Senators Jacobs, Patterson and Whitmer, under their constitutional right of protest (Art. 4, Sec. 18), protested against the passage of Senate Bill No. 610.
Senators Jacobs and Patterson moved that the statements they made during the discussion of the bill be printed as their reasons for voting “no.”
The motion prevailed.
Senator Jacobs’ statement is as follows:
I rise today to strongly oppose the bill before us providing for liens against commercial property for unpaid real estate brokers’ commissions and services. With the economic situation that this country and its citizens are facing, I do believe that it is important to address concerns in the real estate industry. Rather than starting with this bill, perhaps we should be focusing on the needs of our constituents who are facing home foreclosure like the bill my colleague from the 1st District has introduced.
The Real Property Law section of the Michigan State Bar raised numerous valid arguments when this bill was considered in committee. Among them, this legislation interferes with basic property rights, makes brokers a special preferred class of persons; and provides an extraordinary remedy of a lien against real property. This bill could increase litigation and add substantial costs, delays, and disruptions to closing transactions.
This bill only addresses the needs of the brokers, but there are other parties that may be entitled to payment and closing, such as appraisers, title companies, and property managers, who would then be justified in coming to the Legislature asking that they to be given special rights. There also could be an effort to extend these rights to residential real estate.
Proponents have noted that others do have the protections of liens, notably through the Construction Lien Act. The justification of protecting workers who create physical improvements to property does not apply to brokers. Brokers deal directly with owners, purchasers, landlords, and tenants and already have adequate legal remedies for the collection of their commission. I urge my colleagues to vote down this bill.
Senator Patterson’s statement, in which Senator Whitmer concurred, is as follows:
In my legal opinion, this bill creates, or at least extends, an extraordinary legal tool to a prejudgment situation. Prejudgment rights are always looked at very carefully by the courts. In this instance, this prejudgment impingement called a lien invites extended and extensive constitutional scrutiny because it imposes upon real property interests and obligation without first having a determination of whether or not it is justified.
This proposed legislation makes a broker’s lien a special class of person—or makes brokers a special class of persons—extending to them this very extraordinary remedy. It provides an extraordinary remedy at a time when there are already adequate remedies in law for the collection of commissions. By providing lien rates to brokers, it will encourage other parties dealing in real estate to seek this same extraordinary leverage—appraisers, property managers, property inspectors, lawyers, title companies, escrow agents, accountants.
Once brokers’ liens are granted to commercial property, there obviously will be a substantial risk that lien rights will subsequently be extended to include residential property. After all, doesn’t it just make sense to incrementally advance this right? The proposed legislation is patterned after the Construction Lien Act, but the justification for protecting artisans who assert a construction lien who actually create physical improvements to property does not actually apply to brokers.
The proposed legislation seeks to force parties to a transaction to close the transaction in escrow funds sufficient to satisfy the lien, even if there is no indication that it is a justified claim. The validity has not been determined. The proposed legislation is clearly complex, and thus, it will add substantial cost expenses, create instances of litigation, delays, and disruptions to each and every real estate transaction involving commercial property. Perhaps, as an attorney, I should withdraw my “no” vote because it is going to enhance lawyer’s practices. Perhaps I should reconsider my position.
The proposed legislation will result in the filing of more documents affecting real property, problems with timely discovery of such documents, and will, therefore, create an additional underwriting risk for title insurance companies. Those are some of my “no” vote justifications.