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Understanding Pennsylvania’s Broker Lien Law

by | May 15, 2019 | Goldsmith, James L, Industry News, Real Estate & Land Use

Understanding Pennsylvania’s Broker Lien Law

By: James L. Goldsmith, Esquire

A majority of states, including Pennsylvania, have enacted broker lien laws that enable real estate brokers to file liens on commercial property in the full amount of their Pennsylvania real estate commission.

There are prerequisites to be satisfied before a broker’s lien can be asserted:

  • The terms of engagement of the broker and the conditions to be satisfied in exchange for the commission must be specified in writing between the broker and client.
  • When the client is a seller or lessor, this agreement is generally referred to as a listing for sale or rent agreement.
  • The terms should be clear so that there is no ambiguity as to when a fee is earned.
  • It is also imperative that the broker asserting the lien establish that the broker and/or agents affiliated with the broker “have provided licensed services that result during term of the written agreement in the procurement of a person or entity that is ready, willing and able to purchase, lease  . . . as evidenced by a written agreement signed by the owner or owner’s agent.”
  • Generally, the mere marketing of the property’s availability has been deemed to satisfy the requirement that the broker provided licensed services.
  • Notice of a broker’s intent to file a lien must be served on the owner and purchaser at least three days prior to the filing of the lien with the prothonotary in the county in which the property exists.  This requires the broker to anticipate that the seller won’t pay a commission since the lien has to be filed before settlement when the commission is ordinarily paid
  • If a lien is asserted but the transaction does not settle through no fault of the owner, the lien must be removed voluntarily and promptly.  Failure to do so on the part of the broker can result in additional assessments including expenses and attorneys’ fees.

When a lien is asserted before settlement sums sufficient to satisfy the lien can be taken from the proceeds of the transaction and held in escrow in order to allow the transaction to proceed.  If such an account is established, the parties may not refuse to close.  Ultimately the sums held in escrow will be paid to the broker as a commission or returned to the seller if a commission has not been earned.  This may be determined by trial.

Broker liens can be asserted against a buyer who has agreed to pay a commission, but has failed to do so.  A lien against a buyer or tenant can be filed up to 90 days following the date of the purchase or lease.  There would also have to be clear agreement between the buyer/tenant and the broker and broker’s services would have to been provided pursuant to the agreement.

Waivers of a broker’s right to file a lien are ineffective by the terms of the lien law.  For this and other reasons it is imperative that a clear consumer/broker agreement is established at the outset of the relationship.  There should be no uncertainty as to when and how a fee is earned.

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