Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - March 24,
2008 DRL DISCIPLINE: DON'T DO THIS! In this favorite Legal Hotline Hottips feature, we periodically check on the discipline imposed by the DRL Division of Enforcement and report on the behavior and activities that every licensee should avoid. Knowing what behaviors are attracting the attention of the DRL and what penalties are being imposed will allow REALTORS® to model their practice to avoid these situations. Failure to Properly Maintain Trust Accounts and
Safeguard Client Funds . PENALTY IMPOSED: Failure to Disclose Interest as Buyer in Offer . PENALTY IMPOSED: 1.) Commissions - Procuring Cause QUESTION: If a person saw a house with one company and they then go to another company to see the property again and write an offer under buyer agency, can this be done or would the agent who originally showed the property be procuring cause? ANSWER: The issue in this question is procuring cause: who caused the buyer to make the offer that resulted in the sale of the property? There is no one act which determines procuring cause - it can only be answered by a full, knowledgeable consideration of all the facts of the case. If the brokers cannot negotiate an acceptable settlement, the dispute should be submitted to the local association for mediation or arbitration. Arbitration Panels will consider whether, under the circumstances and in accord with local custom and practice, the broker made reasonable efforts to develop and maintain an ongoing relationship with the purchaser. Did the first cooperating broker actively maintain ongoing contact with the purchaser or, did the broker's inactivity, or perceived inactivity, cause the purchaser to reasonably conclude that the broker had lost interest or disengaged from the transaction (abandonment). In other instances, a purchaser, despite reasonable efforts by the broker to maintain ongoing contact, may seek assistance from another broker. The panel will want to consider why the purchaser "abandoned" the first broker and whether the broker engaged in conduct which caused the purchaser to terminate the relationship (estrangement). This can be caused, among other things, by words or actions. Panels will want to consider whether such conduct caused a break in the series of events leading to the transaction and whether the successful transaction was actually brought about through the initiation of a separate, subsequent series of events by the second cooperating broker. READ MORE ABOUT IT: 2.) Offer to Purchase - Confidentiality QUESTION: A buyer that would like to write an offer and remain anonymous - can this be done and how? ANSWER: Under the general principles of agency law, an agent can act for an unidentified principal. In such cases, it is generally inferred that both the agent and the unidentified principal are parties to the contract. The agent and the other party, however, can agree in the contract that the unidentified principal is the real party. This would arguably permit a buyer's agent, upon proper authorization from the buyer in a power of attorney or some other written format, to execute an offer to purchase on behalf of the buyer who would be referenced only as the unidentified principal. Wis. Stat. §§ 706.02 & 706.03, however, cast substantial doubt on whether this practice would be valid in Wisconsin. Section 706.03(1) states that, "A conveyance signed by one purporting to act as agent for another shall be ineffective as against the purported principal unless such agent was expressly authorized, and unless the authorizing principal is identified as such in the conveyance or in the form of signature or acknowledgment." The Wisconsin courts have interpreted this to require that the authorizing principal must be identified in the text of the offer, deed or other conveyance, or in the signature block or acknowledgment section of the conveyance. Section 706.02(1) also requires that all parties be identified in order for a conveyance such as an offer or deed to be valid. Consequently, an agent who signs an offer as "agent for unidentified principal" risks being held personally liable on the contract. In other words, if the buyer skips to Rio, the agent becomes the proud new owner of the property. There also is a risk that the contract will be found invalid for lack of mutuality, that is, there is no real buyer who is entering into an agreement with the seller. The buyer may then lose the property. Alternatively, the buyer could find a person to enter into an offer as "straw man and/or assigns." At closing, the offer could be assigned to the buyer who would then take title in his or her own name. The straw man and the buyer may wish to have an underlying agreement stating the straw man's promise to assign the offer to the buyer at closing and perhaps the buyer's promise to protect the straw man from liability. A second alternative is for the straw man to enter into an offer to purchase in his or her own name and then enter into a second offer to purchase whereby he or she would deed the property to the buyer immediately following the closing with the seller. In both of these alternatives, it generally is not advisable for the agent to be the straw man because there is a substantial risk of liability. The straw man may be forced to purchase the property even if the buyer has backed out of the deal. If the buyer is willing to reveal his or her identity
after the seller accepts the offer, a purchase offer may be written
with the buyer to be named upon the seller's acceptance. Another idea
is to draft an offer to sell with the seller signing first without
knowing the buyer's identify. In these cases, the agent could draft
these offers as a subagent under the new agency law's confidentiality
provisions. A buyer agency would not be necessary. 3.) Office Management - Independent Practice QUESTION: The broker is in the process of bringing in an agent who has run her own brokerage. That broker has a number of listings, the majority of which would be brought with the broker to the new company without any objections from the clients. However, there are some that do not want to make the transition. What are the options for the brokerage? What are the rights of the broker to the listing after she closes her company? ANSWER: When an individual has a broker's license and is working as a broker/salesperson under another broker, Wis. Admin. Code § RL 17.03(1) permits the broker/salesperson to conduct some independent practice. To practice independently under this rule, the broker/salesperson must have the written consent of the employing broker and must avoid conflicts of interest. In addition, the broker/salesperson may not employ other licensees in this independent practice. Where a broker/salesperson conducts independent practice, care should be taken that all of the normal aspects of a brokerage are provided for. The employing broker should have no responsibility for the independent practice if the broker/salesperson establishes the operation as clearly independent. This independent practice vehicle could be used for the agent to finish out those listings where the clients do not want to make the change over to another company. The agent's brokerage and the corporation she operates under do not cease to exist when the agent comes over to the other company. That corporation continues to be in existence and to have a broker's license until the corporation dissolves, which logically would not occur at least until all the listings and offers still within that company have been completed or transferred to the new company. READ MORE ABOUT IT: 4.) Offer to Purchase - Dates and Deadlines QUESTION: Inspection Contingency - How are the days computed for purposes of compliance with this contingency? ANSWER: Lines 140-144 of the WB-11 provide the answer: "Deadlines expressed as a number of 'days' from an event, such as acceptance, are calculated by excluding the day the event occurred and by counting subsequent calendar days. The deadline expires at midnight on the last day. Deadlines expressed as a number of 'business days' exclude Saturdays, Sundays, any legal public holiday under Wisconsin or Federal law, and any other day designated by the President such that the postal service does not receive registered mail or make regular deliveries on that day." Stop Predatory Lending! This Wisconsin REALTORS® Association Best of the Legal Hotline service is provided for you by the WRA's Legal Affairs Department. The service should be considered a general statement of applicable legal principles. Given this format, it is impossible to fully address all potential legal issues which might apply in any particular situation. A determination of any individual's legal rights in a transaction can only be obtained after complete analysis of the law and its applicability to the particular fact situation. Please contact the WRA Legal Hotline if additional information is needed, or private counsel, if legal advice is needed. Thank you for using the Wisconsin REALTORS® Association Best of the Legal Hotline service. Debbi Conrad |