Filing liens can help brokers collect commissions. (Insiders Outlook).One of the surest, but rarely used means by which a real estate broker can enforce its right to a commission is by filing a broker's lien. Simply put, a broker's lien is a property right that imposes a charge or an encumbrance A burden, obstruction, or impediment on property that lessens its value or makes it less marketable. An encumbrance (also spelled incumbrance) is any right or interest that exists in someone other than the owner of an estate and that restricts or impairs the transfer of the estate or upon property for the amount of commissions owed to the broker. The lien attaches not only to the land but to buildings and improvements constructed on the land. A lien, like a mortgage, enables the broker to foreclose fore·close v. fore·closed, fore·clos·ing, fore·clos·es v.tr. 1. a. To deprive (a mortgagor) of the right to redeem mortgaged property, as when payments have not been made. b. on the property if the owner fails to vacate To annul, set aside, or render void; to surrender possession or occupancy. The term vacate has two common usages in the law. With respect to real property, to vacate the premises means to give up possession of the property and leave the area totally devoid of contents. the lien. In creating lien laws, legislatures in the past provided protection for contractors, subcontractors, suppliers, and laborers who directly performed or furnished materials in the improvement of real property. In 1982, however, the New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of State legislature A state legislature may refer to a legislative branch or body of a political subdivision in a federal system. The following legislatures exist in the following political subdivisions: Specifically, the amendment expanded the definition of "improvement to property" to include brokerage services provided by real estate brokers on commercial properties. The broker's lien has become a powerful tool for brokers in that the lien has the same effect on property as a mortgage or the customary mechanics lien A mechanic's lien is a security interest in the title to property for the benefit of those who have supplied labor or materials that improve the property. The lien exists for both real property and personal property. . Lenders generally demand that properties be kept lien-free. Moreover, an owner cannot mortgage or sell its property without discharging the lien. This protection extended to real estate brokers is not without strict limitations. The Lien Law only protects a broker who procures a signed lease for a term of more than three years for any or part of real property intended for non-residential purposes. In addition, the law requires that the broker perform its services pursuant to a written brokerage agreement. The Lien Law was executed to protect lienors and New York courts have applied the law with public policy in mind. It shall be noted that Section 34 of the Lien Law specifically renders void any agreement where a broker waives its right to lien a property. When faced with a broker's lien on its property, an owner will usually select a method to discharge the lien. The most common method of discharging a lien is for the owner to bond the lien with the Supreme Court in the county where the property is located. The amount of the bond is fixed by the court, usually for 110% of the amount of the bond and the bonding company can require a cash deposit for the amount of the lien. The bond will then be substituted for the lien that was filed against the property and the broker is assured of collecting its commission if successful at trial. Another method available to the owner is to petition the court to dismiss the lien because of a defect on its face. This method allows the owner to discharge the lien without committing the funds required for a bond. This method is available only when there is a fatal defect that is apparent on the face of the lien itself. Such defects can include an incorrectly named owner, a mistake in the description of the property or a lien filed beyond the period of limitations prescribed in the lien law. A lien, however, is rarely defective on its face and this relief is not customarily used. Another option available to the owner is to file a counterclaim A claim by a defendant opposing the claim of the plaintiff and seeking some relief from the plaintiff for the defendant. A counterclaim contains assertions that the defendant could have made by starting a lawsuit if the plaintiff had not already begun the action. against the lienor for willful exaggeration Exaggeration Bunyon, Paul legendary giant, hero of tall tales of the logging camps. [Am. Folklore: The Wonderful Adventures of Paul Bunyon] Jenkins’ ear trivial cause of a great quarrel. [Br. Hist. of the lien. An-owner successful with this counterclaim could ask the court to have the lien reduced to the proper amount or have the lien dismissed in its entirety. In addition, the lienor may be compelled to reimburse re·im·burse tr.v. re·im·bursed, re·im·burs·ing, re·im·burs·es 1. To repay (money spent); refund. 2. To pay back or compensate (another party) for money spent or losses incurred. the owner for costs expended ex·pend tr.v. ex·pend·ed, ex·pend·ing, ex·pends 1. To lay out; spend: expending tax revenues on government operations. See Synonyms at spend. 2. by the owner in establishing the exaggeration. Accordingly, the broker must take every precaution of file a lien for no more than the amount to which it is entitled. In this article we have tried to furnish general information on the Lien Law of New York as it is applicable to commercial real estate brokers. As we have indicated, there are technical problems and contingent liabilities Contingent Liability 1. The possibility of an obligation to pay certain sums dependent on future events. 2. Defined obligations by a company that must be met, but the probability of payment is minimal. Notes: 1. that might arise. We urge any broker filing a lien to seek competent legal advice before undertaking that step. |
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