Effective July 1, 2006, Indiana created a new lien right for commercial real estate brokers. The new lien applies to all written agreements entered into after June 30, 2006 for the sale or lease of commercial property. Commercial property, for purposes of the act, means any real estate other than real estate containing one (1) to four (4) residential units, real estate on which no buildings or structures are located that is zoned single family residential or single family residential units such as condominiums or townhomes when sold or leased on a unit-by-unit basis. A principal broker may have a lien upon commercial real estate, or any interest in commercial real estate, that is subject to sale, lease or other conveyance to a buyer or tenant. The face amount of the lien may include brokerage fees, consulting fees and management fees due a principal broker pursuant to a written agreement signed by an owner or the owner’s agent or by a prospective buyer or tenant or by their agent. The lien is available only to the principal broker and not to the broker’s employees, independent contractors or salespersons.

Notice of the lien must be recorded in the office of the recorder in the county where the real estate is located prior to the recording of the deed if the broker claims fees from the conveying owner. If the fees are claimed to be owed by the buyer or tenant, the lien must be recorded within ninety (90) days of the recording of the deed. The lien attaches on the date of recording and does not relate back to the date of the written agreement. Prior to filing the lien, the principal broker must notify the closing agent, title company and/or title insurance agent of the amount due. Also, an owner must notify, not later than ten (10) days prior to the planned closing, the principal broker or brokers involved in a transaction of the name of the closing agent, the title company and the address of the closing. This notice must be sent by registered or certified mail, return receipt requested, or by other means in compliance with the Indiana trial rules. If the principal broker does not attend the closing, the owner shall, in writing at the closing under the penalties of perjury, certify that the owner has notified the principal broker of the closing and that the broker received the notice or, that the broker has been paid in full prior to the closing.

Special rules apply to situations where installments are due a principal broker following the closing of the sale. In that case a broker may file a lien within ninety (90) days of the missed payment. A lien is effective against the transferor’s interest in the real estate to the extent consideration is still owed to the transferor by the transferee.

In the case of a lease or sublease, the lien must be filed within ninety (90) days of the date the tenant takes possession of the real estate. However, if the transferor personally serves notice upon the broker at least ten (10) days prior to the date of the intended execution of the lease, the broker must file its lien prior to the execution of the lease. In the case of a lease, the principal broker may record a memorandum of lien if there are future options which could cause a fee to be owed to the broker. If the option is exercised and the broker is not paid, the broker has ninety (90) days to record the lien. However, if the fee is solely the responsibility of the tenant, the broker may not lien the owner’s real estate.

A principal broker must, within ten (10) days of recording the lien, personally serve or mail, by registered or certified mail, a copy of the notice of lien to the owner of the real estate at the owner’s address as stated in the parties’ written agreement.

The principal broker must, within one (1) year of the recording of the lien, commence foreclosure proceedings. In the case of future fees or commissions due, the broker must commence foreclosure within one (1) year from the occurrence of the event for which future fees or commissions are claimed. The foreclosure must be conducted under the same rules as those for the foreclosure of real estate mortgages. A property owner may demand that a principal broker bring suit within thirty (30) days after service of a demand to foreclose. If the broker does not bring suit within the time required, the lien is extinguished.

Costs of the action, including attorney’s fees, costs and prejudgment interest shall be borne by the nonprevailing party. A party who suffers pecuniary loss as a result of the owner’s failure to comply with the notice requirements of the act may bring suit against the owner. If the non-compliance is found to be fraudulent, the injured party may recover treble damages.

Finally, an owner may have the broker’s lien released by escrowing one hundred ten percent (110%) of the amount of the lien. The broker’s lien then becomes a lien upon the escrowed funds rather than upon the real estate.

Kevin E. Steele