Commission Agreements, the Commercial Broker's Lien and Business Entity Brokers

Getting paid is a broker-only outline topic: Enforcing Compensation Agreements. This lesson pairs it with the contract duties that can cost a commission and with the rules for brokers that operate as business entities.

Contract duties that protect the commission

• Statute of frauds for commissions: no one may sue in Texas to recover a commission on a sale or purchase unless the promise or agreement, or a memorandum of it, is in writing and signed by the party being sued or that party's authorized signer.
• License at the start: to sue for compensation for brokerage acts in Texas, the person must prove being a license holder when the act began, or an attorney licensed in any state.
• These suit rules do not apply to agreements to share compensation among license holders.
• Title notice: when an offer to buy Texas real estate is signed, the license holder advises each buyer in writing to have the abstract examined by an attorney of the buyer's choice or to obtain a title insurance policy. A license holder who fails to do so may not receive or recover the commission.
• TREC forms: failing to use a contract form required by TREC is a ground for discipline.
• Termination date: a brokerage services contract, other than a property management contract, must state a definite termination date that is not subject to prior notice.
• Net listings are allowed only if the principal requires one and appears familiar with current market values, and the agreement must assure the principal's desired price and cap the broker's commission.

The commercial broker's lien: when it applies

The Broker's and Appraiser's Lien on Commercial Real Estate Act lets a broker named in a commission agreement place a lien on commercial real estate. It does not apply to a claim of $2,500 or less, or to a sale claim of $5,000 or less when the property is the owner's principal place of business, has more than one and fewer than five tenants, and has 7,500 square feet or less of gross building area.

• Not commercial: real estate improved with one to four residential units, single-family units sold or leased unit by unit, a homestead, certain land zoned or restricted for single-family use, and certain farm and ranch land more than three miles from any city.
• Commission agreement: a written instrument that entitles the broker to a commission, is signed by the person obligated to pay, states the amount or formula, and (for a seller or lessor) legally describes the property. The agreement must disclose the right to claim a lien.
• Who may claim: only the broker named in the commission agreement, never the broker's employee or independent contractor.
• A waiver or early release of the lien right is void, except that the lien is automatically waived when the commission is earned and payable for a lease transaction and the commission agreement is included as a provision of the lease.

Filing, priority and enforcement

• The notice of lien may be filed only after the commission is earned, with the county clerk where the property is located.
• The broker mails a copy to the owner (and to a buyer, tenant or escrow agent under a binding contract) by certified or registered mail not later than one business day after filing, or the notice is void.
• Timing: on a seller's agreement, record after the commission is earned and before the property is conveyed; on a buyer's agreement, after the buyer acquires title and before the buyer conveys; on a lease, before the earlier of the 91st day after the commission becomes payable or the date the person obligated to pay the commission records a later conveyance of its interest. A late notice is void.
• The lien attaches when recorded and does not relate back to the agreement date. Liens recorded earlier have priority.
• Suit to foreclose is generally due by the second anniversary of recording, and within 30 days after the owner's written demand to sue when the commission is payable.
• If an unpaid lien claim would prevent closing, the person named as obligated to pay must, on the closing date, either escrow the claim plus 15 percent or file a bond: double the lien amount, or 1-1/2 times it when the lien exceeds $40,000.
• Releases are due not later than the fifth day after the owner's written request once the debt is satisfied, and not later than the 10th day when the commission can no longer be earned.

Business entity brokers

• A business entity must be qualified to transact business in Texas. A Franchise Tax Account Status page issued within 21 days before the application is evidence of it, and the entity notifies TREC not later than the 10th day after learning it is not qualified.
• It must designate an individual broker with an active license in good standing who has managing authority (a corporate officer, LLC manager or managing member, or general partner).
• If the designated broker owns less than 10 percent of the entity, it must carry errors and omissions insurance of at least $1 million for each occurrence.
• A broker is not in good standing if the license is revoked or suspended (including probated), if an entity the broker served as designated broker had its license revoked or suspended in the past two years, or if the broker, or such an entity while the broker was its designated broker, has unpaid amounts owed to TREC such as administrative penalties or Recovery Trust Account payments.
• The entity may not act as a broker during any period without a qualifying designated broker, and a broker whose license is inactive, expired, suspended or revoked may not serve as one. A broker may be the designated broker for more than one entity.

Commission agreement

For the lien law, a signed writing that entitles the broker to a commission and states the amount or formula.

Designated broker

The active, good-standing individual broker with managing authority who acts for a licensed business entity.

Where this shows up on the exam

Enforcing Compensation Agreements sits in Agency & Brokerage, business entities in Licensing, and the statute of frauds and promulgated forms in Contracts, which carries 8 of the 50 scored State items. Contract case studies use TREC-promulgated forms, so study the forms themselves alongside this lesson.

Sources

North Carolina law as published by the General Assembly and the Office of Administrative Hearings, checked 2026-11-05:

• Tex. Occ. Code §§1101.355, 1101.555, 1101.652, 1101.806
• Tex. Prop. Code ch. 62 (Broker's and Appraiser's Lien on Commercial Real Estate Act)
• 22 TAC §§535.16, 535.53
• TREC, Business Entity Broker License page and License Holder FAQ
• Pearson VUE Texas Broker State Law outline #094401