________, Page __________. The undersigned

 

12  releases the lien on the following described property:

 

 

13 [Legal description]                

14 Witnesses:                          [Name of Claimant]

15 ____________________________        By: ________________________

16 ____________________________        Its Authorized Agent

 

17 Signed and sworn to before me in ______________ County, Michigan,

18 on ________________, ______[year].

 

19                                    _______________________________

20                                    [Notary's name, county, acting

21                                    in county, and date commission

22                                    expires]

23 Prepared By:                      

24 Return To:                        

 

 


 1        Sec. 7. (1) A person claiming a commercial real estate

 

 2  broker's lien may bring an action to enforce the lien in the

 

 3  circuit court for the county where the commercial real estate is

 

 4  located by filing a complaint and affidavit that the lien has

 

 5  been recorded.

 

 6        (2) The plaintiff in an action under this section shall name

 

 7  as defendants all persons that, at the time the action is filed,

 

 8  have an interest in the commercial real estate that is the

 

 9  subject of the action that would be divested or impaired by the

 

10  foreclosure of the lien.

 

11        (3) The complaint in an action under this section may

 

12  include a claim on the contract from which the lien arises.

 

13        Sec. 8. (1) Subject to subsection (2), an action under

 

14  section 7 shall be commenced within 2 years after the date the

 

15  claim of lien is recorded.

 

16        (2) If the commercial real estate broker's lien is based on

 

17  an option to purchase the commercial real estate, an action under

 

18  section 7 shall be commenced within 6 months after the date the

 

19  commercial real estate is transferred or conveyed pursuant to the

 

20  exercise of the option to purchase. If the commercial real estate

 

21  broker's lien is based on an option to extend a lease or expand

 

22  leased premises, an action under section 7 shall be commenced

 

23  within 6 months of the commencement of the new lease term.

 

24        (3) Failure to commence an action within the applicable time

 

25  period under this section extinguishes the lien. A later claim of

 

26  lien for the same commission or services shall not be made and

 

27  shall not be the basis of an action filed under section 7.

 


 1        Sec. 9. (1) If the court in an action under section 7 finds

 

 2  that the plaintiff is entitled to the commercial real estate lien

 

 3  and that the amount claimed has not been paid, the court may

 

 4  enter a judgment ordering the sale of any interest in the

 

 5  commercial real estate, or part of the commercial real estate, to

 

 6  which the lien attaches. In the order of foreclosure sale, the

 

 7  court shall set a period of redemption not exceeding 4 months.

 

 8  The sale shall be conducted in the same manner as a sale on

 

 9  execution. The sale is final, subject to the period of

 

10  redemption, on the entry of an order of confirmation by the

 

11  court. On expiration of the period of redemption, the grantee

 

12  named in the deed is vested with all right, title, and interest

 

13  in the commercial real estate that was subject to the lien.

 

14  Redemption from a foreclosure sale is complete on full payment of

 

15  the amount in the judgment of foreclosure. If the court

 

16  determines that the proceeds of the sale are insufficient to

 

17  satisfy the judgment, the court may enter a deficiency judgment

 

18  against the person who signed the written agreement to pay the

 

19  real estate broker.

 

20        (2) The court in an action under section 7 shall award costs

 

21  to a prevailing plaintiff, including reasonable attorney fees,

 

22  court and litigation costs, and prejudgment interest.

 

23        Sec. 10. A written demand on behalf of the owner of

 

24  commercial real estate may be served on a person claiming a

 

25  commercial real estate broker's lien, demanding that an action be

 

26  commenced to enforce the lien or that an answer be filed in an

 

27  action pending between the owner and the lien claimant. If the

 


 1  action is not commenced or the answer is not filed within 30 days

 

 2  after service of the demand, the lien is extinguished without

 

 3  further action. Service of the demand may be by registered or

 

 4  certified mail, return receipt requested, or by personal service.

 

 5        Sec. 11. If a claim of lien has been recorded under this act

 

 6  and a condition occurs that prohibits the real estate broker from

 

 7  receiving compensation under the terms of the written agreement

 

 8  on which the claim is based, the real estate broker shall provide

 

 9  a release of lien under section 6 to the owner of record within

 

10  10 days after a written demand by the owner of record or the

 

11  owner's agent.

 

12        Sec. 12. If a claim of lien recorded under this act has been

 

13  paid, or an action to enforce the lien has not been commenced

 

14  within the time provided by section 8, the real estate broker

 

15  shall provide a release of lien under section 6 within 5 days

 

16  after a written demand by the owner of record or the owner's

 

17  agent.

 

18        Sec. 13. (1) If a claim of lien recorded under this act has

 

19  been partially paid, the real estate broker shall provide a

 

20  partial satisfaction and release of lien in the form provided in

 

21  subsection (2) within 5 days after written demand by the owner of

 

22  record or the owner's agent.

 

23        (2) A partial satisfaction and release of lien under this

 

24  section shall be in substantially the following form:

 

 

25 PARTIAL SATISFACTION AND RELEASE OF LIEN

 

 

26        The claimant named below is the claimant under a claim of


 

 1  commercial real estate broker's lien recorded on ____________

 

 2  [date] in the office of the register of deeds of _______________

 

 3  County, Michigan, at Liber _________, Page _________ on the

 

 4  following described property:

 

 

[Legal description]

 

 

 6        The claimant has been paid $_____________, a portion of the

 

 7  amount of the lien.

 

 8        Therefore, the claimant, for and in consideration of the

 

 9  payment, waives, to the extent of the payment, the claim of or

 

10  right to a lien under the commercial real estate broker's lien

 

11  act against the property described above, the building or

 

12  buildings on the property, and the tenant spaces in the building

 

13  or buildings.

 

 

14 Witnesses:                          [Name of Claimant]

15 ____________________________        By: ________________________

16 ____________________________        Its Authorized Agent

 

17 Signed and sworn to before me in ______________ County, Michigan,

18 on ________________, ______[year].

 

19                                    _______________________________

20                                    [Notary's name, county, acting

21                                    in county, and date commission

22                                    expires]

23 Prepared By:                      

24 Return To:                        

 

 


 1        Sec. 14. (1) If a notice of potential lien has been recorded

 

 2  under section 4 and a condition occurs that would prohibit the

 

 3  claimant from receiving compensation under the terms of the

 

 4  written agreement on which the notice is based, the claimant

 

 5  shall provide a termination of notice of potential lien in the

 

 6  form provided in subsection (2) within 5 days after a written

 

 7  demand by the owner of record or the owner's agent.

 

 8        (2) A termination of notice of potential lien under this

 

 9  section shall be in substantially the following form:

 

 

10 TERMINATION OF NOTICE OF POTENTIAL LIEN

 

 

11        The claimant named below, who recorded a notice of potential

 

12  lien on __________________ [date] in the office of the register

 

13  of deeds of _______________ County, Michigan, at Liber _______,

 

14  Page ______, terminates that notice on the following described

 

15  property:

 

 

16 [Legal description]                

17 Witnesses:                          [Name of Claimant]

18 ____________________________        By: ________________________

19 ____________________________        Its Authorized Agent

 

20 Signed and sworn to before me in ______________ County, Michigan,

21 on ________________, ______[year].

 

22                                    _______________________________

23                                    [Notary's name, county, acting

24                                    in county, and date commission

25                                    expires]


Prepared By:                      

Return To:                        

 

 

 3        Sec. 15. A subsequently recorded mortgage has priority over

 

 4  a commercial real estate broker's lien if the mortgagee did not

 

 5  have actual or constructive knowledge of the lien or of a notice

 

 6  of potential lien at the time the mortgagee advanced money under

 

 7  the mortgage.

 

 8        Sec. 16. This act applies to a written commission agreement

 

 9  signed after the effective date of this act.