January 10, 2013

Real Estate Law – Does the Broker’s Lien Exist in Mexico?

By Jorge Ojeda and Carrie Osman

Texas law allows real estate brokers to perfect a lien on commercial properties in order to guarantee payment of their commission in a manner similar to that known as the “mechanic’s lien.” In Texas, this law is known as the “Broker’s and Appraiser’s Lien on Commercial Real Estate Act” and more than half of the states in the U.S. have laws providing for the so-called “Broker’s Lien.” In order to create a “Broker’s Lien,” it is necessary to have a commission/fee agreement in writing between the real estate broker and the party with an interest in the real property (seller, buyer, lessor, lessee). Texas law contains specific provisions on the content of the agreement, including disclosure and notice requirements, among others. The real estate broker earning a commission relative to the sale or lease and in possession of the required written commission/fee agreement must record his/her lien with the country registrar in the county where the commercial real estate is located. It is interesting to note that the lien may be perfected prior to closing, in which case the escrow agent and the other parties to the sale or lease may not close on the transaction until the lien on the real property is released. In the case of Mexico, these aspects with respect to a real estate transaction are different than those in the U.S. To begin with, Mexico does not legally require a governmental accreditation, license or authorization to act as a real estate broker. Second, the right of a real estate broker to receive a commission deriving from their participation in a real estate transaction derives from the agreement entered into with their client, without any encumbrance or lien of any type on the real property and/or the collection rights arising from the purchase and sale or lease agreement. As a result, it may be said that the “Broker’s Lien,” as it is understood under U.S. law, does not apply under Mexican law. In complex real estate transactions in Mexico it is common to have one or more real estate brokers participating and with whom the owners or developers enter into real estate brokerage agreements or real estate promotion services agreements; however, in no event does the execution of such an agreement constitute the creation of a lien on the real property or collections rights to the rents or proceeds that are the subject matter of the transaction. As a result, the lease or sale to third parties is not affected in any way by the existence of agreements with real estate brokers. Nevertheless, it is common practice to indicate the participation of real estate broker(s) in real estate contracts, as well as the party responsible for paying the respective fees, usually by referencing that the payment of such will be made in accordance with a certain agreement entered into independently and separately, in order to protect the parties that are not part of the commission/fee agreement.