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The Illinois Commercial Real Estate Broker’s Lien Statute: A Top 10 List

The Illinois Commercial Real Estate Broker’s Lien Act, 770 ILCS 15/1 (the “Act”), provides a broker whose owed commission money with a strong remedy against a breaching property owner, buyer or tenant. Here are some of the Act’s key provisions:

1. What It Applies To:

“Commercial real estate.”  This is defined as any real estate in Illinois other than (i) real estate containing one to six residential units, (ii) real estate on which no buildings or structures are located, or (iii) real estate classified as farmland under the Property Tax Code.  770 ILCS 15/15

2. What It Doesn’t Apply To:

Real estate that isn’t “commercial”, including single family residential units like condominiums, townhouses, or homes in a subdivision when sold conveyed on a unit-by-unit basis.

3. Is Written Agreement Required? Yes.  770 ILCS 15/10.

4. When Does it Attach?:
The lien attaches when two things happen: (1) the broker becomes entitled to a fee or commission under a written instrument signed by the owner, buyer, tenant (or their agent); and (2) the broker records a notice of lien in the Recorder’s Office of the county where the commercial real estate is located.

5. Does the Lien Relate Back? No.   Unlike mechanics liens, the broker lien does not relate back to the date of contract between broker and owner (or buyer or tenant).  770 ILCS 15/10.

6.  Timing/When To Record:  In the case of a lease, the lien must be recorded within 90 days after the tenant takes possession of the premises,  Exception: if broker is given written notice of the planned lease signing at least 10 days before the intended signing date, the lien claim must be recorded before the lease signing date.

For a purchase, the lien must be recorded before the property is transferred to a buyer. The broker has 10 days from the recording date to mail a copy of the recorded lien to the owner of the property by registered or certified mail, with return receipt requested, or to personally serve the notice on the owner.  The broker’s lien shall be unenforceable if mailing of the copy of the notice of lien recording does not occur at the time and in the manner required by this Act. 770 ILCS 15/15.

7.  How to Enforce the Lien:  The broker enforces the lien by filing suit to foreclose it.  The broker must sue in the Circuit Court for the county where the property is located by filing a complaint and sworn affidavit that the lien has been recorded.  The lawsuit must be filed within 2 years after recording the lien.

8. Contents of the Lien Notice:  The lien notice shall state the name of the claimant, name of the owner, a description of the property upon which the lien is being claimed, the amount for which the lien is claimed, and the real estate license number of the broker.

9.  Q: Can the Liening Broker Recover Her Attorneys’ Fees?  A: Yes. The losing party must pay the winning party’s attorneys’ fees, costs, and prejudgment interest.

10.  Q: What About Priority? A: Prior recorded liens and mortgages against the property shall have priority over a broker’s lien.  770 ILCS 15/15.  These prior recorded liens include mechanics liens recorded after the broker’s lien notice but which relates back to a date prior to the lien recording date and prior recorded liens securing revolving credit and future advances of construction loans as described in Section 15-1302 of the Mortgage Foreclosure Statute.

An Illinois Landlord’s Commercial Lease Damages

In a typical commercial lease lawsuit, the tenant is long gone and possession is not in issue.  Usually, it’s a retail tenant whose business is suffering and who can’t pay the required rent.  Because of this, getting a possession order is often an afterthought as the landlord’s main focus is trying to recover damages from the defaulting tenant.

Commercial leases (lease between two business entities) are less scrutinized by courts than consumer/residential leases: the thinking being that two commercially sophisticated parties should be free to craft their own deals with minimal court oversight.

So, if the commercial lease is between two businesses and there is no fraud, compulsion or over-reaching, the lease terms should be enforced as written.

If a tenant skips out on a 10 year lease with 8 years left on a lease, the lessor could conceivably recover the remaining 8 years left on the lease – IF (big IF) the lease explicitly gives the lessor the right to accelerate damages.  However, the damages question becomes murky if the lease is silent on whether the non-breaching landlord can accelerate rental payments through the lease expiration date.

 If there’s no acceleration clause in a lease (and many leases don’t have them), the rule in Illinois is that recovery for breach of lease is limited to the amount due at trial as there is no obligation to pay rent until rent day. Miner v. Fashion Enterprises, Inc., 342 Ill.App.3d 405 (1st Dist. 2003). 

Also, a failure to pay rent when it accrues does not accelerate the unpaid rent in the absence of a provision in the lease to that effect. A landlord then has the option of (a) suing for rent installments as they come due, (b) suing for several accrued installments, or (c) suing for the entire amount at the end of the lease term. Id.

If a commercial lease contains a clear acceleration clause (lessor can immediately recover all rental payments flowing through the end of the lease), it will likely be enforced.  If it doesn’t, the landlord’s recovery at trial will likely be limited to the amounts due and owing on the trial date.  In such a case, if there is a lot of time left on the breached lease, the landlord can file successive motions to amend the judgment as each month’s rental becomes due and unpaid.