top of page

The Texas Broker's Lien – An Introduction

Updated: Nov 11, 2023

In 1999, Texas adopted the Broker's and Appraiser's Lien on Commercial Real Estate Act ("Act"). Tex. Prop. Code, Chapter 62. Appropriately, the Act allows real estate brokers (and appraisers) to obtain liens on real property when their commissions are left unpaid. This can be a valuable tool for brokers and appraisers.


Here's an example: Owner, Inc. owns commercial property that it rents out to various businesses. Owner hires Listing Agent, LLC ("LA") to list the property for sale, and to aid in closing the final purchase and sale agreement. In exchange, Owner pays LA a 6% commission upon closing. This 6% must be paid, otherwise Owner's property could be subject to a lien by LA.


Who is a "broker"?


Tex. Prop. Code section 62.003(1) defines "broker" as a licensed broker (who is not acting as a residential rental locator) or appraiser licensed under Tex. Occ. Code Chapters 1101 or 1103, respectively. The definition is broad and inclusive. See Tex. Occ. Code section 1101.002(1).


For example, Tex. Occ. Code section section 1101.002(1)(A) defines a "broker" as "...a person who, in exchange for a commission or other valuable consideration or with the expectation of receiving a commission or other valuable consideration, performs for another person one of the following acts: (i) sells, exchanges, purchases, or leases real estate; (ii) offers to sell, exchange, purchase, or lease real estate..."


This definition goes on through subsection (xii). It is an expansive definition of "broker." To illustrate, in the example above, LA is clearly a broker for purposes of Chapter 62, because LA "lists...real estate for sale..." per Tex. Occ. Code section 1101.002(1)(A)(iv).


What amounts can I include in broker's liens?


The amounts included in the lien must be those included in the commission agreement. This includes money "or other valuable consideration." The amount does not have to be exact: it can instead describe a formula for calculating the amount (as the percentage in our example). See Tex. Prop. Code section 62.003(3), (4)(c).


The question really becomes "what is not included?" And due to the inclusive language of section 62.003, there is little that could not be included. It is largely up to the agreement of the parties (the only amounts really that should not be included are those that the owner has already paid).


Owner's agreement with LA could be for 6%, or a flat $20,000 fee, or 4% plus shares of Owner itself, or any other "valuable consideration." As long as the conditions on the amount are satisfied (closing a sale or lease, for example), then the amount can be included.


What property is subject to broker's liens?


The subject property can be any real estate "that is commercial real estate on the date the notice of lien is filed..." Tex. Prop. Code section 62.002(a). So if the property is no longer commercial when you go to file your lien, you have no right to a lien. And the amount of the commission must exceed $2,500.00 (in the aggregate). Tex. Prop. Code section 62.002(b)(1). If your commission is for $2,500.00, then you do not have a right to a lien. But if your lien is based on rent, and the amounts for each unit combine for $2,500.01, then you do have a right to a lien.


Section 62.030 provides the rule for mixed-use real estate. If the property is zoned or restricted for multiple uses, the broker's lien attaches to only the commercial portion.


In our example, suppose Owner's property is all commercial. The lien would thus attach to the entirety of the property. However, if Owner's property is all residential except for a coffee shop operated in a small portion of the building, the lien would only attach to the coffee shop.


Note: Section 62.003 lists property that is specifically excluded, and section 62.002(b) includes a $5,000.00 minimum amount in certain instances. These particulars are very specific, which I consider to be outside the scope of this introduction; I may address them in a future post.


Do any other states allow broker's liens?


In addition to Texas, about 35 other states allow brokers to obtain liens for unpaid commissions (though in a handful of those states, brokers don't have separate liens; they are instead entitled to mechanic's liens).


Unfortunately, California does not currently provide for such broker's liens. And, as far as I have seen, there is no proposed legislation that would allow for them in California.


Conclusion


This introduction gives the basics of the Texas broker's lien: who is entitled to the liens, what amounts may be included, and what property is subject. Broker's liens are a valuable, yet underused, tool available to licensed brokers in Texas.


Chapter 62 sets forth the more detailed requirements, which I plan to address in future posts. This may include filing an enforcement suit, bonds, timelines for the lien, procedures for release, etc.


[Thanks to Andrew Hervey of WAH Tex Realty Services, LLC for this blog post idea.]

4 views0 comments

Recent Posts

See All

Top 5 New Laws in Texas for 2024

Happy New Year! Sorry that this post is coming in late. As always, January 1 brings with it a slate of new laws. My criteria here are: what I thought was interesting, what will impact my clients the m

Top 5 New Laws in California for 2024

Happy New Year! Sorry that this post is coming in late. As always, January 1 brings with it a slate of new laws. My criteria here are: what I thought was interesting, what will impact my clients the m

Comentarios


bottom of page