2012 -- S 2506

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LC01277

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

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A N A C T

RELATING TO PROPERTY - COMMERCIAL REAL ESTATE BROKER LIEN ACT

     Introduced By: Senator Michael J. McCaffrey

     Date Introduced: February 16, 2012

     Referred To: Senate Judiciary

It is enacted by the General Assembly as follows:

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     SECTION 1. Title 34 of the General Laws entitled "PROPERTY" is hereby amended by

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adding thereto the following chapter:

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     CHAPTER 49

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COMMERCIAL REAL ESTATE BROKER LIEN ACT

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     34-49-1. Short title. – This chapter shall be known and may be cited as the “Commercial

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Real Estate Broker Lien Act.”

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     34-49-2. Definitions. – When used in this chapter, unless the context indicates otherwise:

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     (1) “Broker” means a real estate broker who is licensed pursuant to section 5-20.5 of the

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general laws.

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     (2) “Broker services” means services for which a license issued by the Rhode Island

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department of business regulation is required pursuant to section 5-20.5 of the general laws.

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     (3) “Commercial real estate” means and includes leaseholds as well as any and every

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interest or estate in land, whether corporeal or incorporeal, freehold or non-freehold, which at the

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time the property or interest is made the subject of an agreement for broker services, and does not

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include any of the following:

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     (i) Vacant land that is zoned for single family use;

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     (ii) Land with physical improvements consisting of a house and/or structure comprised of

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four (4) or fewer residential units.

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     (4) “Commission” means any compensation which is due to a broker for performance of

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broker services.

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     (5) “Lien claimant” means a broker claiming a lien pursuant to this chapter.

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     (6) “Owner” means the owner of record of any interest in commercial real estate.

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     34-49-3. Commercial real estate lien. – (a) A broker may record a lien on commercial

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real estate in the amount that the broker is due under a written agreement for broker services

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signed by the owner or signed by the owner’s duly authorized agent, if:

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     (1) The broker has performed under the provisions of the agreement;

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     (2) The written agreement for broker services describes the broker’s duties to the owner;

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and

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     (3) The written agreement for broker services states the conditions upon which the

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compensation shall be earned and the amount of such compensation.

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     (4) The written agreement for broker services includes the following notice, “The real

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estate broker may be entitled to certain lien rights pursuant to Rhode Island general laws chapter

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34-49.”

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     (b) The lien under this section shall be available only to the broker named in the

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instrument signed by the owner or the owner’s duly authorized agent. A lien under this section

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shall be available only against the commercial real estate which is the subject of the written

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agreement for broker services.

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     (c) When payment of commission to a broker is due in installments, a portion of which is

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due only after the conveyance or transfer of the commercial real estate, any notice of lien for

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those payments due after the transfer or conveyance may be recorded at any time subsequent to

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the transfer or conveyance of the commercial real estate and within ninety (90) days of the date

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on which the payment is due.

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     34-49-4. Notice of intent to record lien. – (a) The notice of lien shall be effective as a

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lien against the owner’s interest in the commercial real estate only to the extent funds are owed to

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the owner by the transferee, but the lien shall be effective as a lien against the transferee’s interest

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in the commercial real estate. A single claim for lien filed prior to transfer or conveyance of the

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commercial real estate claiming all commissions due in installments shall also be valid and

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enforceable as it pertains to payments due after the transfer or conveyance; provided, however,

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that as payments or partial payments of commission are received, the broker shall provide partial

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releases for those payments, thereby reducing the amount due the broker under the broker’s lien.

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     (b) A lien authorized by this chapter attaches to the commercial real estate only when the

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lien claimant files a timely notice of the lien conforming to the requirements of section 34-49-5

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and this section in the office of the clerk of the superior court. A notice of lien is timely if it is

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filed after the claimant’s performance under the written agreement for broker services and before

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the conveyance or transfer of the commercial real estate which is the subject of the lien, except

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that in the case of a lease or transfer of a nonfreehold interest, the notice of a lien shall be filed no

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later than ninety (90) days following the tenant’s possession of the commercial real estate or no

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later than sixty (60) days following any date or dates set out in the written agreement for broker

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services for subsequent payment or payments. When a notice of a lien is filed more than thirty

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(30) days preceding the date for settlement or possession set out in an offer to purchase, sales

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contract, or lease, which establishes the broker’s claim of performance, the lien shall be available

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only upon grounds of the owner’s breach of the written agreement for broker service.

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     34-49-5. Content of lien notice. – (a) A lien notice under this chapter shall be signed by

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the lien claimant and shall contain an attestation by the lien claimant that the information

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contained in the notice is true and accurate to the best of the lien claimant’s knowledge and belief.

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     (b) The lien notice shall include all of the following information:

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     (1) The name of the lien claimant;

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     (2) The name of the owner;

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     (3) A description of the commercial real estate upon which the lien is being claimed;

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     (4) The amount for which the lien is claimed and whether the amount is due in

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installments; and

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     (5) The claimant’s grounds for the lien, including a reference to the written agreement for

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broker services that is the basis for the lien.

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     34-49-6. Demand for release or satisfaction of lien claim. – If a claim for a lien has

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been filed with the clerk of the superior court and a condition occurs that would preclude the lien

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claimant from receiving compensation under the terms of the written agreement for broker

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services on which the lien is based, the lien claimant shall file and serve the owner of record a

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written release or satisfaction of the lien promptly, and in no event more than thirty (30) days

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after the demand.

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     34-49-7. Lien claimant to mail copy of notice of lien to owner by certified mail. –

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Any lien claimant who files a lien on commercial real estate pursuant to the provisions of this

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chapter shall mail a copy of the notice of the lien to the owner of the commercial real estate by

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certified mail, return receipt requested, or shall serve a copy of the notice of the lien in

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accordance with any of the provisions for service of process. The lien claimant shall file proof of

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service with the clerk of the superior court. The lien is void if the lien claimant does not file and

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serve the lien as provided in this chapter.

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     34-49-8. Enforcement of lien. – A lien claimant may bring suit to enforce a lien which

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attaches pursuant to the provisions of this chapter in any court of competent jurisdiction in the

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county where the commercial real estate is located. The lien claimant shall commence

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proceedings within eighteen (18) months after filing the lien, and failure to commence

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proceedings within the eighteen (18) months shall extinguish the lien. If a claim is based upon an

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option to purchase the commercial real estate, the lien claimant shall commence proceedings

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within one year of the option to purchase being exercised. A claim for the same lien extinguished

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pursuant to this section may not be asserted in any subsequent proceeding. A lender shall not be

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made a party to any suit to enforce a lien under this chapter unless the lender has willfully caused

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the nonpayment of the commission giving rise to the lien.

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     34-49-9. Complaint; content; parties’ foreclosure action; procedure. – (a) A

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complaint filed pursuant to the provisions of this chapter shall contain all of the following:

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     (1) A statement of the terms of the written agreement for broker services on which the

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lien is based or a copy of the written contract or agreement;

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     (2) The date when the written agreement for broker services was made;

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     (3) A description of the services performed;

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     (4) The amount due and unpaid;

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     (5) A description of the property that is subject to the lien; and

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     (6) Any other facts necessary for a full understanding of the rights of the parties.

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     (b) The plaintiff shall file the action against all parties that have an interest of record in

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the commercial real estate; provided, that a lender shall not be made a party to any suit to enforce

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a lien under this chapter unless the lender has willfully caused the nonpayment of the commission

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giving rise to the lien; a foreclosure action for a lien claimed pursuant to this chapter shall be

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brought pursuant to the provisions of this chapter.

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     (c) Valid prior recorded liens or mortgages shall have priority over a lien under this

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chapter.

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     34-49-10. Lien extinguished for lien claimant failing to file suit or answer in pending

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suit within thirty (30) days after service on owner . – If a lien claimant fails to file suit to

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enforce the lien or fails to file an answer in a pending suit to enforce a lien within thirty (30) days

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after a properly served written demand of the owner, lienee, or other duly authorized agent, the

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lien shall be extinguished. Service of the demand shall be by registered or certified mail, return

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receipt requested, or by personal service. The claimant shall file proof or properly served written

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demand with the clerk of the superior court. The provisions of this section shall not extend to any

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other deadline provided by law for the filing of any pleadings or for the foreclosure of any lien

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governed by this chapter.

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     34-49-11. Satisfaction or release of lien. – If a claim for a lien has been filed pursuant to

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the provisions of this chapter with the clerk of the superior court and the claim has been paid in

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full, or if the lien claimant fails to institute a suit to enforce the lien within the time as provided

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by law, the lien claimant shall acknowledge satisfaction or release of the lien in writing upon

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written demand of the owner promptly, and in no event more than thirty (30) days after the

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demand.

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     34-49-12. Cost of proceeding to be paid by non prevailing party. – The costs of any

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proceeding brought to enforce a lien filed pursuant to this chapter, including reasonable attorneys’

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fees and prejudgment interest due to the prevailing party, shall be paid by the non-prevailing

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party or parties. If more than one party is responsible for costs, fees, and prejudgment interest, the

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costs, fee, and prejudgment interest shall be equitably apportioned by the court among the

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responsible parties.

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      34-49-13. Discharge of lien. – (a) Unless an alternative procedure is available and is

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acceptable to the transferee in a real estate transaction, any claim of lien on commercial real

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estate filed under this chapter may be discharged by any of the following methods:

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     (1) The lien claimant of record, the claimant’s agent, or attorney, in the presence of the

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clerk of the superior court, may acknowledge the satisfaction of the claim of lien on the

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commercial real estate indebtedness, whereupon the clerk of the superior court shall enter on the

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record of the claim of lien on the commercial real estate the acknowledgement of satisfaction,

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which shall be signed by the lien claimant of record, the claimant’s agent, or attorney, and

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witnessed by the clerk of the superior court.

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     (2) The owner may exhibit an instrument of satisfaction signed and acknowledged by the

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lien claimant of record, which instrument states that the claim of lien on the commercial real

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estate indebtedness has been paid or satisfied, whereupon the clerk of the superior court shall

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cancel the claim of lien on the commercial real estate by entry of satisfaction on the record of the

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claim of lien on the commercial real estate.

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     (3) By failure to enforce the claim of lien on the commercial real estate within the time

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prescribed in this chapter.

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     (4) By filing in the office of the clerk of the superior court the original or certified copy

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of a judgment or decree of a court of competent jurisdiction showing that the action by the

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claimant to enforce the claim of lien on the commercial real estate has been dismissed or finally

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determined adversely to the claimant.

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     (5) Whenever funds in an amount equal to one hundred twenty-five percent (125%) of the

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amount of the claim of lien on the commercial real estate is deposited with the clerk of the

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superior court to be applied to the payment finally determined to be due, whereupon the clerk of

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superior court shall cancel the claim of lien on the commercial real estate.

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     (6) Whenever a corporate surety bond, in an amount equal to one hundred twenty-five

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percent (125%) of the amount of the claim of lien on the commercial real estate and conditioned

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upon the payment of the amount finally determined to be due in satisfaction of the claim of lien

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on the commercial real estate is deposited with the clerk of the superior court, whereupon the

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clerk of the superior court shall cancel the claim of lien on the commercial real estate.

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     (7) By failure to file documentation if required pursuant to section 34-49.6 or section 34-

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49.10.

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     (b) If funds in an amount equal to one hundred twenty-five percent (125%) of the amount

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that is sufficient to release the claim of lien have been deposited with the clerk of the superior

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court, or a bond in an equal amount has been secured, the lien claimant shall release the claim for

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the lien on the commercial real estate, and the lien claimant shall have a lien on the funds

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deposited with the clerk of the superior court.

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      34-49-14. Priority of lien under this chapter. – Any claim of lien on real property or

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claim of lien on funds allowed under this chapter shall be deemed superior in all respects to any

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other lien claimed under this chapter, regardless of the effective date of the competing liens and

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shall survive notwithstanding any judgment awarding a lien under this chapter.

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     SECTION 2. This act shall take effect 90 days after passage.

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LC01277

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO PROPERTY - COMMERCIAL REAL ESTATE BROKER LIEN ACT

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     This act would enable a real estate broker to record a lien on commercial real estate in the

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amount that the broker is due under a written agreement for broker services.

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     This act would take effect 90 days after passage.

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LC01277

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