Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - February 1, 2010 Fannie Mae Offers New Closing Cost Assistance and Appliance Incentive for Homebuyers To be eligible for this incentive: 1.) Office Management - Broker Duties Both Wisconsin license law and the REALTOR® Code of Ethics require competent practice: Wis. Admin. Code § RL 24.03(2) COMPETENCE REQUIRED: REALTOR® Code of Ethics, Article 11: REALTORS® shall not undertake to provide specialized professional services concerning a type of property or service that is outside their field of competence unless they engage the assistance of one who is competent on such types of property or service, or unless the facts are fully disclosed to the client. Any persons engaged to provide such assistance shall be so identified to the client and their contribution to the assignment should be set forth. (Amended 1/10) 2.) QUESTION: Re: Abandoned fuel oil tank in the basement. If it is disclosed and the buyer is okay with it being there, does it have to legally be removed if the property is transferred? ANSWER: When a heating oil aboveground storage tank (AST) (considered to include basement tanks) is removed from service for any reason other than immediate repair or replace¬ment, Wis. Admin. Code § Comm 10.351 provides that either (a) the tank and all connected piping, including the vent and fill piping, shall be emptied, cleaned and removed from the premises, or (b) the following procedure shall be observed: 1. The tank and all connected piping shall be emptied and purged of all vapors. A person who is under contract with the owner to remove a heating oil AST or to place a heating oil AST out of service shall comply with these requirements. Certified personnel are not required for tank cleaning and tank removal at one- and two-family dwellings (aboveground or in basements). The owner is responsible for compliance if the owner does not engage a contractor to perform these tasks. The employment of certified personnel is recommended to insure that all proper procedures are followed, that tank disposal is done correctly and that appropriate documentation can be obtained to satisfy buyers and lenders. The owner shall provide written notice to the current heating oil vendor within seven days after removing the heating oil AST or placing it out of service. If there is a scheduled delivery in less than seven days, notification may be given verbally provided it is followed by written notification within seven days after verbal notification. • All closed ASTs not immediately removed from the site shall have the word “CLOSED” and the date of final closure permanently marked on the exterior tank wall, at least 3 feet above grade, with lettering at least 3 inches high. 3.) Commissions - Miscellaneous Commission Issues QUESTION: The broker has two agents licensed under the firm in their names. One agent wants her checks paid to a corporation that she is part of and that corporation, besides the agent, also has a broker’s license. Can the broker pay commission to the corporation if it is not under the brokerage? The second agent has an LLC. That LLC does not have a license. Can the broker pay commission to that LLC? Would she have to get a license for that LLC? Would both agents -- if they want to be paid commission to their respective companies -- have to have those companies’ licenses under the brokerage? The question suggests two differing types of evaluation, depending upon the intent of these agents, their companies and the brokerage. Do the agents intend to create an entity for liability, tax or other reasons that will be licensed under the brokerage or do they intend to create an assignment of commission, such as done in a commission assignment loan, to an unlicensed entity? The other side of the coin is the policies the brokerage may wish to establish regarding agent/entity practice and commission assignments. In order for an agent to incorporate him or herself, or create a one-person LLC or some other business entity, the agent must either hold a broker's license or find another broker to fulfill the role of broker for the agent’s business entity practice (incorporated, LLC, etc.). The individual would become an officer of the corporation, a manager of an LLC, etc. and would be a business representative of the business entity. While Wis. Admin. Code § RL 17.03 permits a broker or sales person to be employed by only one broker employer at any time, for purposes of chapter RL 17, an officer of a corporation or a manager of an LLC, for example, is not an employe of the corporation. Thus, the “incorporated” individual broker could still be employed by another broker without violating chapter RL 17. If the LLC created is seeking affiliation with the overall brokerage company, for instance, then the agent creating the LLC must hold a broker license and obtain a business entity license for the LLC. The individual broker establishing the LLC would be a business representative of the business entity. Whether or not incorporating oneself or creating another business entity is the proper thing to do requires an independent analysis of the individual's financial and business position by the individual's own attorney and tax advisor. If the agent has created an LLC, corporation or other business entity for personal reasons but it is not intended to be part of the overall brokerage, then the agent may provide the brokerage with a written statement assigning commissions earned to the LLC, for example, so that the brokerage would pay the LLC rather than paying the agent directly. The brokerage would be wise to engage a private attorney to draft or review any commission assignment agreements that agents may wish to use in this type of situation. In addition, the brokerage should strongly encourage the agents to speak with their tax advisors. READ MORE ABOUT IT: 4.) General Real Estate - Foreclosure QUESTION: An agent had a listing that is subject to the bank approving a short sale. An offer was received but the lender has not decided whether or not to approve the offer. Meanwhile, the property went to a sheriff's sale and the bank purchased the property. The new lister wants to change the locks. Do they have to wait until the court approves the sheriff's sale? ANSWER: The bidder at sheriff’s sale does not take title/possession until judicial confirmation. Once the bidder becomes the owner, then they can change the locks, allow access for showings, etc. Until that time the seller retains possession and control of the property. However, it is possible, depending on the terms and conditions of the mortgage, for a lender to secure a property. For example, if the property is vacant, a receiver or asset manager might be appointed to secure the property. This would be subject to the terms of the mortgage between the owner and the bank and is independent of the result of the sheriff’s sale. 5.) Advertising - Fair Housing QUESTION: The broker was just contacted by a local church, asking her to advertise in the church newsletter for a fee. Is this allowed, due to it being a religious organization? ANSWER: The broker’s advertisement needs to comply with Wis. Admin. Code § RL 24.04 and Article 12 of the Code of Ethic, as with all advertising. When advertising in a church or any religious publication, however, the broker also should be careful to also abide by the principles of fair housing. Limiting ads to publications that are distributed to a very selected audience may violate fair housing law. For instance, if you advertise only in a publication catering to older persons, you may be discriminating against families with children. Brokers should avoid strategies that target less than the whole market: Thus, the broker may advertise in the church newsletter but would be wise to also advertise in other church or religious newsletters, and/or to also advertise in a wide range of publications reaching various groups of consumers so as to not give the appearance that the one religion is being targeted as the preferred group of potential buyers. Debbi Conrad |