Commercial Real Estate Broker Liens
As follow up to my blog entry titled “Collecting Your Leasing Commission,” this blog entry focuses on Arizona commercial real estate broker liens.
Arizona’s commercial real estate broker lien rights are defined in A.R.S. 33-1071 through 33-1076. In short, in order to enforce broker lien rights, the broker must:
(1) disclose in the commission agreement that the broker has lien rights under A.R.S. 33-1071 et seq.,
(2) record a “broker’s preliminary notice of intent to lien” and deliver a copy to the owner: (a) at least 15 days prior to the date the tenant takes possession, or (b) prior to the date the deed is recorded, and
(3) record a “notice of commercial real estate broker lien”: (a) within 90 days after the tenant takes possession, or (b) within 90 days after the date the deed is recorded*.
(* There is no timeframe in the statute for the recordation of the “notice of commercial real estate broker lien” for purchase and sales.)
Commission Agreement Language
A.R.S. 33-1071 provides that in order for a broker to exercise broker lien rights, the following requirements must be satisfied:
(1) A written agreement must exist between the broker and owner that: (a) provides for the payment of a commission for real estate services, and (b) discloses in the same size type as a majority of the document that failure to pay the compensation may give lien rights as provided in A.R.S. 33-1071 et seq.,
(2) The broker must produce a “ready, willing and able” tenant or purchaser, or the owner must execute a lease or purchase agreement,
(3) The broker must comply with all preliminary notice and lien requirements in A.R.S. 33-1072 and 33-1073, and
(4) All conditions to payment in the commission agreement are satisfied.
Similar to the 20 day preliminary notice for construction liens, brokers must file a preliminary notice for broker liens. A.R.S. 33-1072(C) provides:
“Not later than fifteen days before the date that the tenant takes possession of the leased premises, the broker shall record a document entitled ‘broker’s preliminary notice of intent to lien’ in the office of the county recorder in the county in which the real property is located and shall deliver personally or by first class mail a copy of the broker’s preliminary notice of intent to lien to the owner of the real property interest. The broker’s preliminary notice of intent to lien shall state that the broker is entitled to compensation under the terms set forth in the written agreement between the broker and the owner and that the broker intends to claim a lien on the real property. The broker’s preliminary notice of intent to lien shall include all of the information prescribed by section 33-1073, subsection A and shall be entitled ‘broker’s preliminary notice of intent to lien’. The broker’s failure to record the broker’s preliminary notice of intent to lien within the time prescribed by this subsection extinguishes the broker’s lien rights.”
A.R.S. 33-1073 provides that a notice of commercial real estate broker lien must include:
“1. The name and the address of the principal place of business of the broker who claims the lien and the broker’s real estate license number.
2. The name and the mailing address of the owner of the real property.
3. The real property interest that is owned by the owner.
4. The amount of the lien.
5. The legal description of the real property that is the subject of the lien.
6. The street address of the real property, if any.
7. The statement that the broker who claims the lien is entitled to compensation from the owner of the real property.
8. The notarized signature of the real estate broker that avows that based on information and belief the contents of the notice of commercial real estate broker lien are true and accurate.”
The commercial real estate broker lien does not apply to residential property (but see A.R.S. 33-1071(E) for exceptions). A commercial real estate broker lien can be foreclosed like a mortgage. A commercial real estate broker lien is only valid for 2 years. Finally, the prevailing party in an enforcement action shall be awarded costs and reasonable attorney fees.
Prior to using any language or concepts from this blog entry, consult with an attorney.
Ryan Rosensteel is a real estate and construction attorney licensed in Arizona. You can contact him at email@example.com.