A recent article in the Nassau Lawyer argued for the use of the lis pendens to enforce a broker’s right
to a commission on the sale of real property.
Before we get our hopes up and start filing notices of pendency on every
unpaid commission, let’s take a closer look at the law on this issue.
The lis pendens is a document
recorded with the county clerk which warns potential purchasers of real
property that litigation is pending which may affect title. The lis
pendens creates constructive notice of the pending lawsuit and renders the
property unmarketable. While this might
sound like a great way to enforce your rights to a commission, the lis pendens is available only for
actions that affect title, possession, use or enjoyment of real property. A claim for money due under a contract meets
none of these requirements, and it has been consistently held that the lis pendens is not an appropriate
remedy.
One court expressed its utter exasperation that brokers who hold
themselves out as real estate professionals could be so ignorant of this “basic
tenet of real estate law.” In the Second Department, which includes all of Long
Island, it is well settled that this remedy does not apply to brokerage
commissions. See Homespring, LLC v. Lee, 2008 NY Slip Op 7618.
So what is the proper way to enforce your right to a
commission? In residential transactions,
the proper remedy is Real Property Law 294-b, which gives a broker the right to
record an affidavit of entitlement to a commission with the county clerk who
will hold the amount of the commission until the broker’s rights can be
determined by a court. For
non-residential transactions, a narrow exception exists which creates a lien when
the commission derives from the broker’s negotiation of a lease longer than
three years. Lien Law § 2 (4), 3.
