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Colorado Passes Broker Lien Law

Recently the Colorado legislature passed, and Governor Ritter signed, the Commercial Real Estate Brokers Commission Security Act (HB 10-1288), which allows a Colorado real estate broker to obtain a lien on commercial property if the broker earns a commission from the leasing (but not the sale) of such property under a written agreement with the owner or the owner's agent and the commission is not paid.

To obtain and maintain the lien, the broker additionally must:

1. deliver to the owner written notice of intent to file the lien;

2. make good faith efforts to mediate the dispute with the owner during the following 30 days;

3. record a notice of lien in the county records no sooner than 30 days after delivery of the notice of intent to the owner and no later than 90 days after the later of (a) the date the tenant takes possession, and (b) the date the commission is due;

4. deliver to the owner a copy of the notice of lien within 10 days after recording; and

5. within 6 months after recording the notice of lien, start an action to foreclose the lien and record a notice of that action.

A lien arising under the law attaches to the property at the time the notice of lien is recorded; it does not relate back to the date of the listing agreement or the date services are rendered by the broker. The broker's lien is subordinate to any unrecorded agreements of which the broker had knowledge and all prior recorded instruments. Also, the broker cannot assert a lien for a lease renewal commission if (a) the property has been sold to a party for value and without knowledge of the renewal commission obligation, and (b) a notice of the broker's lien has not been recorded by the time the deed is recorded.

The new broker lien law applies to broker agreements entered into on or after August 11, 2010. Significantly, the act contemplates that brokers may give prospective waivers of their rights under this law if there is mutually acceptable consideration for the waiver. Real estate owners and property managers should consider including such waivers in listing agreements entered into on or after August 11, 2010.

Otten Johnson's Real Estate practice group is well-versed in the Commercial Real Estate Brokers Commission Security Act and related issues. For more information on this Client Alert or on addressing broker lien issues, please contact any of the attorneys in the Real Estate practice group  (for a listing, click here.)

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