Page 10 - NBIZ Magazine April 2022

Requirements for the Notice before the second anniversary of the date the notice of
For the lien to be valid, the notice of lien must be signed lien is filed. The exception to the two (2) year statute
by the broker or by a person authorized to sign on behalf of of limitation is when the owner demands that the lien
the broker. It also must contain the following: be foreclosed. The owner can demand that the broker
file a lawsuit to foreclose the lien. The Act sets a thirty
1) a sworn statement of the nature and amount of the (30) day period where the broker claiming the lien can
claim, including; file a lawsuit to foreclose the lien if the broker receives
i) the commission amount or the formula used to written notice from the owner to foreclose. If the
determine the commission; lawsuit is not filed within this time, the lien voids.
ii) the type of commission at issue, including a
deferred commission; and Risk vs Reward
iii) the month and year in which the commission The process of filing a notice of a broker’s lien is com-
was earned. plex. The notice of lien is a sworn statement required to
be notarized by a Texas notary. It is highly recommend-
2) the name of the broker and the real estate license ed that a lawyer prepares and files the notice. The Act
number of the broker; clearly states the requirements. Once a broker starts the
process, the relationship between agent and owner will
3) the name as reflected in the broker’s records of any now be one of Plaintiff and Defendant.
person who the broker believes is obligated to pay the The notice of lien, if properly done, will effectively
commission under the commission agreement; place a lien against the owner’s commercial property.
If the owner does not discharge the lien by payment
4) the name as reflected in the broker’s records of any or escrow, the broker will be faced with filing a law-
person the broker believes to be an owner of the commercial suit to foreclose the lien. That lawsuit could include a
real estate interest on which the lien is claimed; simple breach of contract claim for the amount of owed
commissions.
5) a description legally sufficient for identification of the The prevailing party to a lawsuit for foreclosure of
commercial real estate interest sought to be charged with a broker’s lien is entitled to recover legal fees. The Act
the lien; also allows an owner to recover legal fees incurred if the
broker is unable to prove or recover under the Act. Inter-
6) the name of any cooperating broker or principal in the estingly, the Act goes on to allow a civil penalty against
transaction with whom the broker intends to share the an owner or tenant who acted in bad faith by failing to
commission and the dollar or percentage amount to pay a commission under a commission agreement that
be shared; and waived the broker’s right to file a lien under the Act. The
civil penalty may also be assessed against a broker who
7) a copy of the commission agreement on which the lien violates the Act in bad faith.
is based. The filing of a broker’s notice of lien can effectively
get an owner’s attention when one’s earned commission
One should note the extensive information required to is due and not paid. Many brokers hesitate in filing a
be in the notice. If one requirement is missed, the lien notice of lien due to the relationship between the two
becomes invalid. parties. Once filed, the notice of lien will sever any pro-
ductive business relationship that previously existed.
Notice of Lien Filing Therefore, caution should be exercised when starting
After the notice of lien is filed, written notice has to be the process. If the filing of a notice of lien is not an
provided no later than one business day after the date the option, the broker can always file a lawsuit for breach
broker files the notice of lien. After, the broker must mail of contract. N
a copy of the filed notice by registered mail with return
receipt requested to the owner of the commercial property
on which the lien is claimed or to the prospective buyer Brian D. Womac is a licensed attorney in Texas
or tenant and any escrow agent (title company) named since 1985 celebrating 36 years of active practice in
in the contract for sale if the property is subject to a commercial real estate law. He has been board-certified
sales contract. The notice requirements should be strictly in commercial real estate law for thirty (30) years
followed. If a broker fails to properly provide notice, the (1991-2021) and has personally handled over 3,000
lien becomes invalid. litigation matters in Harris County, Texas. His client
base consists of corporations, partnerships, companies,
Time to File Suit lending institutions, insurance companies, investors,
Except when there is a deferred commission claimed, management and leasing companies, and others owning
the broker has to file a lawsuit to foreclose the lien on or real estate.

10 NBIZ ■ April 2022