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Legal Hottips -  July 14, 2008
This Legal Hottips article may be reprinted only if it is reprinted in its entirety, including the disclaimers above and below the Hotline questions and answers. The Wisconsin REALTORS® Association Best of the Legal Hotline Service is an educational resource intended to keep the Association abreast of legal developments and concerns involving real estate practice in Wisconsin. We look forward to your input regarding the service, especially regarding the types of topics you would like covered.

1.) Contract Issues & Forms - Approved Forms
QUESTION:
Isn't the language in the "Delivery" definition section in the 2008 version of the WB-1 Residential Offer to Purchase and WB-36 Buyer Agency/Tenant Representation Agreement a bit confusing?

ANSWER:

The Delivery definition in these two contracts reads as follows:

DELIVERY: Delivery of documents or written notices related to this Listing may only be accomplished by:
1) giving the document or written notice personally to the party;
2) depositing the document or written notice postage or fees prepaid or charged to an account in the U.S. Mail or a commercial delivery system, addressed to the party, at the party's address (See lines 265, 271 and 277.);
3) electronically transmitting the document or written notice to the party's fax number (See lines 267, 273 and 279.); and,
4) as otherwise agreed in additional provisions on lines 242-250 or in an addendum to this Listing.

The appearance of the word "and" between the third and fourth parts of the definition may cause a bit of confusion and cause some to mistakenly conclude that it is not a consecutive list of delivery alternatives. While it may be argued that the definition is grammatically sound the way it is in the WB-1 and WB-36, the WRA, however, thought it was best to line out the word "and" on these forms, which will soon be done in ZipForm, to help make sure that no one gets the wrong idea. Members are encouraged to do the same with their paper forms as well. Future WRA printings of the WB-1 and WB-36 will also include this line-out. When the vacant land, farm, residential condominium and commercial listing contracts are finalized by the DRL over the coming months, the definition of delivery will have the word "or" between the third and fourth items - this will remove any possibility of misinterpretation.

REALTORS® should be very careful to do their jobs well, especially with regard to visual inspections, disclosure, advertising, real estate condition reports (RECR) and contingency provisions in the offer to purchase.

Visual Inspections
Wis. Admin. Code § RL 24.07(1)(b) provides, "Listing broker. When listing real estate and prior to execution of the listing contract, a licensee shall inspect the real estate ., and shall make inquiries of the seller on the condition of the structure, mechanical systems and other relevant aspects of the property as applicable. The licensee shall request that the seller provide a written response to the licensee's inquiry."

The inquiries to the seller regarding the property condition and the seller's written response generally take the form of the RECR. With respect to the listing broker's inspection of the property, no written record is required, but prudent listing brokers will require all listing agents to keep a written record of their observations, using a form like the WRA Listing/Selling Visual Inspection Form.

Seller's RECR
The listing agent should remember that the responsibility to complete a RECR falls solely upon the shoulders of the seller. If the seller wants specific guidance on what to disclose or not disclose, the agent should refer him to his attorney for legal advice. An agent who tells a seller how to answer RECR questions risks liability for the content thereof.

The prudent listing broker will make sure that the seller understands that if the seller makes a full and complete disclosure of the nature and extent of property conditions that may be seen by the buyer as a defect, those property conditions may not be listed as a defect under the inspection contingency in the offer to purchase. Defects which have been previously disclosed in sufficient detail so that the buyer is aware of the nature and extent thereof cannot be the reason for the voiding of the offer under the Inspection Contingency in the WB 11 Residential Offer to Purchase.

Disclosure of Material Adverse Facts
If a seller fails to disclose a defect and it is not disclosed elsewhere, the licensee must promptly disclose the defect in writing if it constitutes a material adverse fact. If the licensee, as a competent licensee knows that this fact: (1) has a significant adverse affect on the value of the property; (2) significantly reduces the structural integrity of the property; (3) presents a significant health risk to the occupants of the property; or (4) is information that indicates that a party to the transaction is not able to or does not intend to meet their obligations under the contract, then the issue constitutes an adverse fact. If a party to the transaction were to so indicate, or if a competent licensee would generally recognize that this fact is of such importance that it would affect a reasonable party's decision to enter into a contract or would affect the party's decision about the terms of the contract, the fact is both adverse and material. If this fact is both adverse and material, then Wis. Admin. Code § RL 24.07(2) requires a licensee to timely disclose the fact in writing to all parties to the transaction, even if the client would direct the licensee not to disclose. A sample material adverse fact disclosure letter is available in Legal Update 02.12, "2002 REALTOR® Highlights," online at www.wra.org/LU0212.

Attributing the Source
A Wisconsin licensee can be found liable to a buyer for inaccurate statements made by the broker which appear to the buyer to have been made from the broker's own personal knowledge. In Wisconsin, the law provides that an inexperienced buyer should be entitled to rely on the factual statements made by a professional. Accordingly, when a broker receives data from the seller, the city treasurer's office, or another third party and restates the information in the MLS data sheet or in other advertising as if it were fact, the broker may be responsible for the accuracy of the information. Accordingly, REALTORS® are recommended to specifically attribute data used in advertisements, such as acreage, square footage, and assessed values, to its source, and/or use general disclaimers. Disclaimers may not, however, provide certain and absolute protection in all cases.

Inspection Contingencies
The buyer should be equipped to investigate and inspect every aspect of the property. A diligent agent will give the buyer every opportunity to inspect and test by providing a full array of inspection and testing contingencies that the buyer may use. Contingencies can be provided and the buyer can decide later whether to employ them - the buyer does not have to use every contingency but it is better to have contingencies that the buyer decides not to use than to have to try to amend the offer to add something later on because there is no guaranty that the seller will agree. This is particularly true in cases where there is no RECR, for example, where the seller is exempt from the RECR.

The Guidelines for Real Estate Transfer Fee and Return, published by the Wisconsin Department of Revenue, indicate that the social security numbers of the both the grantor and grantee generally are required on the transfer return. There is an exception, however, for persons who are not United States citizens when they purchase property. If the buyer is not otherwise legally required to have a social security number (SS#) or an individual tax identification number (ITIN), the buyer may simply state "nonresident alien" in the SS# box on the transfer return. To determine whether a buyer needs to have a SS# or an ITIN, the buyer may wish to review the Internal Revenue Services (IRS) Publication 519, U.S. Tax Guide for Aliens, online at www.irs.gov/pub/irs-pdf/p519.pdf.

The statutory restrictions regarding limitations on property ownership by aliens (640 acres) are found in Wis. Stat. §§710.01-.02, online at http://www.legis.state.wi.us/statutes/Stat0710.pdf.

Addendum D provides for electronic document delivery. However, to create contracts by E- mail, an electronic consent for use of electronic documents, signatures and delivery first must be given by any consumer in the transaction -- over the internet or via e-mail. See the tips for using the "Consent for Use of Electronic Documents and Signatures in Consumer Real Estate Transactions" form and obtaining electronic consent from consumers in "E-Mail Delivery:
Working with Consumer Consents to Deliver Electronic Documents," in the May 2008 issue of the Wisconsin Real Estate Magazine, online at http://www.news.wra.org/story.asp?a=922.

Is That Your Final Fair Housing Answer?

The WRA Equal Opportunity in Housing Committee has updated and reformatted the "Is That Your Final Fair Housing Answer?" Power Point game show program originally developed by the Committee in 2002 for use in the fair housing portion of local association new member orientation. This game show program is now available on the WRA Web site as a PowerPoint and as a PDF of the individual slides. There are two versions of the game show available in each format: one to be used for a single player or when used informally with all questions open to the audience or a volunteer. A second version is designed for team play when the audience is divided into two groups that each play the game as a team. The single play and team play versions of this fair housing game show in the two different formats, as well as an instruction sheet and tips for presenting the game show before a group, are found online at http://www.wra.org/Resources/resource_pages/Fair_Housing_game.htm. This is a great program for local associations, companies or offices to use at meetings or fair housing observances, or for just quizzing yourself or others on your knowledge of fair housing law in Wisconsin. Check it out!

REALTORS® Safety Resources
Whether it's putting up signs along the highway or showing a house to a prospective buyer, it's important to be safe. Recognize the potential risks - both on the job and off. Use the resources below to stay safe on the job:

. Safety at the Office (PDF: 290KB)
. Safety Scenarios (PDF: 202KB)
. Showing and Managing Commercial Property (PDF: 119KB)

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
Director of Legal Affairs
Wisconsin REALTORS® Association
4801 Forest Run Road Suite 201
Madison, WI 53704
Phone: 608-241-2047; 800-279-1972
Fax: 608-242-2279

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