Order Reprints

By Karen Gentry | TransActions
This e-mail address is being protected from spambots. You need JavaScript enabled to view it

WEST MICHIGAN – Increasingly, commercial real estate brokers have been stiffed on earned commissions after transacting a sale or lease on deals that have taken months or even years to complete.

It’s happened to Stu Kingma, VP of Wisinski Group, 10 times in the last 16 years, including one time this summer. Kingma said everybody likes to get paid for the work they do, although it doesn’t often make sense to litigate because you can “spend a nickel to get a penny.”

The “Commercial Broker Lien Act” aims to address the problem by allowing a lien to be placed on commercial property for non-payment of commission. The bill introduced by Senator Jason Allen, R-Traverse City, passed the State Senate on Dec. 8, 2009, unanimously passed the State House Regulatory Reform Commission and now heads to the House floor for consideration.

“In a case where there’s concern about a fee being paid that is rightfully earned, a lien can be put in place similar to a lien to protect contractors,” Kingma told TransActions.

The legislation has a good chance of passing, according to Brad Ward, director of public policy and legal affairs for the Michigan Association of Realtors.

Under the pending legislation, a commercial real estate broker’s lien would be attached to commercial real estate in favor of the broker if the broker has a written commission agreement and is entitled to a commission under the written agreement. If a real estate broker is owed a commission as a result of a lease, the broker will be able to record a claim of lien any time after the lease is signed. The broker would be required to record the lien before the conveyance of the property.

Ward served as a lobbyist for MAR and brought in commercial realtors to testify in favor of the legislation.

“The problem has been around for a number of years, it’s just become more acute over the last few,” Ward told TransActions. “This is a very big issue for our membership, and it has our association behind it.”

He said the commission amount can be eaten up in the first portion of litigation and a cost benefit analysis can show real estate brokers could spend $15,000 to collect $10,000.

Rod Alderink, partner/associate broker with NAI West Michigan and president-elect of the Commercial Alliance of Realtors in Grand Rapids, said it’s been a historical problem because there are often many ownership changes as buildings are sold over time, and there’s a tendency for brokers to be left out of the transaction. Transactions can also get complicated when a tenant buys a building that was foreclosed on and taken back by the bank.

“There have been instances where owners will attempt to sell the building without paying the real estate broker who put the lease together in the first place,” Alderink told TransActions.

Alderink said it’s a growing problem because of real estate foreclosures in the current economy. He said the new law will simply require everybody to be honest and upfront so those who are due compensation get paid.

“It’s not an extra fee, not anything beyond what a broker is owed per the contract in place between the building owner and the brokerage company,” Alderink said.

He said brokers and sellers agree to certain terms and conditions regarding commission when the building is listed. Alderink noted the Commercial Broker Lien Act has broad-based commercial broker support from across Michigan.

Ward said MAR has been working on and fine tuning the legislation over the last couple of years. Supporters of the legislation worked with registers of deeds and the Michigan Land Title Association to ensure there are no issues with the titles of property or with timely closings.

Another purpose of this legislation is to prevent future lawsuits in regards to commissions. According to MAR, buyers or sellers sometimes look to take advantage of brokers not wanting to lose a sale.

About 24 other states already have commercial broker lien laws in place, including the neighboring states of Illinois and Ohio.

  Order Reprints

TAGS:

• brad ward
• commercial alliance of realtors
• commercial real estate
• michigan association of realtors
• michigan land title association
• nai west michigan
• rod alderink
• stu kingma
• west michigan
• wisinski group