DR Legal News: Commercial brokerage loses ‘slander of title’ countersuit

In the July edition of D.R. Legal News, a commercial real estate brokerage firm lost a case in Michigan and more than $20,000 in litigation costs after refusing to release a broker’s lien.

It’s just one of six case studies summarized by Lisa Harms Harzler of Sorling Northrup Attorneys, in this issue of D.R. Legal News. Get the details now.

This situation began with Anton, Sowerby & Associates getting an exclusive listing agreement to sell or lease a commercial property owned by GAM Properties. The brokerage introduced a potential buyer (Mr. C’s Lake Orion, L.L.C.) to GAM. But after GAM defaulted on its mortgage, an appointed receiver negotiated a sale to Mr. C’s for $1.2 million and offered to settle the brokerage firm’s claim for a commission.

The parties could not reach an agreement on the commission, so the brokerage firm recorded a broker’s lien for $60,000. In order to close the sale, the receiver and Mr. C’s funded an escrow account for $75,000 to cover the brokerage firm’s claim and asked for a release of the lien.

Anton, Sowerby & Associates refused to release the lien, and Mr. C’s filed a counterclaim accusing the brokerage firm of “slandering its title.”

Slander of title, writes Hartzler, is a remedy for malicious publication of false statements that disparage an owner’s right in property. The Michigan Appelate Court decided that the brokerage firm properly recorded its broker’s lien prior to the sale of the property, but was obligated under Michigan’s state law to release the lien when the escrow was created. The persistent failure to release what was then a false lien demonstrated sufficient malice to constitute slander of title. The court affirmed an award to Mr. C’s for all of its litigation costs, which totaled more than $20,000.

Leave a Reply

Your email address will not be published. Required fields are marked *