Commercial Broker Lien Law

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Commercial Broker Lien Law

PROVISIONS OF LAW:

The law creates lien rights for real estate brokers who enter into written contracts for services related to selling, leasing, or conveying any interest in certain commercial real estate. Commercial real estate includes any parcel of real estate in Ohio other than real estate containing one -four residential units or publicly owned properties.

Conditions of the lien:

1. only the broker named in the contract has a lien;

2. the lien is effective only if the contract for services is in writing and is signed by the broker or the broker’s agent and the owner of the lien property or the owner’s agent;

3. the amount of the lien is limited to the amount due to the broker pursuant to the contract. If the amount due to the broker is payable by the seller in installments, a portion of which is due after conveyance, the amount of the lien is limited to the amount due to the broker prior to or upon conveyance;

4. the lien is effective only against the interest in real estate that is the subject of the contract.

Provisions for perfecting the broker’s lien with which the broker must comply:

1. the broker is required to record a lien affidavit in the county recorder’s office of the county in which the real estate is located;

2. the lien affidavit must include the name of the broker who has the lien, the name of the property owner, a legal description of the lien property, the amount for which the lien is claimed, the date and a summary of the written contract on which the lien is based, and the real estate license number of the broker. The affidavit must be signed by the broker or the broker’s agent.

3. a lien affidavit based on the sale of lien property where the seller is paying the fee must be recorded prior to the conveyance of the property;

4. a lien affidavit based on the sale of lien property where the buyer is paying the fee must be recorded within 90 days after the conveyance of the property.

5. a lien affidavit based on the lease of lien property must be recorded within 90 days after a default by the owner in the payment of a fee due under the contract for services related to leasing the lien property.

6. on the day the lien affidavit is recorded, the broker is required to provide a copy of the lien affidavit to the owner of the lien property and, where a contract for the sale or other conveyance of the lien property has been entered into, the prospective transferee, where known, either by personal delivery or by certified mail

Enforcement of a lien:

A broker must comply with the following provisions in order to commence proceedings to enforce a lien:

1. the broker is required to file a complaint in the common please court in the county where the property is located;

2. the complaint must be filed within two years following the recording of the lien affidavit. Failure to do so extinguishes the lien.

3. a complaint must identify the contract upon which the lien is based and the date of the contract, describe the services performed by the broker pursuant to the contract, specify the unpaid amounts due to the broker pursuant to the contract, specify the address of the lien property, and have a copy of the contract attached.

4. the broker is required to name as defendants in the complaint all parties that have a legal or equitable interest in the lien property of whom the broker has knowledge.

The law allows an owner to demand that the broker commence a suit to enforce a broker’s lien by serving a written notice of demand on the broker by personal delivery or by certified mail. The broker is required to commence the suit or file the answer demanded within 28 days after receipt of the notice of demand or the lien is extinguished.

Foreclosure; alternative dispute resolution:

The law provides that all liens claimed are subject to existing law governing the sale of property when a mortgage is foreclosed or a specific lien is enforced, unless the parties agree to proceed with alternative dispute resolution (ADR). In that case, the claim must be heard and resolved in the agreed upon ADR forum. The court must retain jurisdiction to enter and enforce the award or other result of ADR on all interested parties to the foreclosure.

Release or satisfaction of lien:

The law requires a broker to file a written release or satisfaction of the broker’s lien in the county recorder’s office of the county in which the lien was recorded within ten days after any of the following:

1. moneys in an amount sufficient to release the broker’s lien have been deposited in an escrow account;

2. the owner satisfies the claim upon which the broker’s lien is based;

3. the broker fails to file a claim to enforce a lien within the specified time;

4. the claim upon which the broker’s lien is based has been resolved by a written agreement of the broker and owner, by a court, or by any process agreed to by the broker and owner.

On the day the release or satisfaction is recorded, the broker must provide the owner with a copy of the release or satisfaction by personal delivery or by certified mail.

Attorney’s fees and costs:

Courts are authorized to assess the nonprevailing parties, in an action based on a broker’s lien, with costs and reasonable attorney’s fees incurred by the prevailing parties.

Lien priority:

The law grants priority over a broker’s lien to all valid mechanic’s liens and all prior recorded liens and mortgages.

Escrow accounts; exceptions:

To enable a transfer of lien property to close when a broker’s perfected lien may otherwise prevent the closing, the law requires, with certain exceptions, an escrow account be established by the owner, into which moneys from the proceeds of the closing must be deposited in an amount sufficient to release the broker’s lien. The moneys must be held in escrow and can only be released as ordered by a court, or as directed by agreement of the broker and owner or by any process agreed to by the broker and owner.

The law states that an owner may not refuse to close a transfer of lien property because of the requirement to establish an escrow account. A prospective transferee of the lien property cannot refuse to close the transfer of the lien property solely because the broker recorded a lien affidavit as long as the owner has established the escrow account, and the prospective transferee has received from the escrow agent for the escrow account a verified statement that the escrow account has been established.

The law also provides that when funds have been placed in escrow, the broker claiming a lien has an equitable lien on the escrowed funds, and the lien recorded on the lien property must be extinguished as a matter of law.

The broker and owner are not required to follow the escrow procedures if either:

1. an alternative procedure is available that would allow the transfer of lien property to close and that procedure is acceptable to the broker and prospective transferee;

2. the proceeds from the transfer of lien property would be insufficient to release all liens, including the broker’s lien, that are claimed against the lien property.

Liability:

The law provides that any broker that asserts or records a spurious or materially inaccurate broker’s lien or fails to release or acknowledge release or satisfaction of a broker’s lien, in compliance with the law, is liable for damages incurred by any person who has a legal or equitable interest in the lien property.

Lien Affidavit form
Service Upon Owner of Release of Lien form
Release of Broker’s Lien form
Service Upon Owner/Prospective Transferee of copy of  Lien Affidavit form