MISSISSIPPI LEGISLATURE

2000 Regular Session

To: Business and Financial Institutions

By: Senator(s) Hewes

AN ACT TO CREATE THE COMMERCIAL REAL ESTATE BROKER LIEN ACT; TO DEFINE CERTAIN TERMS; TO ESTABLISH A COMMERCIAL REAL ESTATE BROKER LIEN AND TO SPECIFY WHICH PERSONS ARE ENTITLED TO THE LIEN; TO PROVIDE FOR THE FILING OF THE NOTICE OF THE LIEN AND ITS CONTENTS; TO PROVIDE FOR THE ENFORCEMENT OF THE LIEN IN THE CIRCUIT COURT OF THE COUNTY WHERE THE COMMERCIAL REAL ESTATE IS LOCATED; TO PROVIDE FOR THE PRIORITY OF LIENS; TO REQUIRE THE ESTABLISHMENT OF AN ESCROW ACCOUNT WHEN A NOTICE OF LIEN HAS BEEN FILED THAT WOULD PREVENT THE CLOSING OF A TRANSACTION OR CONVEYANCE; TO PROVIDE FOR THE RELEASE OR SATISFACTION OF THE LIEN; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Short title.

This act shall be known and may be cited as the "Commercial Real Estate Broker Lien Act."

SECTION 2. Definitions.

As used in this act, the following terms have the following meanings:

(a) "Broker" means a real estate broker as defined in Section 73-35-3(1), Mississippi Code of 1972.

(b) "Commercial real estate" means any real estate in this state except:

(i) Real estate improved with one (1) to four (4) residential units;

(ii) A single-family residential unit, including a condominium, townhouse, mobile home, residential lot, or home in a subdivision, if the unit is sold, leased or otherwise conveyed on a unit-by-unit basis and regardless of whether the unit is part of a larger building or located on real estate containing more than four (4) residential units;

(iii) Any property or any interest therein, which is sold, leased or otherwise conveyed to a governmental entity or to a utility, or to any subsidiary or affiliate thereof.

(c) "Commission agreement" means a written instrument that:

(i) Entitles a broker to a commission;

(ii) Is signed by the person obligated to pay the commission or the person's authorized agent;

(iii) References the commission amount or describes the formula used to determine the commission amount; and

(iv) Contains a description legally sufficient for identification of the real estate that is the subject of the agreement.

(d) "Conveyance" means a sale, lease or other transfer of commercial real estate.

(e) "Real estate" means real estate as defined in Section 73-35-3(2), Mississippi Code of 1972.

SECTION 3. Persons entitled to lien.

(1) A broker who has earned a commission under a commission agreement signed by the owner of commercial real estate or the owner's authorized agent shall have a lien for the unpaid amount of the commission against the commercial real estate, or the interest in commercial real estate, that is listed with the broker under the agreement.

(2) A broker who has earned a commission under a commission agreement signed by a prospective buyer of commercial real estate or the prospective buyer's authorized agent shall have a lien for the unpaid amount of the commission against the commercial real estate, or the interest in commercial real estate, that is acquired as a result of the commission agreement.

(3) A broker who has earned a commission under a commission agreement signed by a prospective tenant of commercial real estate or the prospective tenant's authorized agent shall have a lien on the interest, if any, of the commercial real estate that the prospective tenant leases in the amount specified by the commission agreement.

(4) A commission lien described by this section is available only to the broker named in the contract and shall not be available to any employee or independent contractor of the broker.

SECTION 4. Filing of notice of lien.

(1) A lien established pursuant to this section is perfected when both of the following have occurred:

(a) The broker is entitled to a fee or commission under the contract.

(b) Except as provided in paragraphs (c), (d) and (e) of this subsection, the broker records a notice of lien in the office of the chancery clerk in the county in which the commercial real estate or interest in the commercial real estate is located prior to the actual conveyance or transfer of the commercial real estate against which the broker is claiming a lien. The lien shall attach as of the date of the recording of the notice of lien and does not relate back to the date of the written agreement.

(c) Except as provided in paragraphs (d) and (e) of this subsection, and, when payment to a broker is due in installments, a portion of which is due only after the conveyance or transfer of the commercial real estate, any claim for lien for those payments due after the transfer or conveyance may be recorded at any time subsequent to the transfer or conveyances of the commercial real estate and prior to the date on which the payment is due but shall only be effective as a lien against the commercial real estate to the extent monies are still owed to the transferor by the transferee. A single claim for lien recorded prior to transfer or conveyance of the commercial real estate claiming all monies due under an installment payment agreement shall not be valid or enforceable as it pertains to payments due after the transfer or conveyance. The lien shall attach as of the recording of the affidavit of lien and not relate back to the date of the written agreement.

(d) In the case of a lease the claim of lien must be recorded within ninety (90) days after the tenant takes possession of the leased premises, unless written notice of the intended signing of the lease is personally served on the broker entitled to claim a lien at least ten (10) days prior to the date of the intended signing of the lease, in which case the claim for lien must be recorded before the date indicated for the signing of the lease in the notice served on the broker. The lien shall attach on the date of the recording of the notice of lien and not relate back to the date of the written agreement.

(e) A notice of lien may be filed within a period of three (3) days after the actual conveyance or transfer of the commercial real estate against which the broker is claiming a lien if, not later than three (3) days prior to the date of the conveyance or transfer, the owner, or leasehold owner, and the prospective buyer receive actual written notice of the broker's claim for lien stating that he is entitled to compensation under the terms set forth in the written contract and intends to claim a lien on the commercial real property. Actual notice may be evidenced by a registered or certified mail receipt signed by the owner, or leasehold owner, and the buyer, or personal service made on each party. Where there are two (2) or more owners or two (2) or more prospective buyers, the notice shall be served upon each owner and each prospective buyer. The notice shall include a statement of the buyer's right to deposit funds into an escrow account under Section 8 of this act.

(2) Where the commercial real estate is located in more than one (1) county, the lien may be filed in any one or more of the counties but shall be effective only as to the part of the commercial real estate in the county in which it has been filed.

(3) The broker shall within five (5) days of recording its notice of lien mail a copy of the notice of lien to the owner of record of the commercial real estate by registered or certified mail, with return receipt requested, or personally serve a copy upon the owner of record or his agent. The broker shall also notify, in similar manner, the prospective purchaser or tenant and any escrow agent named in a contract for the sale or lease of the interest in the commercial real estate on which the lien is claimed if:

(a) A binding written contract for the sale or lease of the interest of the commercial real estate on which the lien is claimed is in effect between the owner and the prospective purchaser or tenant in a transaction that is the basis for the commission; and

(b) The binding written contract in the transaction that is the basis for the commission is executed by the owner and prospective purchaser or tenant before the date the notice of lien is filed.

(4) Mailing of the copy of the notice of lien is effective when deposited in the United States mailbox with postage prepaid. The broker's lien shall be unenforceable if mailing of the copy of the notice of lien recording does not occur at the time and in the manner required by this act.

(5) The broker's election to exercise any rights authorized by this act shall in no manner be construed as a violation of any fiduciary relationship existing between the broker and the seller or buyer, and any such action taken in accordance with this act shall not be cause for any party to refuse to close the transaction.

SECTION 5. Contents of notice of lien.

The notice of lien must be signed by the broker or by a person authorized to sign on behalf of the broker and must contain the following:

(a) A sworn statement of the claim, substantially including the commission amount or the formula used to determine the commission amount and the date or the occurrence of the event when the commission is due;

(b) The name of the broker and the real estate license number of the broker;

(c) Substantially the name of the owner and any other person who the broker knows is obligated to pay the commission;

(d) A description legally sufficient for identification of the commercial real estate sought to be charged with the lien;

(e) A description of the interest in the commercial real estate sought to be charged with the lien;

(f) A copy of the applicable commission agreement; and

(g) The affidavit of lien shall be verified before a notary public or other authorized officer.

SECTION 6. Enforcement of lien.

(1) A broker may bring suit to enforce a lien in the circuit court of the county where the commercial real estate is located by filing a verified complaint and sworn affidavit that the notice of lien has been recorded in compliance with this act.

(2) A complaint in a suit filed under this section must contain:

(a) A brief description of the commission agreement that is the basis for the lien, including a description of the disclosure of the broker's right to the lien contained in the commission agreement;

(b) The date on which the commission agreement was executed;

(c) A description of the services performed by the broker;

(d) The amount due and unpaid;

(e) A description of the commercial real estate to which the lien attaches; and

(f) Other facts necessary for a full understanding of the rights of the parties.

(3) The plaintiff shall make all interested parties, whose interest in the commercial real estate is affected by the action, defendants to the action, and shall issue summons and provide service as in other civil actions. The summons and complaint, and all other particulars of suit, shall be made in accordance with the Mississippi Rules of Civil Procedure.

(4) All liens claimed under this section shall be foreclosed, as provided for by the law. Failure to commence proceedings within one (1) year after recording the notice of lien shall extinguish the lien.

(5) The owner, licensee or other authorized agent may demand that the broker commence a suit to foreclose a broker's lien by serving a written demand on the broker by registered or certified mail, return receipt requested, or by personal service. A suit shall be commenced or answer filed within thirty (30) days thereafter, or the lien shall be extinguished.

SECTION 7. Priority.

All deeds of trust or mortgages, all purchase money mortgages and all liens for ad valorem taxes, regardless of when recorded, and all other liens recorded prior to the recording of the broker's lien provided by this act shall have priority over the broker's lien. A broker's lien against the interest of a person owning the commission is not valid or enforceable against a grantee, purchaser, lessee or transferee of an interest in the commercial real estate from the person owing the commission if the deed, lease or instrument transferring the interest is recorded before the broker's lien is recorded.

SECTION 8. Escrow of disputed amounts.

(1) If a notice of lien described by this act has been filed that would prevent the closing of a transaction or conveyance, an escrow account shall be established from the proceeds of the transaction or conveyance in an amount sufficient to satisfy the lien and related costs for any interpleader action brought by the person maintaining the escrow account. If an escrow agent is named in the contract on which the transaction or conveyance is based, the escrow account shall be established with the named escrow agent.

(2) A party may not refuse to close a transaction because of the requirement to establish an escrow account as proved by this section.

(3) The amount held in escrow shall be held in escrow until:

(a) The rights of the parties claiming the amount in escrow are determined by a written agreement of the parties, a court of law, or an alternative dispute resolution process agreed to by the parties;

(b) The broker's lien is no longer enforceable; or

(c) The funds are interpled into a court of competent jurisdiction.

(4) When the escrow account is established under this section, the brokers lien against the commercial real estate is extinguished and becomes a lien on the proceeds in the escrow account.

(5) The parties are not required to follow this escrow procedure if alternative procedures which would allow the transaction to close are available and are acceptable to the transferee in the transaction.

SECTION 9. Release of lien.

(1) A broker shall record a written release or satisfaction of the broker's lien in the office of the chancery clerk in which the lien was recorded within ten (10) days after any of the following:

(a) When a debt that is the basis for a lien under this act is satisfied.

(b) Whenever a condition occurs that would preclude the broker from receiving compensation under the terms of the broker's written agreement.

(c) 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.

(d) Upon recording the release or satisfaction, the broker shall immediately provide the owner with a copy of such release or satisfaction by personal delivery or by certified or registered mail, return receipt requested.

SECTION 10. Broker liability.

Any broker that asserts or records a spurious or materially inaccurate broker's lien under this section, or in bad faith refuses to release or acknowledge release or satisfaction of a broker's lien in compliance with this section, is liable for damages incurred by any person who has a legal or equitable interest in the lien property.

SECTION 11. This act shall take effect and be in force from and after July 1, 2000. The change in law made by this act applies only to an agreement to compensate a licensed real estate broker that is entered into on or after the effective date of this act.