2012 -- H 7439 SUBSTITUTE A

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LC01234/SUB A

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO PROPERTY - COMMERCIAL REAL ESTATE BROKER LIEN ACT

     Introduced By: Representatives Petrarca, Winfield, Brien, and O`Neill

     Date Introduced: February 09, 2012

     Referred To: House Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 34 of the General Laws entitled "PROPERTY" is hereby amended by

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adding thereto the following chapter:

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     CHAPTER 49

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COMMERCIAL REAL ESTATE BROKER LIEN ACT

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     34-49-1. Short title. – This chapter shall be known and may be cited as the “Commercial

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Real Estate Broker Lien Act.”

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     34-49-2. Definitions. – When used in this chapter, unless the context indicates otherwise:

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     (1) “Broker” means a real estate broker who is licensed pursuant to section 5-20.5 of the

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general laws.

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     (2) “Broker services” means services for which a license issued by the Rhode Island

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department of business regulation is required pursuant to section 5-20.5 of the general laws.

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     (3) “Commercial real estate” means and includes leaseholds as well as any and every

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interest or estate in land, whether corporeal or incorporeal, freehold or non-freehold, which at the

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time the property or interest is made the subject of an agreement for broker services, and does not

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include any of the following:

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     (i) Vacant land that is zoned for single family use;

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     (ii) Land with physical improvements consisting of a house and/or structure comprised of

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four (4) or fewer residential units.

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     (4) “Commission” means any compensation which is due to a broker for performance of

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broker services.

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     (5) “Lien claimant” means a broker claiming a lien pursuant to this chapter.

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     (6) “Owner” means the owner of record of any interest in commercial real estate.

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     34-49-3. Commercial real estate lien. – (a) A broker may record a lien on commercial

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real estate in the amount that the broker is due under a written agreement for broker services

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signed by the owner or signed by the owner’s duly authorized agent, if:

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     (1) The broker has performed under the provisions of the agreement;

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     (2) The written agreement for broker services describes the broker’s duties to the owner;

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and

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     (3) The written agreement for broker services states the conditions upon which the

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compensation shall be earned and the amount of such compensation.

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     (4) The written agreement for broker services includes the following notice, “The real

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estate broker may be entitled to certain lien rights pursuant to chapter 34-49.”

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     (b) The lien under this section shall be available only to the broker named in the

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instrument signed by the owner or the owner’s duly authorized agent. A lien under this section

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shall be available only against the commercial real estate which is the subject of the written

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agreement for broker services.

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     (c) When payment of commission to a broker is due in installments, a portion of which is

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due only after the conveyance or transfer of the commercial real estate, any notice of lien for

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those payments due after the transfer or conveyance may be recorded at any time subsequent to

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the transfer or conveyance of the commercial real estate and within ninety (90) days of the date

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on which the payment is due.

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     34-49-4. Notice of intent to record lien. – (a) The notice of lien shall be effective as a

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lien against the commercial real estate as identified in the written agreement for broker services.

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A single claim for lien filed prior to transfer or conveyance of the commercial real estate claiming

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all commissions due in installments shall also be valid and enforceable as it pertains to payments

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due after the transfer or conveyance; provided, however, that as payments or partial payments of

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commission are received, the broker shall provide partial releases for those payments, thereby

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reducing the amount due the broker under the broker’s lien.

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     (b) A lien authorized by this chapter attaches to the commercial real estate only when the

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lien claimant files a timely notice of the lien conforming to the requirements of section 34-49-5

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and this section in the land evidence records of the municipality where the commercial real estate

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is located. A notice of lien is timely if it is filed after the claimant’s performance under the

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written agreement for broker services and before the conveyance or transfer of the commercial

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real estate which is the subject of the lien. Except that in the case of a lease or transfer of a

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nonfreehold interest, the notice of a lien shall be filed no later than ninety (90) days following the

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tenant’s possession of the commercial real estate or no later than sixty (60) days following any

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date or dates set out in the written agreement for broker services for subsequent payment or

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payments. When a notice of a lien is filed more than thirty (30) days preceding the date for

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settlement or possession set out in an offer to purchase, sales contract, or lease, which establishes

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the broker’s claim of performance, the lien shall be available only upon grounds of the owner’s

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breach of the written agreement for broker service.

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     34-49-5. Content of lien notice. – (a) A lien notice under this chapter shall be signed by

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the lien claimant and shall contain an attestation by the lien claimant that the information

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contained in the notice is true and accurate to the best of the lien claimant’s knowledge and belief.

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     (b) The lien notice shall include all of the following information:

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     (1) The name of the lien claimant;

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     (2) The name of the owner;

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     (3) A description of the commercial real estate upon which the lien is being claimed;

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     (4) The amount for which the lien is claimed and whether the amount is due in

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installments; and

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     (5) The claimant’s grounds for the lien, including a reference to the written agreement for

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broker services that is the basis for the lien.

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     34-49-6. Demand for release or satisfaction of lien claim. – If a claim for a lien has

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been filed with the clerk of the land evidence records of the municipality where the commercial

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real estate is located and a condition occurs that would preclude the lien claimant from receiving

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compensation under the terms of the written agreement for broker services on which the lien is

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based, the lien claimant shall file and serve the owner of record a written release or satisfaction of

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the lien promptly, and in no event more than thirty (30) days after the demand.

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     34-49-7. Lien claimant to mail copy of notice of lien to owner by certified mail. –

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Any lien claimant who files a lien on commercial real estate pursuant to the provisions of this

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chapter shall mail a copy of the notice of the lien to the owner of the commercial real estate by

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certified mail, return receipt requested, or shall serve a copy of the notice of the lien in

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accordance with any of the provisions for service of process.

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     34-49-8. Enforcement of lien. – A lien claimant may bring suit to enforce a lien which

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attaches pursuant to the provisions of this chapter in any court of competent jurisdiction in the

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county where the commercial real estate is located. The lien claimant shall commence

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proceedings within ninety (90) days after filing the lien, and failure to commence proceedings

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within the ninety (90) days shall extinguish the lien. If a claim is based upon an option to

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purchase the commercial real estate, the lien claimant shall commence proceedings within ninety

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(90) days of the option to purchase being exercised. A claim for the same lien extinguished

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pursuant to this section may not be asserted in any subsequent proceeding. A lender shall not be

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made a party to any suit to enforce a lien under this chapter unless the lender has willfully caused

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the nonpayment of the commission giving rise to the lien.

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     34-49-9. Complaint; content; parties’ foreclosure action; procedure. – (a) A

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complaint filed pursuant to the provisions of this chapter shall contain all of the following:

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     (1) A statement of the terms of the written agreement for broker services on which the

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lien is based or a copy of the written contract or agreement;

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     (2) The date when the written agreement for broker services was made;

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     (3) A description of the services performed;

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     (4) The amount due and unpaid;

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     (5) A description of the property that is subject to the lien; and

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     (6) Any other facts necessary for a full understanding of the rights of the parties.

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     (b) The plaintiff shall file the action against all parties that have an interest of record in

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the commercial real estate; provided, that a lender shall not be made a party to any suit to enforce

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a lien under this chapter unless the lender has willfully caused the nonpayment of the commission

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giving rise to the lien; a foreclosure action for a lien claimed pursuant to this chapter shall be

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brought pursuant to the provisions of this chapter.

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     (c) Valid prior recorded liens or mortgages shall have priority over a lien under this

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chapter.

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     34-49-10. Lien extinguished for lien claimant failing to file suit or answer in pending

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suit within ninety (90) days after service on owner . – If a lien claimant fails to file suit to

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enforce the lien or fails to file an answer in a pending suit to enforce a lien within ninety (90)

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days after a properly served written demand of the owner, lienee, or other duly authorized agent,

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the lien shall be extinguished. The provisions of this section shall not extend to any other deadline

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provided by law for the filing of any pleadings or for the foreclosure of any lien governed by this

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chapter.

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     34-49-11. Satisfaction or release of lien. – If a claim for a lien has been filed pursuant to

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the provisions of this chapter with the clerk of the land evidence records of the municipality

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where the commercial real estate is located and the claim has been paid in full, or if the lien

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claimant fails to institute a suit to enforce the lien within the time as provided by law, the lien

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claimant shall acknowledge satisfaction or release of the lien in writing upon written demand of

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the owner promptly, and in no event more than thirty (30) days after the demand.

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     34-49-12. Cost of proceeding to be paid by non prevailing party. – The costs of any

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proceeding brought to enforce a lien filed pursuant to this chapter, including reasonable attorneys’

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fees and prejudgment interest due to the prevailing party, shall be paid by the non-prevailing

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party or parties. If more than one party is responsible for costs, fees, and prejudgment interest, the

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costs, fee, and prejudgment interest shall be equitably apportioned by the court among the

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responsible parties.

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     34-49-13. Dismissal of complaint for other cause. – (a) If any person in interest,

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including, but not limited to, an owner or lessor, claims:

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     (1) That it appears from the notice of intention that the claimant has no valid lien by

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reason of the character of the agreement for which a lien is claimed; or

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     (2) That a notice or other instrument has not been filed or recorded in accordance with the

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applicable provisions of section 34-49-4 et seq., or

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     (3) That for any other reason, a claimed lien is invalid by reason or failure to comply with

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the provisions of section 34-49-5 et seq., then in such event, such person may apply forthwith to

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the superior court for the county where the land lies for an order to show cause why the lien in

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question is invalid, or otherwise void, or that the basis of the lien is without probability of a

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judgment being rendered in favor of the lienor. A mortgage holder or servicer is not a necessary

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party under this section and shall not be named as a party in any such application or order of

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notice.

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     (b) An order of notice to appear and show cause why the relief demanded in the

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complaint should not be granted shall be served upon the necessary parties no later than one week

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prior to the date of the scheduled hearing. If the necessary parties cannot be found, such service

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may be made as the court shall direct. The application shall be made upon a verified complaint

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accompanied by other written proof of facts upon which the application is made. Upon granting

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or denying the application, the court shall enter an order or judgment as applicable on the matter

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involved.

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     34-49-14. Discharge of lien. – (a) Any claim of lien on commercial real estate filed

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under this chapter may be discharged by any of the following methods:

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     (1) The lien claimant of record may acknowledge the satisfaction of the claim of lien on

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the commercial real estate indebtedness, whereupon the clerk of the land evidence records of the

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municipality where the commercial real estate is located shall enter on the record of the claim of

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lien on the commercial real estate the acknowledgement of satisfaction, which shall be signed by

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the lien claimant of record, the claimant’s agent, or attorney, and witnessed by the clerk of the

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superior court.

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     (2) The owner may exhibit an instrument of satisfaction signed and acknowledged by the

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lien claimant of record, which instrument states that the claim of lien on the commercial real

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estate indebtedness has been paid or satisfied, whereupon the clerk of the superior court shall

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cancel the claim of lien on the commercial real estate by entry of satisfaction on the record of the

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claim of lien on the commercial real estate.

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     (3) By failure to enforce the claim of lien on the commercial real estate within the time

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prescribed in this chapter.

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     (4) By filing in the office of the clerk of the land evidence records of the municipality

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where the commercial real estate is located, the original or certified copy of a judgment or decree

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of a court of competent jurisdiction showing that the action by the claimant to enforce the claim

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of lien on the commercial real estate has been dismissed or finally determined adversely to the

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claimant.

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     (5) Whenever funds in an amount equal to one hundred twenty-five percent (125%) of the

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amount of the claim of lien on the commercial real estate is deposited with the clerk of the

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superior court to be applied to the payment finally determined to be due, whereupon the clerk of

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superior court shall cancel the claim of lien on the commercial real estate.

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     (6) Whenever a corporate surety bond, in an amount equal to one hundred twenty-five

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percent (125%) of the amount of the claim of lien on the commercial real estate and conditioned

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upon the payment of the amount finally determined to be due in satisfaction of the claim of lien

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on the commercial real estate is deposited with the clerk of the superior court, whereupon the

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clerk of the superior court shall cancel the claim of lien on the commercial real estate.

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     (7) By failure to file documentation if required pursuant to section 34-49.6 or section 34-

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49.10.

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     (b) If funds in an amount equal to one hundred twenty-five percent (125%) of the amount

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that is sufficient to release the claim of lien have been deposited with the clerk of the superior

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court, or a bond in an equal amount has been secured, the lien claimant shall release the claim for

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the lien on the commercial real estate, and the lien claimant shall have a lien on the funds

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deposited with the clerk of the superior court.

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     SECTION 2. This act shall take effect ninety (90) days after passage.

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LC01234/SUB A

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PROPERTY - COMMERCIAL REAL ESTATE BROKER LIEN ACT

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     This act would enable a real estate broker to record a lien on commercial real estate in the

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amount that the broker is due under a written agreement for broker services.

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     This act would take effect ninety (90) days after passage.

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LC01234/SUB A

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