Real Estate 101 – How does a real estate broker secure the payment of their commission on the sale of an Ohio commercial property?

I am routinely asked by real estate brokers and agents what steps need to be taken to ensure their broker commission gets paid upon the sale of a commercial property. The strongest protection available to a real estate broker to ensure their commission is paid is the broker’s lien provided by Ohio Revised Code (ORC) Section 1311.86(A). I will follow up this post with a subsequent post on broker’s rights to payments for commercial leasing transactions.

The broker’s lien statute, ORC Section 1311.86(A), provides that “Any broker that enters into a written contract for services relating to selling, leasing, or conveying any interest in commercial real estate has a lien on that commercial real estate.”

IMPORTANT – The requirements for a broker’s lien are technical. This post is purely a summary of some of the requirements for Ohio broker’s liens and should not be construed as legal advice.Broker’s considering filing a broker’s lien in Ohio should contact an attorney. If a broker improperly files a broker’s lien they can be subject to liability including but not limited to claims for slander of title.

One of the most common pitfalls in this practice area involves brokers that do not have a separate listing agreement and rely solely upon language in a purchase agreement for their payment. If the broker does not sign that purchase agreement (as required by ORC Section 1311.86(A)) and files a broker’s lien,there is a chance that (a) broker’s lien can be challenged for failing to comply with ORC Section 1311.86 and (b) the broker can be liable for clouding title to the property.

What are the requirements for a broker’s lien on commercial real estate?

The requirements are as follows:

  • written contract for services signed by the broker (or broker’s agent) and owner of the lien property (or the owner’s agent).
  • lien is in the name of the broker and not a sales agent
  • the lien amount is limited to the amount due under the written contract and due prior to the conveyance
  • the lien is effective only against the real estate being sold
  • broker perfects the lien as required by ORC Section 1311.87 including the deadlines for filing

When must the lien affidavit be filed for broker’s representing the seller and paid by the seller?

For broker commissions due on the sale of property (the broker represents the seller and is paid by the seller), the lien affidavit meeting the requirements of ORC Section 1311.87 is filed before the deed is filed transferring the property

When must the lien affidavit be filed for broker’s representing the seller and paid by the seller?

For broker commissions due on the purchase of property (i.e. the broker represents the purchaser and is paid by the purchaser), the lien affidavit meeting the requirements of ORC Section 1311.87 is filed within ninety (90) days after the conveyance of the property to the buyer

What the steps required to perfect a broker’s lien on commercial real estate?

The preference requirements are set forth in ORC Section 1311.87 and a fairly straightforward. In general, they require:

  • the broker to be entitled to a commission
  • The broker timely filed a lien affidavit with the county recorder
  • the lien affidavit is timely filed based on whether the broker is representing the buyer or seller
  • the broker provides a copy to the seller or the buyer by personal delivery or certified mail based on who the broker is representing

What must be included in the lien affidavit?

The lien affidavit requirements are set forth in Section 1311.87(B) and generally require:

  • name of the broker entitled to the lien
  • name of the owner of the subject property
  • legal description of the lien property
  • amount of the lien claimed
  • date and summary of the contract on which the lien is based
  • real estate license number of the broker
  • a statement that the information contained in the affidavit is “true and accurate to the knowledge of the signator”
  • be signed by the broker or broker’s agent and verified

 

– See more at: http://ryanrivchun.com/2013/07/real-estate-101-how-does-a-real-estate-broker-secure-the-payment-of-their-commission-on-the-sale-of-an-ohio-commercial-property/#sthash.p3sxErl6.dpuf