On Oct. 5, 2010, Michigan Governor Jennifer Granholm signed into
law Senate Bill 610, which permits real estate brokers to assert
against "commercial real estate" a lien for unpaid
brokerage fees incurred in connection with the sale or lease of
that same realty. This legislation, outlined below, directly
impacts not only buyers and sellers of real estate and their
brokers but also mortgagees and other persons holding a lien on the
affected real estate. The following is an analysis of this
bill's main provisions.
A. Who and What Is Covered by the Act?
The lien granted under this statute is available only to
individuals licensed as a real estate broker under Michigan's
Occupational Code and cannot be claimed by an "employee ,
agent, subagent, or independent contractor" of a licensed
broker. The lien can only attach to "commercial real
estate" which is defined in the negative as "real estate
or an interest in real estate that is not any of the following: (i)
real estate zoned for single family use and on which no building or
structure is located; (ii) real estate on which 4 or fewer
residential units are located; and (iii) real estate on which more
than 4 residential units are located if the units are single-family
units...that are sold, leased or otherwise conveyed on a
unit-by-unit basis."
B. What is Necessary for the Lien to Attach to the Real
Estate?
In order for a licensed real estate broker to obtain attachment of its broker's lien on commercial real estate, all of the following circumstances must be present:
- the broker has a written commission agreement and is entitled to a commission under that agreement; and
- the broker records its claim of lien in the county in which the real estate is located before the property is conveyed, unless certain exceptions specified in the act apply.
The primary exceptions to the rule that require recordation of the lien before the conveyance is made are as follows:
- if the broker's commission is due in installments, and at least one installment is due after the conveyance, then the claim of lien may be recorded after the conveyance and before the post-conveyance installment or installments are due. In any event, however, the claim of lien must be recorded under these circumstances by no later than 60 days after the conveyance is made.
- if a broker is due a commission on a lease of commercial real estate, the broker may record a claim of lien within 60 days after the lease is executed. The lien will attach after both of the following occur: (i) the claim of lien is recorded; and (ii) the lessee takes possession of the leased realty.
- if a broker has a written agreement with a potential buyer to act as its agent, then the lien will attach when both of the following occur: (i) the buyer purchases or accepts the conveyance of the realty; and (ii) the claim of lien is properly recorded.
- with respect to an option to purchase real estate in the future, a broker may record a claim of lien at any time after the signing of the option and before the conveyance pursuant to the option occurs. However, this lien attaches only after both of the following occur: (i) the claim of lien is recorded; and (ii) the real estate is conveyed pursuant to the option.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
