Using Broker Lien Law to Protect Commissions

Blog, Real Estate

Using Broker Lien Law to Protect Commissions

Commercial Brokers have an added tool available for them to collect an outstanding commission. Ohio’s Broker Lien Law allows a broker to file an affidavit creating a lien against an owner’s property for the amount owed. The lien can then be foreclosed or paid when title transfers to a buyer. The amount of the lien is limited to the amount that is due to the Broker and the lien affidavit cannot be filed until the Broker has earned the commission. Further, there are certain procedural steps that Brokers must take in order to avail themselves of the law.

  1. The Broker must have a signed written contract with the owner or the owner’s agent, obligating the owner to pay a commission. Here it is critical that buyers agents and tenant representatives obtain a compensation agreement from the owner or the owner’s agent. Without this written agreement, the Broker cannot file a lien affidavit.
  2. When the Broker has earned and is entitled to the commission, the Broker files the lien affidavit with the County Recorder for the county in which the property is located and provide a copy of the lien affidavit to the owner of the property. The law details exactly what must be in the lien affidavit, including the name and license number of the Broker, the name of the owner, the legal description for the property, the amount of commission due and a description of the written agreement with the owner. The lien affidavit must be recorded within 90 days of closing on a sale or, on a lease transaction, within 90 days of the owner’s or owner’s agent’s failure to pay the commission.
  3. The Broker will then only have 2 years in which to sue to foreclose the lien. During this period, the owner may demand the Broker initiate the lawsuit, after which the Broker only has 28 days to sue to foreclose the lien.

The law does allow a court to award attorney’s fees to the party that prevails in a lawsuit involving the lien. As such, Brokers may consider retaining counsel to prepare and record the lien (thereby protecting your commission) and then in any suit to foreclose the lien. For commercial practitioners, provided the steps above are navigated correctly, the Broker Lien Law is a useful way to compel the payment of earned commissions. Here’s what an appellate court has ruled on commission rebates.

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