Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - May 5, 2008 IMPACT OF DRL FORMS EMERGENCY RULE Effective April 16, 2008 a new emergency rule from the Department of Regulation and Licensing regulates the use of approved forms for real estate practice. The purpose of the emergency rule is to prohibit the altering of Department-approved forms in a manner such that blank lines containing inserted provisions are placed between provisions of the approved form text in such a manner as to create the appearance and implication that they are approved by the Department. In other words, extra provisions or extra blank lines may not be inserted between the numbered lines of the Department-approved forms. The end result is that Department-approved forms may not be substantively altered and that additional lines may not be added to the forms. The emergency rule does not change the ability to use the blank lines provided in the approved forms or to attach an addendum as authorized under § RL 16.06(4) and (5). This new rule does impact some of the WRA's DRL forms, specifically the WB3, WB4, WB5, WB6 and the old WB36. These forms have the sex offender language added on the last page as unnumbered lines. The new revised WB-36 forms are currently available and many of the others are currently being revised by the Department and are expected to be available in the upcoming months. All of the forms revised by the Department have the sex offender registry notice included in the numbered lines.
1.) Commissions - Miscellaneous Commission Issues QUESTION: An agent has been working on a short sale for over the past month. The bank has had a copy of the listing contract since the beginning that clearly states the commission. The agent has provided them everything they've asked for in a timely manner and gone above and beyond to facilitate the short sale. The property is due to close on April 30. Late yesterday, the bank contacted the agent and announced that the short sale had been approved but that they've cut the commission. They've also arbitrarily lined out fees charged by the title company on the HUD without any discussion with them. As a result, they are basically holding the agent hostage to the successful closing of the transaction. They've also known the title company's fees for more than two weeks and yet they purposely waited until the 11th hour to make it an issue. If the agent doesn't agree to the commission cut, the bank is threatening to put the buyer and seller at risk by disallowing the transaction. Had they disclosed up front in writing that commission would not exceed "x," that might be a different story, but this isn't right. Does the agent have any options? ANSWER: Dealing with short sales is precarious because there are
many pitfalls that may result in no closing or a closing that does not
include the payment of the real estate commission. The agent cannot
allow the fact that their commissions are not being paid in full to
stop a transfer or closing. Unfortunately, there is little the agent
can do to stop a lender from conditioning their approval of the short
sale on the reduction of the commission. The agent may wish to amend
their listing contact with the seller to provide that "X" amount of the
commission will be paid at closing and the remaining commission will be
paid after closing. The agent may require the seller to provide a
promissory note for the remaining commission due. However, this
arrangement would arguably need to be disclosed to the lender to comply
with Wis. Admin. Code § RL 24.07(4), which requires written
disclosure of side deals to lenders. 2.) Commissions - Referral Fees QUESTION: Re: Broker with a referral agreement with another office. The agent has left the office. What happens to the payment of the referral fee? ANSWER: Pursuant to Wis. Stat. § 452.14(f), an agent receives commission or referral fees from the employing broker. The payment of such fees is determined by the terms and conditions of the agent's independent contractor agreement with the broker. The agent's expectation of fees after termination is also determined by the independent contractor agreement. The terms and conditions of the referral agreement will
determine who is obligated to pay or who is to receive a referral fee
and under what circumstances. The broker may review the referral
agreement to determine the applicable standards for this referral fee. 3.) Fair Housing - Americans with Disabilities Act (ADA) QUESTION: Is the broker's office address of record required to be ADA compliant, or can the address of record be the broker's home with client and staff meetings conducted at off-site, ADA compliant locations? ANSWER: The Americans with Disabilities Act (ADA) insures that businesses that provide goods and services to the public are accessible to people with disabilities. The ADA requires accessibility at public accommodations. Places of public accommodation include a facility whose operation affect commerce and fall within the statutory categories of public accommodation. Real estate offices are classified as service establishments so a broker's office or home office are places of public accommodation if it is a location where services are provided to the public, in other words, a place where business is conducted. The home office need not be ADA compliant only if it is just a place where the agent works on the telephone and computer, and not a location where the agent meets with clients and customers. Creating accessibility may require modifications or the
removal of barriers when removal is "readily achievable." When a place
of public accommodation is located in a home, the portions of the home
used for the office are covered by ADA, even if those portions are also
used for residential purposes. ADA coverage applies not only to the
office area, but also includes an accessible route from the sidewalk,
through the doorway, through the hallway leading to the office, and to
other portions of the home, such as restrooms, that are used by clients
and customers. 4.) General Real Estate - Condominiums QUESTION: The agent is representing the buyer who has an accepted condominium offer. The buyer received a partial set of condominium disclosures on April 25, and the remaining disclosures on April 30. The buyer has to rescind offer due to a restriction in the condominium rules and regulations regarding her dog's breed and asked the agent to draft a notice. The agent filled out a WB-41 stating, "Buyer acknowledges receipt of the condominium disclosures on April 30, 2008. In accordance with Wis. Stat. § 703.33(4), the buyer hereby rescinds the offer to purchase." Is this enough to release the buyer from the contract and have her earnest money returned? Or should the agent also prepare a cancellation agreement and mutual release (CAMR) to disburse the $2,000 in earnest money that the buyer has already paid? ANSWER: The agent is properly providing the WB-41 notice with
regard to the condominium documents, but would be wise to also prepare
a CAMR to address the release of the parties from the contract and the
disbursement of the earnest money. 5.) Listing Contracts - Co-Listings QUESTION: The broker has a friend she works with, who also is a broker and owns her own company. Can they list a home together? ANSWER: The broker should first check to see whether this would violate the rules of any MLS or listing service the brokers intend to use. A co-listing may be prepared with one contract signed by the seller and both brokers or with each broker having their own listing contract. An agreement between brokers regarding their respective responsibilities should also be created. This agreement establishes the respective duties, obligations, responsibilities, costs, etc. between the two brokers and indicates how commission will be divided. It is important to protect the seller from paying any potential double commission. 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 |