owners/tenants in common. This left
my client with either a lien, which was
not supported by a written agreement
which bound both owners, or in the alternative, a claim for damages against
the first owner LLC for breach of warranty of authority – the damages being
the “lost” commission.
Recall that most of the 34 broker lien
acts contain a provision allowing for the
prevailing party to recover its attorney
fees from the non-prevailing party, so
you want to make sure, as you draft,
sign, and record that broker lien, that
your claim is a winner. My client’s claim
had some flaws, it was not the proverbial “slam dunk,” because the listing
agreement did not clearly bind the second owner.
The idea behind broker lien rights is
to have a clear enforceable claim and
thereby record a lien and then release
it at closing in exchange for the full
commission; but in this case, I had a
co-owner who wasn’t happy about the
surprise sale commission, who wasn’t
happy with his co-owner, and didn’t
want to pay the sale commission. The
result was a compromise, the “haircut”
we all fear.
Could this reduction in fee have been
avoided and prevented? Of course! Here
is my recommendation for those read-
ers who manage a brokerage firm, or
for those of you who prefer to receive
full, as opposed to reduced, commis-
sions. Check the legal titleholder for
every property your firm lists, at the
onset and before execution of the listing
agreement. You might even train a staff
member to do this for all of the firm’s
1. Check for the identity of the owner.
2. Check for co-owners.
3. If the owner or owners are business
entities, make sure that the person or
persons signing the listing agreement
have proper authority to bind the entity.
a. For an LLC, look at the operating
agreement, or check public records
to see if the party signing the listing
agreement is the manager or all of
the members of the LLC.
b. For a corporation, check for the
proper officer, perhaps even a corporate resolution.
c. For a partnership, a look at the partnership agreement will tell you if your
signatory is a general partner – and
if there are several general partners
whose signatures are needed.
The brokerage profession is challenging enough – even in so-called strong
markets. Don’t make it tougher and risk
losing, or even compromising a commission, when your own due diligence
can protect you.
The idea behind broker lien
rights is to have a clear
enforceable claim and
thereby record a lien.