Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - May 27, 2008 1.) Offer to Purchase - Inspection Contingency Per the terms of the WB-11 Residential Offer to Purchase home inspection contingency, if the offer was accepted with no right to cure and a notice of defects, listing the items to which the buyer objects is delivered with a copy of the inspector's report, then the offer to purchase is null and void. However, there is a distinction between a notice and an amendment. The offer to purchase provides on lines 303-304 that a proposed amendment is not a notice of defects. The broker drafting the document has created an internal inconsistency by using an amendment that says it is a notice of defects. Per the offer, the buyer waives the right to give a notice of defects if it is not provided within the time allowed for the home inspection. The buyer may, however, offer an amendment at any time to change the terms of the offer. The listing agent should present the amendment to the
seller, but cannot make a legal determination about the effect of the
document - the agent should refer the parties to their attorneys if
they need legal interpretations and opinions. If the attorneys say it
is an amendment the seller may agree to the terms and conditions or
reject the amendment. If the seller does not agree, the parties will
continue with their accepted offer. If the attorneys say it is a notice
of defects, the offer to purchase would be null and void because the
seller did not have a right to cure. 2.) Landlord/Tenants - Termination of Leases QUESTION: The broker has a commercial rental property. The tenant owes a great deal of back rent. The tenant was taken to the hospital and expects to be there a few months. The unit is a mess; there are beer cans estimated in the thousands, cartons and a few personal items. The tenant was given a 5-day notice to quit or pay, which was hand-delivered by his daughter to the hospital. It was also posted on the entry door and a voice mail message was left on the tenant's cell phone. In addition, there is a water leak in the unit which has soaked mounds of paper. Unknown to the broker, he has been living in the unit without an occupancy permit. The tenant handled local art work for people and some have contacted the broker wanting to get in the unit to get their work. They do not have a list of items, so have no proof which items are theirs. The broker has photographed the area. The broker needs to get in there to start clean up. Does the broker have to publish a notice or retain personal items for 30 days? It is so filthy that the broker is afraid that rodents and bugs will infest other parts of the building. Please advise. ANSWER: The agent may wish to consult an attorney to review the paperwork and situation to advise specifically if, in their opinion, the tenant has departed the premises giving the agent the legal right to proceed with the storage of the personal items. In the absence of inconsistent provisions in the lease, a landlord has the right to store the property left on the premises by a departed tenant per Wis. Stat. § 704.05(5). The property may be stored on or off the premises. The landlord will have a lien on the property for the actual and reasonable costs of such removal and storage; or, if stored by landlord, for the actual and reasonable value of storage. The landlord's lien is superior to any security interest of a creditor of the tenant. The following procedures must be followed: 1. The landlord must give notice of the storage to the tenant within ten days after the storage charges commence. Notice may be given personally or by ordinary mail to the tenant's last known address. 2. The notice shall state the daily storage charges, and may not include any costs of damages to the premises or present or future rent. 3. The landlord must give notice of his intent to dispose of the property. If the tenant or a secured party fails to redeem the property within 30 days following such notice, the landlord may sell the property by public or private sale or other appropriate means. Notice may be given personally or by ordinary mail to the tenant's last known address. 4. The landlord must hold the proceeds of sale (less costs of sale and storage charges) for 60 days after the sale. If the net proceeds are not claimed within that time, the landlord must send them to the Wisconsin Department of Administration for use in homeless assistance programs. These rules apply in the absence of any inconsistent
provisions in the lease. Thus, the landlord and tenant may agree to an
alternative lien agreement concerning the rights and duties for storage
and disposition of the tenant's property. Such agreement should clearly
state whether net sale proceeds are payable to the State, the tenant or
landlord. This lien agreement must appear in NONSTANDARD RENTAL
PROVISIONS in residential leases or rental agreements. 3.) Offer to Purchase - Financing Contingency QUESTION: What happens if the buyers deliver a loan commitment before the deadline, but it is contingent upon sale of buyers' house? ANSWER: Because the term "loan commitment" is not defined as a
"firm" commitment in the WB-11 Residential Offer to Purchase, a loan
commitment that contains contingencies arguably satisfies the financing
contingency in the Offer. Additionally, in view of lines 208-210, which
state that "if Buyer qualifies for . . . financing acceptable to Buyer,
Buyer will deliver . . . a copy of the written loan commitment to
Seller," it is arguable that if the buyers deliver any loan commitment
to the seller, even a loan commitment containing contingencies, the
buyers have determined that the financing is acceptable and, thus, have
waived the financing contingency. The buyers, therefore, should
understand that, by delivering this loan commitment to the seller, the
buyers may be legally obligated to purchase the property even if the
lender does not make the loan. The sellers may consult with their
attorney to discuss claims against the buyers if they fail to close. 4.) Offer to Purchase - Secondary Offers QUESTION: A property has a primary and a secondary offer, which are both subject to sale. A third offer has now come in that the seller would like to move into primary position. The third offer will be accepted by the seller as a secondary offer. Who needs to receive notice? ANSWER: First, the seller should give a written bump notice to the primary buyer. The bump notice must be delivered using the delivery methods authorized on the first page of the offer. Not only must there be proper delivery, but a second standard must also be met: actual receipt. "Actual receipt" generally means that the buyer has the written notice in his hands, regardless of whether it came by personal delivery, mail, or fax. It may be advisable to provide that mail is not an appropriate means of delivering a bump clause notice because it may take a long time, delaying the process. The primary buyer then has the ability to waive their home sale contingency (and whatever else was agreed upon in line 284 of the WB-11 residential offer) within the number of hours provided in line 286. If the primary buyer does this, they remain primary. If not, the offer becomes null and void. When the first offer becomes then null and void, then the seller may give written notice to the third buyer (whose offer should have been accepted as a secondary offer by then) that their offer is now primary. The second offer may be left in place as a secondary offer. Any secondary buyer's rights arise solely from the language of the secondary offer. The secondary buyer normally is not given the right to be advised when the first buyer has received the bump clause notice from the seller nor to know the specifics of the bump clause procedure provided in the first offer. In the latter case, licensees would be prohibited from disclosing this information by the Wis. Admin. Code § RL 24.12 confidentiality of offers rule. The secondary buyer typically can do nothing but wait for notice from the seller that the secondary offer has been made primary. Although it may appear to be clear that the offer is no
longer enforceable, the seller needs to be sure that the first buyer
does not retain some sort of claim with respect to the first offer
based on failure to follow procedure or some other event that has
happened during the offer process. This assurance can best be obtained
if the parties execute a cancellation agreement and mutual release
(CAMR). If the parties refuse to sign a CAMR, the seller may obtain an
attorney's opinion that the offer has terminated before accepting
another offer as primary. 5.) Commissions - Referral Fees QUESTION: An agent used to work for Company A and has left and only holds a sales license and is not with a broker at this time. He would like to sit in open houses and knows he cannot write offers. What can the licensee do when sitting in open houses? Can the agent receive referral fees? ANSWER: Wis. Stat. § 452.19 permits a broker to pay referral fees and finders fees to other Wisconsin licensees as long as that person's license is active, regardless of the fact that the person holds a salesperson's license (rather than a broker's license). The fact that the person is not currently employed by a broker is not relevant. Pursuant to Wis. Stat. § 452.14(3)(f), any referral fee received by an employed salesperson (whether licensed as a broker or a salesperson) in connection with a real estate transaction may be received by the salesperson only from the salesperson's employing broker. A non-employed or inactive salesperson, however, can make a referral and receive a fee. It may be prudent practice to ask for a copy of an agent's license before entering into an agreement for a paid referral. The agent must have a valid, current license - he or she must complete the continuing education requirements and pay the renewal fee each biennium to keep his or her salesperson's license current, or must have an inactive license with the DRL per Wis. Stat. § 452.12(6). It is not necessary that the agent be a local Board or WRA member. In regards to the open house, a salesperson may not provide real estate services unless working underneath a licensed broker. Real estate/brokerage services would include hosting an open house and therefore would be prohibited. 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 |