Broker Security Act Will Take Effect August 11, 2010

The Commercial Real Estate Broker's Commission Security Act, HB 10-1288 (the "Broker Security Act"), was signed in late April and will become effective August 11, 2010. The Broker Security Act grants brokers the right to lien property to secure leasing commissions owed to them pursuant to valid commission agreements entered into after the effective date.

The Broker Security Act applies to any real property other than real property containing one to four residential units. It provides brokers who procure tenants for such property with a means of securing payment of monies owed through the filing of a lien against the owner's fee title to the property. In order to be entitled to this statutory lien right, a broker must be a "Real Estate Broker" under Colorado law. The broker must also have a written listing agreement, written compensation agreement, or other written agreement with the owner or an agent of the owner that establishes a right to compensation for commercial leasing services. Third, the broker's services must have resulted in the procurement of a lease of an interest in the real property against which the lien is filed, or the broker must otherwise have earned a commission in accordance with such agreement.

A broker entitled to the lien right must follow the process set forth in the Broker Security Act before filing a lien, including giving 30 days' notice of the intent to file a lien and making a good faith effort to resolve the dispute, through mediation, for a period of 30 days. The notice of lien must be filed no later than 90 days after the tenant takes possession of the leased property or within 90 days of the commission due date, whichever is later.

As a matter of background, a lien is a legal mechanism that, by law or by agreement, gives an interest to the claimant in the title to real property and is used as security to ensure payment or the fulfillment of other agreements. A lien can be foreclosed upon or, if the lien has not sooner expired or been released, must be satisfied upon any sale or refinancing of the encumbered property in order for the seller to be able to deliver clear title.

A lien under the Broker Security Act attaches to the encumbered property when the claim for lien is recorded. It does not relate back to the date of the listing or other written compensation agreement. Its priority relative to the other interests in the subject property, including its priority relative to other liens, is determined by the order in which the documents evidencing such interests and liens are recorded in the real property records-first in time equals first in right-with certain exceptions where a party has actual prior notice of an unrecorded document.

The Broker Security Act includes language indicating that a broker can agree to a prospective waiver of his or her lien rights, and a lien created under the Broker Security Act can be bonded over. The Broker Security Act also protects a property owner against spurious, invalid or fraudulent liens by providing specific remedies to the property owner in such cases.

If you have any questions regarding this article or its possible impact on your activities and operations, please contact your Sherman & Howard attorney or one of the attorneys in our Real Estate Group.

Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation.

	Contact Us Services Attorneys News and Events Publications About the Firm Inclusiveness Careers In the Media Events and Registration Press Releases Speaking Engagements Articles Client Advisories Subscriptions History Offices Pro Bono Interlaw Contact Us Culture Legal Opportunities Support Staff Publications Client Advisories Home > Publications > Client Advisories > View Broker Security Act Will Take Effect August 11, 2010 The Commercial Real Estate Broker's Commission Security Act, HB 10-1288 (the "Broker Security Act"), was signed in late April and will become effective August 11, 2010. The Broker Security Act grants brokers the right to lien property to secure leasing commissions owed to them pursuant to valid commission agreements entered into after the effective date. The Broker Security Act applies to any real property other than real property containing one to four residential units. It provides brokers who procure tenants for such property with a means of securing payment of monies owed through the filing of a lien against the owner's fee title to the property. In order to be entitled to this statutory lien right, a broker must be a "Real Estate Broker" under Colorado law. The broker must also have a written listing agreement, written compensation agreement, or other written agreement with the owner or an agent of the owner that establishes a right to compensation for commercial leasing services. Third, the broker's services must have resulted in the procurement of a lease of an interest in the real property against which the lien is filed, or the broker must otherwise have earned a commission in accordance with such agreement. A broker entitled to the lien right must follow the process set forth in the Broker Security Act before filing a lien, including giving 30 days' notice of the intent to file a lien and making a good faith effort to resolve the dispute, through mediation, for a period of 30 days. The notice of lien must be filed no later than 90 days after the tenant takes possession of the leased property or within 90 days of the commission due date, whichever is later. As a matter of background, a lien is a legal mechanism that, by law or by agreement, gives an interest to the claimant in the title to real property and is used as security to ensure payment or the fulfillment of other agreements. A lien can be foreclosed upon or, if the lien has not sooner expired or been released, must be satisfied upon any sale or refinancing of the encumbered property in order for the seller to be able to deliver clear title. A lien under the Broker Security Act attaches to the encumbered property when the claim for lien is recorded. It does not relate back to the date of the listing or other written compensation agreement. Its priority relative to the other interests in the subject property, including its priority relative to other liens, is determined by the order in which the documents evidencing such interests and liens are recorded in the real property records-first in time equals first in right-with certain exceptions where a party has actual prior notice of an unrecorded document. The Broker Security Act includes language indicating that a broker can agree to a prospective waiver of his or her lien rights, and a lien created under the Broker Security Act can be bonded over. The Broker Security Act also protects a property owner against spurious, invalid or fraudulent liens by providing specific remedies to the property owner in such cases. If you have any questions regarding this article or its possible impact on your activities and operations, please contact your Sherman & Howard attorney or one of the attorneys in our Real Estate Group. Sherman & Howard has prepared this advisory to provide general information on recent legal developments that may be of interest. This advisory does not provide legal advice for any specific situation. This does not create an attorney-client relationship between any reader and the Firm. If you want legal advice on a specific situation, you must speak with one of our lawyers and reach an express agreement for legal representation. © 2010 Sherman & Howard L.L.C. August 8, 2010 Copyright 2000-2012 Sherman & Howard L.L.C. All rights reserved. Privacy Policy \| Terms of Use