Mississippi’s commercial real estate professionals will gain some leverage on the commission front starting July 1.
With passage of Senate Bill 2559, commercial brokers can obtain and foreclose on a property if the buyer or seller or lessee or lessor fails to pay the broker the agreed upon commission or fee.
Mississippi is the 30th state to enact a commercial real estate broker lien law, according to Derek Easley, governmental affairs director of the Mississippi Association of Realtors and Mississippi Commercial Association of Realtors.
“If a broker had a commission and is not getting paid, until now his only option was to lawyer up.”
Going to court might make sense on an unpaid $100,000 commission but not on a $5,000 to $10,000 one, considering the time and expense involved, Easley noted.
The first effort to get a bill came in the early 2000s but eventually dropped off the legislative radar. It resurfaced in the 2013 session as a priority of the Mississippi Association of Realtors and Mississippi Commercial Association of Realtors. It lacked the traction to make it to the finish line but came back this year to win passage.
Easley said non-payment-of-commission disputes frequently arise with lease renewals whose listing agreements specify a percentage payment to the broker who secured the tenant and negotiated the lease. Enforcement is difficult without the leverage of a lien, however, he added
“By and large it is an issue that keeps coming up with lease renewals,” Easley said, and added: Resolution “always goes back to those listing agreements.”
Commission disputes also develop in deals in which the broker of the lease or sale agrees to take the commission over an extended time. “A lot of our folks who have spent months – if not years – putting these commercial real estate deals together that had contractual agreements to get these payments were not getting payments,” Easley said.
If not outright stiffed by the other party, the broker is surprised at closing with a request to renegotiate the commission, said Nancy Lane, broker/owner Nancy Lane Commercial Realty in Jackson.
“SB 2559 will now give commercial brokers a level of protection for the work they provided and the commission they earned,” she said in an email.
Janice Shows, 2014 Mississippi Association of Realtors president, said the new law gives commercial protections similar to those afforded contractors (and starting July 1 subcontractors) on construction projects. In each instance, they brought value to the asset, Shows said.
“The only difference is that the broker does not have materials they can recover even though they have brought value to property,” she said in a written statement. “A lease or sale is the direct result of the work performed by the broker and they deserve to be paid the contracted amount for the work completed.”
On the other hand, brokers who claim they should be paid when they shouldn’t can expect trouble, Easley said.
Filing of false lien claims subjects them to triple damages, he noted. “Our goal is not to tie-up a person’s property. We want to hold our own people just as responsible.”
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