Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - June 16,
2008 1.) Disclosure - Material Adverse Facts; Disclosure -
Mutual Mistake of Fact If an agent knows or is aware of information suggesting
the possibility of a material adverse fact, Wis. Admin. Code
§ RL 24.07(3) states that the agent will be practicing competently
if the agent makes timely written disclosure of the information
suggesting the material adverse fact to all parties to the transaction,
recommends the parties obtain expert assistance to inspect or
investigate for the possible material adverse fact, and, if directed by
the parties, draft appropriate inspection or investigation
contingencies. The duty to disclose has priority over any duty owed to
the agent's client. 2.) Offer to Purchase - Delivery QUESTION: Is there any liability entailed in being the recipient for delivery for a party in an offer to purchase? In particular, is there liability associated with being the buyer's recipient for delivery in the WB-14 Residential Condominium Offer to Purchase? ANSWER: When a broker agrees to use the broker's mailing address
or fax number as the destination for delivery to a party, the broker
accepts the responsibility to handle documents mailed or delivered to
the broker on behalf of the seller in a timely and professional manner.
The same may be said when the company or an agent is named as a party's
recipient for delivery. A broker's acceptance of these roles creates
new responsibilities on the part of the broker to make sure that
notices and other documents received on behalf of a party are promptly
and competently processed and presented to the party. Depending upon
the facts and circumstances, the broker typically must act swiftly
because the party often is required to give a quick response to the
other party. Arguably there may be some liability on the part of a
broker who fails to timely process and deliver critical materials. Agents wishing to avoid this sort of predicament should do as the court suggests in the Molepske opinion: do not be the buyer's recipient for delivery, or do so only with the understanding that documents delivered to them, particularly the condominium disclosure documents, must be immediately presented to the buyers. Agents who still wish to serve as the buyer's recipient for delivery in a condominium offer to purchase may wish to add language in additional provisions to help ensure that the buyer's Wis. Stat. § 703.33(4) rescission rights are not triggered until the buyer's actual receipt of the disclosure materials. Such a provision might state something to the effect of, "Buyer shall not be deemed to have received the Condominium Disclosures described on lines 81-94 until Buyer has actually, physically received the Condominium Disclosures, notwithstanding the provisions on lines 25-36 of the Offer." Agents in this situation would be well-advised to consult with private legal counsel regarding any such provision that they wish to insert in the WB-14 offer to help ensure maximum protection from risk of liability. 3.) Disclosure - Lead-Based Paint; Disclosure - Real Estate Condition Report QUESTION: Re: Listing a property that is held in a trust. The woman who owns the property is 96 years old and in a nursing home. Is a real estate condition report (RECR) and a lead-based paint (LBP) addendum required? ANSWER: All sellers subject to Wis. Stat. Chapter 709, whether broker assisted or FSBO, must complete a Chapter 709 RECR or risk rescission of the offer to purchase. Chapter 709 generally applies to all persons who transfer real estate containing one to four dwelling units, including condominium units, time share property, living quarters in a commercial property, etc. Chapter 709 does not apply to (1) personal representatives, trustees, conservators and other fiduciaries appointed by or subject to supervision by the court, but only if those persons have never occupied the property (Note this does not include powers of attorneys); (2) real estate which has not been inhabited, e.g. new construction; and (3) transfers exempt from the real estate transfer fee, e.g. between spouses, foreclosures, probate transfers, etc. (Note: this does not include sales of foreclosed properties). A seller can either (a) complete the RECR to the best of his or her knowledge, (b) retain a professional to provide an inspection report to be used as the basis for completing the RECR, (c) refuse to complete the RECR and sell "as is," risking buyer rescission, or (d) refuse to complete the RECR and sell "as is," refusing to accept any offers from buyers who do not waive their Chapter 709 rescission rights. Wis. Stat. § 709.08 allows a buyer to waive the right to receive a RECR and the right to rescind the offer based upon the content of the RECR. Buyers should be advised to confer with legal counsel before waiving any legal rights - REALTORS® cannot provide legal advice of this sort. However, even with those waivers, a seller may be obligated in certain situations, under common law, to disclose material defects that the buyer may not be able to discover (see the discussion of the Green Springs Farm v. Spring Green Associates Ltd Partnership case on page 9 of Legal Update 02.07, "Duty to Disclose," online at www.wra.org/LU0207). With respect to the federal LBP disclosure rule and
Addendum S, in cases where a trustee has been given authority to sell
target housing by the beneficiaries of the trust, the trustee would
have the responsibility to comply with the requirements of this rule.
Otherwise, the responsibility would rest with the beneficiaries of the
trust. 4.) Advertising - Miscellaneous Advertising Issues QUESTION: Re: Ethical marketing practices for brokers. A real estate brokerage has made up dozens and dozens of small signs (like the yard signs supporting a candidate during a political campaign) and blanketed them all over several municipalities, placing them at various intersections, right-of-ways, freeway entrances/exits, etc. to advertise their company and services. Certainly municipalities most likely have ordinances forbidding that type of blanket marketing and against the placing signs on other people's property without their permission, whether they choose to enforce the ordinances or not. With the extent of marketing this company has done with these signs, it is highly unlikely/impossible that permission was granted, and certainly not likely that permission would have been granted if the property owners had been asked. Is this broker conducting illegal marketing practices and does it violate the REALTOR® Code of Ethics? Does the broker have a legitimate complaint to get this other broker to stop this marketing practice? ANSWER: On its face this set of circumstances does not violate any specific article of the Code of Ethics. The licensee may contact the local municipalities to
inquire about the placement of signs and other marketing materials on
private property and in the public right-of-way. Such an inquiry and/or
a formal complaint may cause the local municipalities to demand that
the broker cease all marketing in such locations. Of course, this is
presuming the local municipalities in question have such
ordinances. 5.) Fair Housing - Advertising QUESTION: An apartment building has open stairways and there is a second floor unit. A family with young children is looking at it. It is somewhat of a safety hazard with the open stairways and a couple of balconies that are two stories up. Is it the broker's place to tell them whether or not it is safe for their children? ANSWER: The broker must tread lightly because he wants to make sure he is not representing or implying that families with young children are not welcome to live on the second floor. That would be a discrimination complaint waiting to happen. It is against federal and Wisconsin fair housing law to limit the floors on which families and children may live. The broker may politely point out in a general manner, not specific to children, the safety hazards of an open stairway on the second floor. It would be most prudent, however, to not mention it because the family may perceive adverse implications or innuendoes in even innocent statements and file a complaint. The agent's well-intentioned concern could be characterized as a subtle form of steering: the agent decides on behalf of the buyer that they need to be warned of this hazard. Unless the agent points out the safety concern to all potential tenants, it is best to not mention it. Real Estate Continuing Education/License Renewal
Deadlines Also please be reminded that REALTORS® need to
complete Quadrennial Ethics Training by December 31, 2008. The
quadrennial ethics training requirements are incorporated in the
2007-2008 CE Course 4 offered by the WRA. If you takeA free online
quadrennial ethics course also is available at online at http://rodomino.realtor.org/mempolweb.nsf/pages/quadrennialethicstrainingcourse.
The NAR online course may be customized for a residential or commercial
real estate emphasis. Learn how to Stage your Properties to Compete in the Market On August 8, 2008, Martha Webb will present a program "Positioning Properties to Compete in the Market" at the Kalahari Resort in Wisconsin Dells. Staging is receiving national attention as an established trend in real estate. Now is the time to develop the knowledge and skills to integrate staging into your business. This course is an in-depth study of the staging process designed to integrate staging, pricing and developing strategic marketing skills. Completion of this course qualifies as a one-day CRS Elective as well as the Certified Home Marketing Specialist designation (CHMS). For more information and to register for the Positioning Properties to Compete in the Market program, visit: www.wra.org/crscourses. 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 |