2013 -- S 0507 SUBSTITUTE A

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LC01759/SUB A/2

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO PROPERTY - COMMERCIAL REAL ESTATE BROKER LIEN ACT

     Introduced By: Senators McCaffrey, and Lynch

     Date Introduced: February 28, 2013

     Referred To: Senate 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. – As used in this chapter, the following words shall have the

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following meanings:

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     (1) "Commercial real estate" means any real estate other than: (i) Real estate containing

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one to four (4) residential units; (ii) Real estate on which: (A) No buildings or structures are

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located; and (B) Which is zoned for single-family residential use; or (iii) Single-family residential

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units such as condominiums, townhouses, or homes singly or in a subdivision when sold, leased,

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or otherwise conveyed on a unit by unit basis, even though these units may be a part of a larger

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building or parcel of real estate containing more than four (4) residential units.

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     (2) "Compensation" means fees, commissions, and any and all other compensation which

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may be due a real estate broker for performance of licensed services as defined in section 5-20-1

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et seq.

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     (3) "Real estate" and "real estate broker" are as defined in section 5-20.5-1 et seq.

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     34-49-3. Broker's lien. – (a) Any real estate broker shall have a lien upon commercial

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real estate or any interest in that commercial real estate which is the subject of a purchase, lease

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or other conveyance to a buyer or tenant (which transferee includes without limitation subtenant

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and assignee) of an interest in the commercial real estate, in the amount of compensation that the

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real estate broker is due for licensed services, which compensation shall include without

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limitation, brokerage fees, consulting fees, and management fees:

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     (1) Under a written instrument which is executed either by the owner of an interest in the

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commercial real estate or by the owner’s authorized agent; or

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     (2) Under a written instrument executed by a prospective buyer or prospective tenant or

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its respective authorized agent.

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     The lien shall be available to the real estate broker named or referred to in the agreement

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or instrument signed by the owner, buyer, or tenant (or their respective agents) and not to an

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employee or independent contractor employed by or affiliated with the real estate broker.

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     (b) A lien under this chapter shall attach to the commercial real estate or any interest in

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the commercial real estate upon:

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     (1) The real estate broker being entitled to compensation under a written instrument

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signed by the owner, buyer, tenant, or their authorized agent, as applicable; and

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     (2) Except as provided in subsections (c), (d), (e), or (f) below, the real estate broker

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recording a notice of lien in the land evidence records for the municipality in which the

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commercial real estate or any interest in the commercial real estate is located, prior to the

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recording of an actual instrument of conveyance or transfer of legal title to the commercial real

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estate against which the real estate broker claims a lien by the party from whom compensation is

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claimed. The lien shall attach as of the date of the recording of the notice of lien and does not and

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shall not relate back to the date of the written agreement. If a notice of lien is recorded after the

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date of recording of an instrument conveying or transferring legal title to the commercial real

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estate from the party from whom compensation is claimed, then such notice of lien shall not

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constitute a lien on the interest in commercial real estate held by the transferee.

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     (c) Except as provided in subsections (d), (e), or (f) when payment to a real estate broker

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is due in installments, a portion of which is due only after the conveyance or transfer of the

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commercial real estate or interest therein, any notice of lien for those payments due after the

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transfer or conveyance may be recorded at any time which is subsequent to the transfer or

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conveyance of the commercial real estate or interest therein or which time is within ninety (90)

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days of the date on which the payment is due. Such notice of lien shall only be effective as a lien

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against the transferor’s interest in the commercial real estate to the extent funds are owed to the

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transferor by the transferee, but the lien shall be effective as a lien against the transferee’s interest

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in the commercial real estate without limitations described above in this section. A single claim

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for lien recorded prior to transfer or conveyance of the commercial real estate or interest therein

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claiming all compensation due in installments shall also be valid and enforceable as it pertains to

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

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payments of compensation are received, the real estate broker shall provide partial releases

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therefor, thereby reducing the amount due the real estate broker under its lien.

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     (d) In the case of a lease (which shall also include a sublease or assignment of lease), the

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notice of lien must be recorded not later than ninety (90) days after the tenant occupies the leased

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premises. Provided, however, that if the landlord serves written notice of the intended execution

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of the lease by personal service on the real estate broker entitled to claim a lien, at least ten (10)

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days prior to the date of the intended execution of the lease, the notice of lien must be recorded

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before the date indicated in such notice for the execution of the lease. The lien shall attach as of

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the recording of the notice of lien and does not and shall not relate back to the date of the written

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agreement.

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     (e) If a real estate broker may be due any compensation excluding compensation due

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upon execution of the initial lease, such as compensation arising from and including, but not

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limited to, the exercise of an option: (1) To expand leased premises; (2) To renew or extend a

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lease; or (3) To purchase commercial real estate; which compensation is due, pursuant to a

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written agreement or instrument signed by the then owner or tenant (collectively “future

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commissions”), then the real estate broker may record its notice of lien at any time after execution

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of the lease or other written agreement which contains such rights, but not later than ninety (90)

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days after the occurrence of the act or event on which the future commission is claimed. An

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action to enforce a lien to collect future commissions must be commenced within two (2) years of

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the act or event for which the future commission is claimed.

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     (f) In the event that the commercial real estate is sold or otherwise conveyed prior to the

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date on which a future commission is due, if the real estate broker has recorded a valid notice of

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lien prior to the sale or other conveyance of the commercial real estate, then the purchaser or

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transferee shall be deemed to have notice of and shall take title to the commercial real estate

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subject to the notice of lien. Provided, however, that if a real estate broker claiming a future

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commission fails to record its notice of lien for future commission prior to the recording of a deed

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conveying legal title to the commercial real estate to the purchaser or transferee for consideration,

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then such real estate broker may not claim a lien on the commercial real estate, and any notice of

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lien recorded subsequent to the recording of such deed shall not constitute a lien on the

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commercial real estate and shall be null and void and of no effect.

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     (g) If a real estate broker claims compensation based on a written instrument executed by

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a prospective buyer or tenant or agent as described in subdivision (a)(2) of this section, then the

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notice of lien shall attach upon the prospective buyer or tenant purchasing or otherwise accepting

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a conveyance or transfer of the commercial real estate or interest therein and the recording of a

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notice of lien by the real estate broker in the land evidence records in which the commercial real

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estate, or any interest in the commercial real estate is located, within ninety (90) days after the

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recording of the deed or other instrument for the purchase or other conveyance or transfer to the

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buyer or within ninety (90) days of such tenant occupying the leased premises in the case of a

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lease or sublease transaction. The lien shall attach as of the date of the recording of the notice of

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lien and does not and shall not relate back to the date of the written agreement.

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     (h) The real estate broker shall, within ten (10) days of recording its notice of lien, either

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personally serve, deliver to, or mail a copy of the notice of lien by registered or certified mail,

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return receipt requested, to the owner of record or to the agent of the owner of record at: (1) The

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address of the owner stated in the written instrument on which the claim for lien is based; or (2) If

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no such address is given, then to the address where the real estate tax bill(s) are sent for the

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commercial real estate on which the claim of the lien is based; or (3) To the address of the

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property. Mailing of the copy of the notice of lien is effective when deposited in a United States

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mailbox with postage prepaid.

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     (i) A real estate broker may bring suit to enforce a lien in the superior court for the county

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where the commercial real estate is located by filing a complaint and sworn affidavit that the

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notice of lien has been recorded.

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     (j) A real estate broker claiming a lien shall, within two (2) years after recording the

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notice of lien, commence proceedings by filing a complaint and recording a notice of lis pendens

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in the land evidence records in the municipality in which the commercial real estate is located.

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Failure to commence proceedings as required herein within two (2) years after recording the

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notice of lien shall extinguish the lien.

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     (k) A real estate broker claiming a lien based upon an option or other right to purchase or

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lease shall, within two (2) years after the transfer or conveyance of the commercial real estate

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under the exercise of the option to purchase or lease, commence proceedings by filing a

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complaint and recording a notice of lis pendens in the land evidence records in the municipality in

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which the commercial real estate is located.

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     (l) Failure to commence proceedings within the time limits set forth herein shall

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extinguish the lien.

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     (m) A complaint under this section shall contain a brief statement or description of the

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agreement, contract, or instrument on which the notice of lien was filed, the date when the

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agreement, contract or instrument was made, a description of the services performed, the amount

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of compensation due and unpaid, a description of the commercial real estate which is subject to

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the notice of lien, and other facts reasonably necessary to describe the rights of the parties. The

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plaintiff shall make all interested parties of whose interest the plaintiff real estate broker is

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notified or has knowledge defendants to the action, and shall issue summons and provide service

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as in other civil action. When any defendant resides outside or has left the state, or on inquiry

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cannot be found, or is concealed within the state so that process cannot be served on that

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defendant, the plaintiff shall cause a notice to be given to that defendant, or cause a copy of the

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complaint to be served upon that defendant in the manner and upon the same condition as in other

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civil actions. Failure of the plaintiff to provide proper summons or notice shall be grounds for

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judgment against the plaintiff and in favor of the defendant which is not properly served with

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summons or notice. All liens claimed under this chapter shall be foreclosed as provided in chapter

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34-27.

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     (n) The notice of lien shall state the name of the claimant, the name of the legal title

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owner of the commercial real estate, a legal description of the commercial real estate upon which

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the lien is claimed, the amount for which the lien is claimed, and the number of the real estate

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broker’s license. The notice of lien shall recite that the information contained in notice is true and

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accurate to the knowledge of the signator. The notice of lien shall be executed by the real estate

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broker or by a person authorized to execute on behalf of the real estate broker and shall be

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verified. A notice of lien substantially in the following form shall be deemed to comply with the

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foregoing requirements:

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     NOTICE OF COMMERCIAL REAL

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     ESTATE BROKER LIEN

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     LAND EVIDENCE RECORDS

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     XXX

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     Broker-Claimant,

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     vs.

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     XXX,

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     Owner

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Notice is hereby given that the undersigned Broker-Claimant, whose real estate license number is

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_______________, and whose business address is ____________________________, makes the

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following statement and claims a Commercial Real Estate Broker Lien under the law entitled

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"Commercial Real Estate Broker Lien Act,” chapter 34-49 states:

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     (1) _____________________, _________________, Rhode Island __________, Plat and

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Lot Number, ________________________ and which is legally described on Exhibit A attached

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hereto is improved with a commercial building. The record owner of the Property (“Owner”) is

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______________________ and _________________________ as Tenant/Sublessor.

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     (2) There is a written agreement to which the Tenant/Sublessor of the Property, is a party

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by which Tenant/Sublessor is obligated to pay Broker-Claimant a commission.

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     (3) That the Broker-Claimant by its sponsored licensee(s) provided services for said

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Tenant/Sublessor and is in compliance with Broker-Claimant’s obligations under a written

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agreement to which Tenant/Sublessor is a party;

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     (4) That the amount of the commission or fee to which Broker-Claimant is entitled is

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$_____________; and

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     (5) Broker-Claimant now claims a lien on the Property and all improvements thereon and

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against all persons interested therein in the sum of ____________________________________

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and 00/100 ($__________ ).

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      By: ________________________________

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      Its Authorized Agent

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     STATE OF RHODE ISLAND

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     COUNTY OF ________________

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     __________________________ as agent for ____________________________, being

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first duly sworn on his/her oath, deposes and states that he/she has read the foregoing Lien Notice

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for Commercial Real Estate Broker Lien and knows the contents thereof and that all the

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Statements therein contained are true and accurate to the knowledge of the undersigned.

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     Subscribed and sworn to before me this

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     _____ day of ___________, _______.

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     ________________________________________

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     Notary Public

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     My commission expires:

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     Prepared by: ATTY

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      FIRM

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      ADDRESS

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      PHONE

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     Return to: ATTY

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      FIRM

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      ADDRESS

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      PHONE

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     (o) Whenever a notice of lien has been filed with the office of the applicable land

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evidence records and a condition occurs which would preclude the real estate broker’s right to

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compensation under the terms of the written instrument on which the lien is based, the real estate

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broker shall provide to the owner of record of the commercial real estate, within ten (10) days

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following written demand by such owner of record, a recordable written release or satisfaction of

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the notice of lien.

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     (p) Upon written demand of the owner, hence, or other authorized agent of the owner or

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lienee, which demand shall be served on the real estate broker claiming the lien requiring suit to

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be commenced to enforce the lien or answer to be filed in pending suit, a suit shall be commenced

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or answer filed within thirty (30) days after actual receipt thereof or the lien shall be extinguished.

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Service of such written demand may be made by registered or certified mail, return receipt

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requested, or by personal service.

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     (q) Whenever a notice of lien has been recorded with the land evidence records and such

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claimed commission has been paid to the real estate broker claiming the lien, or where there is

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failure to institute a suit to enforce the lien within the time provided by this chapter, the real estate

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broker shall acknowledge satisfaction or release of the notice of lien in writing, on written

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demand of the owner within five (5) days after payment or within five (5) days of expiration of

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the time in which the complaint was to be filed.

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     (r) If the real estate broker and the party or parties from whom the commission is

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claimed agree to alternative dispute resolution (“ADR”), the claim shall be heard and resolved in

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the forum on which these parties have agreed. The court before which the lien enforcement

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proceeding is brought shall retain jurisdiction to enter judgment on the award or other result made

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or reached in ADR on all parties to the foreclosure. The real estate broker’s notice of lien shall

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remain on record and the enforcement proceeding shall be stayed during the pendency of the

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ADR process.

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     (s) The cost of proceedings brought under this chapter including in trial, appellate courts,

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and ADR proceedings including reasonable attorneys’ fees, costs, and prejudgment interest, costs,

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and fees shall be equitably apportioned by the court or ADR tribunal among the responsible

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parties.

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     (t) Except for a waiver or release of lien provided in consideration of payment of the fee

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claimed by the real estate broker, or pursuant to subsections 3(o) and 3(q) above, and waiver of a

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real estate broker’s right to lien commercial real estate under this chapter, or any other waiver or

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release of lien shall be void.

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     (u) The foregoing provisions of this subsection shall not limit or otherwise affect claims

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or defenses or other remedies a real estate broker, owner, or any other party may have in law or in

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equity.

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     34-49-4. Priority. – Prior recorded liens, mortgages, and other encumbrances shall have

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priority over a real estate broker’s lien. Such prior recorded liens, mortgages, and encumbrances

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shall include, without limitation, a mechanic’s lien claim that is recorded prior to the real estate

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broker’s notice of lien.

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     34-49-5. Escrow of disputed amounts. – (a) Except as otherwise provided in this

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section, whenever a claim for lien has been filed with the appropriate land evidence records, and

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an escrow account is established either from the proceeds from the transaction, conveyance, or

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any other source of funds in an amount computed as one hundred fifty percent (150%) of the

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amount of the claim for lien, then the lien against the real estate shall be extinguished and

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immediately become a lien on the funds contained in the escrow account. Upon creation of such

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escrow, the lien claimant shall be required to provide and record a release of lien against the real

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estate within five (5) business days. In the event that the lien claimant fails to provide or record a

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release of lien, then the escrowee is hereby authorized to either: (1) Execute and record a release

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of lien; or (2) Pay into the registry of the superior court in the county where the land is located an

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amount equal to one hundred fifty percent (150%) of the amount claimed in the notice of lien; or

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(3) In lieu of cash, deposit in the registry of the court the bond of a surety company licensed to do

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business in this state in the amount of one hundred fifty percent (150%) of the amount claimed in

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the notice of lien. On proper proof of payment or deposit and on motion of the owner or lessee or

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tenant, any justice of the superior court shall enter ex parte, an order discharging and releasing the

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notice of lien and dismissing the cause as to the owner or lessee or tenant and as to all persons

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having any title, claim, lease, mortgage, attachment, or other lien or encumbrance, and upon entry

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of the order, the property shall be as if no notice of lien was recorded. Provided, however, that

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with respect to the escrowed funds and/or surety bond, proceeds the real estate broker’s lien

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attaches to such escrowed funds and/or surety bond proceeds whichever applies;

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     (b) The requirement to establish an escrow account or election to take measures described

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in subdivision (a)(2) or (a)(3) above, shall not be cause for any party to refuse to complete or

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close the transaction.

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     SECTION 2. This act shall take effect upon passage and shall apply to claims for

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compensation based on written instruments executed on or subsequent to the effective date.

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LC01759/SUB A/2

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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 establish the Commercial Real Estate Broker Lien Act.

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     This act would take effect upon passage and shall apply to claims for compensation based

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on written instruments executed on or subsequent to the effective date.

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LC01759/SUB A/2

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