Posted by MikeC/NY on 9/4/08 7:24pm
Msg #263217

Liens as a way to collect fees

We've had this discussion several times in the past - some folks who are aggressively pursuing payment mention putting a lien on the BO's property.

I took part in a webinar today about the new NY Commission Protection Act, which is intended to help protect real estate brokers from being screwed out of their commissions. Most of it has nothing to do with closings and NSAs, but the attorney giving the presentation did emphasize that it is illegal in NY to put a lien on property in order to recover a commission (and by extension, to recover a fee for services related to a real estate transaction). That doesn't mean you can't actually create the lien, but it won't stand up in court.

Much worse, there's a recent case in NY where a broker created a lien to protect his commission, which led to a clouded title, which led to the deal dying at the closing table. The homeowner was able to sell the property later, but at a reduced price. Guess who was on the hook for the difference? The judge ruled that because the broker improperly filed a lien that caused the homeowner to lose money, the broker was responsible for the loss and had to pay the homeowner the amount that was lost.

Clearly, what applies in NY doesn't apply everywhere else (luckily, for the rest of you...), but the point is that you should be absolutely sure of what your state and local laws allow before deciding that this might be a good strategy for you to pursue. If you're even thinking of doing this, consult with an attorney first - and preferably an attorney familiar with real estate law in your area. The alternative is potential financial disaster for you - and your E&O will not help you.

Reply by notaryinmo on 9/4/08 7:27pm
Msg #263219

It will cetainly be interesting to see how all this pans out, and if any other states decide to follow. Keeping my fingers crossed it doesn't happen in Missouri.

Reply by NCLisa on 9/4/08 8:33pm
Msg #263231

I'd be filing a lien against the business or it's owners properties. I'm sure most of the SS's do a poor job separating their finances that their businesses are not protected by the LLC or corporate veil.

Reply by MikeC/NY on 9/4/08 8:51pm
Msg #263233

The point is that before you do it, make sure you are legally allowed to do it. If you know with absolute certainty that your state law allows it, then go for it. If you're not sure, talk to an attorney who knows local real estate law.

The last thing you want to have happen is to learn that you improperly filed a lien, and that you're now responsible for the consequences....

Reply by NCLisa on 9/4/08 10:51pm
Msg #263242

Your original post was all about filing liens against the borrower. I would never even consider that action, as non payment is not the borrowers problem. There would be no issue with filing a lien against the business, it's property, and even the business owners personal & real property. LLC & Corp status don't protect those that mix their business and personal assets.

Reply by MikeC/NY on 9/5/08 5:08pm
Msg #263308

You can't do that here unless you have a judgment against them. Perhaps things work differently in NC; I would have no way of knowing. You still should either know your state law or consult with an attorney, or risk the chance of creating a liability for yourself.

Reply by Sandra Clark on 9/4/08 8:56pm
Msg #263234

The contract for our services is thru the lender, tc or a ss. not the borrower. Key word being
contract. How would you expect to file a lien against the property or the borrower?

I am not licensed to practice law, therefore, I cannot give you legal advice, but I did stay at a Holiday last week.

Reply by Gary_CA on 9/4/08 11:49pm
Msg #263249

No legal advice here either...

but my guess is that it's illegal to cloud title like that in any state. Think about it. Maybe not illegal, but certainly creates a liability. As for a lien against the SS... first you have to have a judgment.

Mechanics liens are only for physical work done to improve the property.

We're gonna eat a fee or two in our lifetime, but collection shouldn't really be that much of an issue. 90% of it can be accomplished by being a very nice but very squeaky wheel. Day after day after day after day.

And... never doing a second job if you have to chase your money.

RE commissions are a little different, a lot bigger and a bigger piece of your overall revenue stream... but 90% of those problems can be solved at the beginning with a simple script...

"Ya know Mr. Paynin Theas buying and selling a home is a huge deal and it's very important that you have a good match with your agent. I might be wrong, but it just seems to me you'd be served better by a different agent."

You don't know the details at the beginning... but you know when you're dealing with someone whose gonna screw ya... don't.

Reply by desktopfull on 9/5/08 6:57pm
Msg #263318

Re: No legal advice here either...

First, the borrower's didn't hire or contract with us to do their closing.
Second, it would be in violation of the RESPA.

At least, that's what I was told by a lawyer.

Reply by Kevin/Ct on 9/5/08 6:59am
Msg #263255

Wrongfully encumbering title to someone's property with an invalid lien often results in the putative lien holder finding himself on the wrong end of a suit for slander of title or an action to quiet title. Unless your state expressly allows such liens a a matter of statute or common law, it is a very dangerous course to follow.

A much more beneficial approach would be to find a legal method of liening the file upon which you work and the proceeds received by the signing service, title company and lender as a result of your work.

Reply by MW/VA on 9/5/08 7:46am
Msg #263256

That's what happens when someone gets involved in UPL. I'm actually glad the homeowner was compensated by the broker.
I've heard these desperate measures discussed before, as well. I can't imagine why anyone would think they could do this. The borrower has absolutely no obligation for the payment of our fees. As it has already been pointed out, they do not contract with us for our services.

Reply by Ronda Roaring on 9/5/08 6:47pm
Msg #263315

I read a blog on this. It has absolutely nothing to do with us. This commission applies to real estate agents, real estate salespersons and real estate brokers, all of whom are LICENSED by the state. It sets up a commission for these people to appeal to if they don't get their commission (percentage).

There are lots of differences between a real estate agent and a notary in NYS. One of them is that notaries are COMMISSIONED by the state and act as representatives of the state to verify identity. Another is that we don't work on commission.

Reply by MikeC/NY on 9/5/08 9:07pm
Msg #263342

"I read a blog on this. It has absolutely nothing to do with us. This commission applies to real estate agents, real estate salespersons and real estate brokers, all of whom are LICENSED by the state. It sets up a commission for these people to appeal to if they don't get their commission (percentage)."

Whatever you were reading has the facts all wrong - I'd be happy to explain it to you in a PM, but it's out-of-scope for this forum. The only thing I will say now is that in NY, there are only 3 types of real estate licenses - broker, associate broker, and salesperson. There's no such thing here as a "licensed real estate agent". If your bloggers don't know this simple fact, I think it's a safe bet to question whatever other information they're providing...

The bottom line in NY is this - other than mortgage, tax, or mechanic's liens (which a notary does not qualify for), you cannot put a lien on someone's property unless you have a judgment against them. The fact that you are a commissioned official of the state does not give you a free pass - you still have to obey the law.

I STRONGLY suggest that you consult an attorney before you try doing something like this. Aside from the fact that you have no reason to drag the homeowner into your dispute with the SS or TC, if you cloud their title when you're not legally entitled to do so you may be exposing yourself to major problems - and could end up wishing that all you lost was that fee you were trying to collect...