Following years of requests from the Michigan Association of Realtors and the Commercial Board of Realtors, Michigan has now joined at least 25 other states and established lien rights for commercial brokers. The Legislature recognized that commercial real estate brokers often have difficulty collecting their commissions because commercial real estate, especially in the current market, takes a long time to close.
How does it work?
A licensed commercial real estate broker (not his employees, agents or other subcontractors) is entitled to file a lien for his commission if he:
- Has a written commission agreement, signed after 10/5/2010 (the effective date of the new law);
- Is entitled to a commission under the agreement;
- Files the lien before the land is transferred to the buyer; AND
- Sends a copy of the lien to the owner within 10 days of it being recorded.
A commercial broker may also file a lien for a commission due for the lease of a property. That lien may be recorded within 60 days after the lease is signed. There are also provisions in the act to protect the broker’s right to be paid in installments, for purchase options and where a commission is due for the modification or extension of a lease.
What about disputes?
In the event that the amount of the lien is in dispute, then the owner can open an escrow account and deposit enough money to satisfy the lien. This extinguishes the lien and allows the parties to close on the sale or lease of the property. The escrow cannot be released until the parties reach a mutual agreement or a court orders the disbursement of the funds. The Court is entitled to award either the broker or the property owner a reasonable attorney fee, court and litigation costs and interest.
How do I take advantage of this?
The new act is very strict about the written requirements, the notice to be given and the filing deadlines. If you are a broker, you might need to review your current commercial listing and agency agreements to make sure your lien rights are properly perfected and preserved. Similarly, buyers, sellers, landlords and tenants in commercial transaction might want legal counsel to review the listing agreement and closing documents to prevent non-consensual liens that could halt the transaction.
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