Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - October 12, 2009 EPA Publishes Guidelines for Meth Lab Cleanup The Environmental Protection Agency has issued guidance for cleanup of methamphetamine labs that have become disclosure problem for real estate agents. The EPA’s Voluntary Guidelines for Methamphetamine Laboratory Cleanup is based on a review of the best available science and practices for cleanup. The Guide also includes best practices for specific items or materials, sampling procedures and technical resources. Meth lab cleanup has been problematic for real estate agents and home buyers who worry about what standards were used to clean up homes before they are returned to the market. FHA Issues Flood Insurance Reminder Read the Mortgage Letter at http://www.hud.gov/offices/adm/hudclips/letters/mortgagee/files/09-37ml.doc. 1.) Offer to Purchase - Amendments The buyers and sellers may amend the offer to purchase after the original closing date has passed. The closing date in an offer is not the same as a contract termination date, such as the termination date in a listing contract. If this had been a listing contract, then the listing agent would have been correct. With an offer to purchase, however, the co-broke is correct because the amendment to extend the closing date need not be executed before the original closing date. All transaction documents should always reflect the actual agreement and the current dates. Parties should always indicate the actual date that they sign to avoid allegations of fraud. 2.) Offer to Purchase - Financing Contingency QUESTION: In the WB-11 Residential Offer to Purchase the Financing Contingency on lines 167-168 states that the buyer's Financing Contingency is satisfied upon delivery of a written loan commitment (even if subject to conditions). If the commitment is subject to a satisfactory appraisal (a condition), is the contingency indeed satisfied upon delivery of the written commitment that includes that condition? What happens if the appraisal is not satisfactory and the buyer cannot obtain a loan with the same terms in the offer? ANSWER: If the loan commitment is delivered to the seller with ANY condition, then the buyer has satisfied the Financing Contingency and has effectively created a cash deal. The offer to purchase is between the buyer and the seller and the Financing Contingency of the WB-11 sets the terms of their agreement. If the buyer provides the loan commitment, even if subject to conditions, the buyer has waived financing. If the buyer provides the seller the loan commitment and the loan commitment is subject to an appraisal and the property does not appraise out, then the buyer is still contractually obligated to buy the property even though the loan he thought he was getting has fallen through. If this situation occurred, the seller could claim that the buyer breached the terms of the contract and sue for specific performance or damages. The offer is between the buyer and the seller and does not include the lender – the terms of the loan commitment are not incorporated into the offer. The offer never had an appraisal contingency but the loan was contingent on the appraisal. There are a couple of ways to avoid this problem: 1) include an appraisal contingency in the offer [an optional Appraisal Contingency will be included in the new WB-11] or 2) provide more time for the buyer's loan commitment since the appraisal is often the last step for the lender. 3.) Liability - Post-Closing Disputes QUESTION: If a broker is being sued in small claims court, can the broker file a counter-claim suit for the legal cost of the defense? ANSWER: The following is a great resource regarding Small Claims Court: http://www.wicourts.gov/about/pubs/circuit/docs/smallclaims.pdf. This resource specifically discusses counter-claims, use of an attorney and the monies a party may receive if he or she wins. Below is an excerpt regarding the winner recovering costs. However, the broker should consult an attorney regarding all of these issues. Please note that attorney fees cannot be recovered unless the party wins and the attorney actually appears in court on the party’s behalf. “Can I recover my costs? 4.) Fair Housing - Miscellaneous QUESTION: An offer has been written on a condominium unit where dogs over 15 lbs. are not allowed. The offer has a contingency for written authorization from condominium association for a “service dog (Labrador Retriever weighing approximately 70 lbs.) to accompany buyers on the purchased premises and related common areas.” The buyers have no apparent disabilities. The listing agent is aware that there are emotional needs that may require a service animal. Would it be proper for the listing agent to request a letter from buyers’ doctor for proof of disability and also proof of training for the service animal? If buyers submit both, is the association legally bound to give the requested authorization? Or may they still deny the request? ANSWER: The listing agent should advise the seller and/or the condominium association to contact their attorney to advise them on how to proceed and whether it is permissible or legal to deny the request. Generally under Wisconsin law, the dog would have to have certification papers from a school approved by the Wisconsin Department of Workforce Development for training assistance animals. Wis. Stat. § 106.50(2r)(bm) provides, “Animals assisting persons with disabilities. 1. If an individual's vision, hearing or mobility is impaired, it is discrimination for a person to refuse to rent or sell housing to the individual, cause the eviction of the individual from housing, require extra compensation from an individual as a condition of continued residence in housing or engage in the harassment of the individual because he or she keeps an animal that is specially trained to lead or assist the individual with impaired vision, hearing or mobility if all of the following apply: This situation, however, may be controlled by federal law. Under federal law pertaining to reasonable accommodations, if a person with disabilities provides documentation that he or she has a physical or psychiatric disability that substantially limits a major life activity and that because of the person’s disability a companion animal is necessary to enable the person to equally enjoy the unit, the companion animal generally must be allowed. This requires documentation of the both the disability and the need for the accommodation. The buyers, however, need not disclose the details of the disability nor provide a detailed medical history. A detailed discussion of the federal law requirements is found at http://www.usdoj.gov/crt/housing/jointstatement_ra.php. 5.) Offer to Purchase - Cancellation and Mutual Release QUESTION: An agent has an accepted offer on a commercial property subject to lender approval (short sale). The seller and the buyer agreed to extend the deadline for lender approval to October 27, 2009. Since this is a rather long time away, the buyer would like to keep looking for another property. Assuming the buyer finds another property, what is the best way to cancel the accepted offer and get the earnest money returned? The buyer has a financing contingency in the offer so if the buyer were to get an accepted offer on another property before lender approval on the first offer, he would not qualify for the financing on the first offer. Would that be would be an option? ANSWER: Pursuant to line 219 of the WB-15 Commercial Offer to Purchase, both the seller and the buyer have a duty to exercise good faith and due diligence to complete the offer. Therefore, undertaking any act (for example, obtaining an accepted offer on another property) knowing that that act will cause the current offer to fail, may be considered to be a breach of contract. The agent cannot advise the buyer on “how to” get out of a contract. Rather, if that is the intent of the buyer, the buyer should be referred to legal counsel for advice. Additionally, the cooperating agent may have a duty to disclose this information to the listing broker and the seller as information suggesting the possibility of a material adverse fact (information that indicates that a party to a transaction is not able to or does not intend to meet his or her obligations under a contract or agreement made concerning the transaction). One option may be for the buyer may attempt to negotiate an agreement with the seller for a cancellation of the contract. Debbi Conrad |