What Should You Know About Commercial Real Estate Broker’s Liens?
When a commercial real estate broker is not paid a commission, Michigan law allows the broker to file a lien against the property involved in the transaction. To be enforceable, the lien must include specific information, such as the broker’s name, the amount claimed, a legal description of the property, and “the name of the owner of the commercial real estate.” This requirement is broader than it may appear. Michigan’s Commercial Real Estate Broker’s Lien Act (CREBLA), MCL 570.581 et seq., does not require the lien to identify the record owner of the property, only an owner. In commercial transactions where ownership is divided among multiple parties, this distinction is critical.
How Do Courts Evaluate These Liens?
Courts consider whether the lien complies with the statutory requirements as written. CREBLA distinguishes between “owner” and “owner of record,” meaning that a lien is not presumptively invalid simply because it names a party other than the record title holder. The key question is whether the named party qualifies as an owner in some meaningful sense.
What Happens When a Broker Names the Wrong Owner?
In Great Day Real Estate, LLC v. ASJJ Hotel Management, Inc., and Riverview Hospitality, LLC, a broker recorded a lien naming a company that it believed to be the owner of a hotel property. However, a different but related company held title to the property in public records. The trial court invalidated the lien for failing to name the record owner, but the Michigan Court of Appeals reversed, holding that CREBLA only requires naming “an owner,” not necessarily the record owner. The case was sent back to determine whether the named company had a sufficient ownership interest in the property.
These situations happen more often than you might think. For example, a property may be operated by one LLC while title is held by another affiliated company, or the buyer of a property may function as the practical owner without being listed on the deed. In these scenarios, a broker may reasonably identify the wrong “type” of owner and still have a valid lien if the named party has a legitimate ownership interest.
What Actions Should You Take Before Filing a Commercial Real Estate Broker’s Lien?
Before recording a commercial real estate broker’s lien, take time to understand the ownership structure of the property. Review public records and all related agreements to identify parties with potential ownership interests. When in doubt, legal guidance can help avoid disputes resulting from inaccuracies in a lien.