REPORT ON BILLS FAVORABLY REPORTED BY COMMITTEE

COMMITTEE:

Insurance and Real Estate Committee

TITLE OF BILL:

AN ACT CONCERNING COMMERCIAL REAL ESTATE TRANSACTIONS AND BROKERS' LIENS.

SPONSORS OF BILL:

Insurance and Real Estate Committee

  

REASONS FOR BILL:

Current law requires certain items to be part of every compensation agreement between a broker and a client who seeks to buy or lease industrial or commercial real estate in Connecticut. This has posed a problem, specifically with out-of-state entities, which are either reluctant or unwilling to sign listing agreements and buyer representation agreements containing all of the elements Connecticut law requires; thus, taking business away from real estate brokers in Connecticut. This bill redefines a "commercial real estate transaction" so that a written agreement, in any form, is sufficient to permit the commercial real estate practitioner to participate in the sale and collect a commission. The bill also provides for the broker in a commercial real estate transaction to be paid a renewal commission, if a tenant exercises an option contained in a lease procured by a commercial real estate broker. Furthermore, it allows a broker lien to be placed on the property before the sale of such property to a new buyer, in order to secure renewal commissions.

RESPONSE FROM ADMINISTRATION/AGENCY:

None Expressed

NATURE AND SOURCES OF SUPPORT:

Alan Fischer, a commercial real estate practitioner and Immediate Past President and Certified Commercial Investment Member of the Commercial Investment Real Estate Institute, testified in support of this bill because the current law which requires certain items to be part of every compensation agreement between a broker and his client is out of date and unpractical. Out-of-state entities are either reluctant or will not sign listing agreements and buyer representation agreements containing all of the elements required by Connecticut law. This leaves commercial real estate practitioners having to decide to either illegally service the needs of this out-of-state client or turn the client away. This bill remedies this situation by defining a "commercial real estate transaction" and then provides that so long as the commercial real estate practitioner has a signed written agreement for compensation, in whatever form, to be sufficient in order to permit the commercial real estate practitioner to collect a commission. This bill also deals with "Runaway Landlords." Commercial landlords are frequently willing to pay the commercial real estate practitioner a reduced renewal commission if an option contained in a lease procured by the commercial real estate broker as part of the original lease transaction is exercised by the same tenant. Problems arise when the landlord arranges to sell the building and there is no obligation by the new buyer to pay the real estate broker should the tenant exercise the lease options. This bill permits a commercial real estate practitioner to place a broker lien on the property before the sale to secure renewal commissions. However, it does not make the broker lien automatic in such situations. All of the procedures set forth in the Broker Lien law for protection against unwarranted claims remain in effect. Mr. Fischer asked that "eight families" in the definition of "commercial real estate transaction" be changed to "four families, " as to coincide with other statutes that define residential transactions as involving 1 to 4 structures.

Carl Traub, commercial real estate practitioner and Past Chairman of the Commercial Real Estate Council of the Greater Hartford Association of Realtors, testified in support of this legislation because it will assist Connecticut commercial real estate practitioners service the needs of out-of-state concerns seeking to purchase and lease industrial and commercial real estate in Connecticut. These sophisticated out-of-town concerns often have their own form of compensation agreement with real estate practitioners that they insist on using and do not contain all of the elements required by Connecticut. This causes out-of-state clients to be reluctant to do business or refuse to do business in Connecticut. Mr. Traub went on to reiterate the same thoughts as Mr. Fischer.

NATURE AND SOURCES OF OPPOSITION:

None Expressed

 

Nancy Shannahan

3/21/00

 

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