BY JOHN KIRITSIS, ESQ., CPA, MBA, MS, JD, LL.M
In New York City (NYC), real estate broker commission liens are legal claims that brokers may assert to seek payment for their services in assisting with the sale or lease of real property. These liens can complicate property transactions and involve various legal intricacies. Here’s an overview of the legal aspects involving NYC broker commission liens:
- Brokerage Agreements:
Brokerage agreements between real estate brokers and property owners or sellers outline the terms and conditions under which the broker will provide services and earn a commission. These agreements may include provisions regarding the commission amount, payment terms, and circumstances under which the commission is earned.
- Commission Lien Creation:
In NYC, brokers have the legal right to place a lien on the property for which they procured a buyer or tenant, even if the commission payment is disputed. This lien serves as security for the broker’s claim to receive the agreed-upon commission.
- Notice of Lien:
To create a commission lien, the broker must file a “Notice of Lien for Real Estate Broker’s Commission” with the New York City Department of Finance. This notice provides public notice of the broker’s claim to the commission.
- Seller’s Agreement:
In some cases, sellers may agree to indemnify the buyer against any broker commission claims, ensuring that the buyer is not responsible for the broker’s commission.
- Contract Contingencies:
Buyers may include contract contingencies that require the seller to clear any broker commission liens before closing. This ensures that the buyer’s title to the property is free of any encumbrances.
- Impact on Closing:
Broker commission liens can delay or complicate property transactions, as title companies and lenders may require the lien to be addressed before closing.
- Disputes and Challenges:
Broker commission disputes can arise if the parties disagree on whether the broker’s efforts were the “procuring cause” of the transaction or if the terms of the commission were met. Such disputes may involve negotiations, mediation, or litigation.
- Lien Priority:
Broker commission liens are junior liens, meaning they have lower priority than mortgages and other liens on the property. This means that, in the event of a foreclosure, mortgage lenders are typically paid before brokers.
- Lien Duration:
Broker commission liens remain effective for one year from the date of filing. If the dispute is not resolved within that period, the broker may need to renew the lien.
- Legal Representation:
Both property owners and brokers may benefit from legal representation when dealing with broker commission liens. Property owners may seek legal advice to challenge unjustified liens, while brokers may need assistance with enforcing their lien rights.
Navigating broker commission liens in NYC requires an understanding of real estate and lien laws. If you’re involved in a property transaction or dispute related to broker commissions, consulting with legal professionals experienced in NYC real estate law is advisable to ensure that your rights and obligations are properly addressed.
Citations, References and Potentially Useful Resources for Further Information:
New York State Constitution
Federal Securities Regulation
New York State Martin Act
New York Condominium Act
New York State Security Regulations
New York Business Corporation Law
New York Limited Liability Company Law
New York Uniform Partnership Act
Federal Internal Revenue Code
New York State Tax Laws, Rules & Regulations
New York City Tax Laws, Rules & Regulations
Winston Churchill Owners, Inc. v. Regents Real Estate Associates
Board of Managers of the Park Regis Condominium v. Park Regis Owners Corp.
Park Sutton Condominium v. 447 E. 57th St. LLC
28 E. 10th Street Corp. v. Veras
Riverside Syndicate, Inc. v. Munroe
Essex House Condominium v. Marks
The Parc Vendome Condominium v. Atkinson
54-56 Meserole Street Owners Corp. v. Rossi
The Beekman Regent Condominium v. Bottiglieri
Chelsea 19th LLC v. West 19th Street Realty LLC
New York Department of Finance
New York City Department of Buildings
New York City Bar Association
New York State Bar Association
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