Commercial Brokers’ Lien Law Enacted in Delaware

April 2013Articles In the Zone

The Delaware legislature has passed the “Commercial Real Estate Brokers’ Lien Act.” The “Lien Act” or the “Brokers’ Lien Act” applies to real estate “Brokers” who hold a broker license from the Delaware Real Estate Commission with respect to the sale or rental of real estate in the State of Delaware. The Act applies to Brokerage “Agreements,” which means any written agreement for the payment for brokerage services of a broker for the management, sale, purchase, lease or other conveyance or acquisition of commercial real estate. Commercial real estate does not include single family residential units such as residential condominiums, townhomes and mobile homes.

The Act provides the broker with the right to place a lien upon commercial real estate that is the subject of a brokerage agreement for the unpaid amount of compensation due the broker as stated in the brokerage agreement, provided that the brokerage agreement expressly states the following:

  1. The amount or the method of calculating the amount of compensation for the services of the broker; and
  2. That the brokerage agreement is a binding contract under state law; and
  3. The identity of the real estate that is covered by the brokerage agreement by description and/or tax parcel number.

Section 26.04 of the Act provides that the brokers’ lien shall attach to the commercial real estate upon the broker filing an Affidavit and Notice of Brokers’ Lien in the form required by the office of the Recorder of Deeds in the county where the commercial real estate is located. The broker must then, within 10 days, cause a copy to be served upon the person or entity charged by certified mail, return receipt requested or process server. The Affidavit and Notice of Brokers’ Lien may only be filed by an attorney admitted to the Bar of the Supreme Court of the State of Delaware.

The lien shall be recorded within 90 days of the failure to pay upon completion of all duties required under the Brokerage Agreement. The Affidavit and Notice of Brokers’ Lien shall be effective for one year following the date of filing and while any litigation concerning it is pending.

As you may expect, this has been a hot topic among real estate attorneys in the State of Delaware.