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New York Real Estate Broker’s Liens FAQ

New York Real Estate Broker’s Liens FAQ

By John Harwick, Esq., featured by the Greater Capital Association of Realtors.

What is a broker’s lien?John Harwick_cropped

When a licensed real estate broker obtains a tenant for a lease of commercial property, the broker is entitled to a commission. In cases where a broker’s client is reluctant to pay a broker’s lien for the commission may be filed against the real property.

Who can file a broker’s lien?

A broker who obtained a tenant for a lease of a term of more than three years for non-residential purposes pursuant to a written contract of brokerage employment or compensation can file a lien. However, a tenant’s broker is not eligible to file a lien. Only the broker for the landlord or owner of the property is entitled to file a lien.

What does the lien attach to?

The lien attaches to the leased real property.

When can a broker’s lien be filed?

The Notice of Lien may be filed after the performance of brokerage services and execution of the lease. However, if the commission is to be paid in installments then the Notice of Lien may be filed within eight (8) months after final payment is due but no later than five (5) years after the date the first payment was made.

When does the lien arise?

The lien “attaches” to the property upon filing a Notice of Lien. The Notice of Lien must be served on the owner of the property within the statutory period. If the broker does not properly serve the owner of the property, and file proof of service within the statutory deadline, then the lien is terminated and ineffective.

How do I file a lien?

The Notice of Lien must be filed in the Clerk’s office of the county where the property is situated. If the property is in two counties then it must be filed in both Clerks’ offices. The commission agreement must be attached to the Notice of Lien. There are very strict service requirements for serving notice on the property owner and filing proof of service. A broker should consult an attorney to ensure the lien is prepared, filed, and served correctly.

How long does a broker’s lien last?

A broker’s lien can last for one (1) year after the Notice of Lien is filed unless the lien holder within that one year time acts to foreclose on the lien to seek payment. The lien can be extended another year by filing a notice of extension, which must include the name of the property owner, name of the lien holder, a brief description of the property, how much the lien is for, when the original lien was filed and the extension should be served on the property owner. The lien can only be automatically extended that one time. If another extension is sought it must be through a court order.

Is a written brokerage agreement required?

Yes. Generally a written agreement is not required for a brokerage contract. However, New York Lien Law requires a “written agreement of employment or compensation” to be able to file for a broker’s lien.

Can the broker waive the right to a lien for his commission?

No. Under New York Lien Law any agreement to waive a right to file or enforce any lien will be found void as against public policy and wholly unenforceable.

Can a broker file a lien regarding the sale of real property?

No, a broker can only file a lien for commission when the broker has procured a tenant, with a lease for more than 3 years, for non-residential purposes. However, a broker can file an affidavit for entitlement of commission in a sale of real property but this does not arise to the level of a lien and has far different rules.

What is the effect of bankruptcy on a broker’s ability to file a lien?

A broker can file a lien against a client in bankruptcy as the “automatic stay” does not prevent any act to perfect or to maintain perfection of an interest in property.

What happens if the client refuses to pay?

The broker can foreclose on the lien and force the sale of the property at public auction. The cost of the sale, taxes, and superior liens will be paid first. The broker will be entitled to the surplus up to the amount of their lien.

 

New York Real Estate Broker’s Liens FAQ was last modified: February 13th, 2018 by Jake Dumesnil