Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - November 2, 2009 Wisconsin First in Nation to Administer New Rule to Protect Children during Renovation In 2008 the U.S. Environmental Protection Agency (EPA) published its Renovation, Repair and Painting (RRP) rule that regulates paint-disturbing work conducted in residential houses, apartments and child-occupied facilities such as schools and day-care centers built before 1978. This rule affects construction trades, rental property owners and property managers. Its goal is to protect young children from exposure to lead-dust hazards that can be created during renovation and other paint disturbances. Renovation is broadly defined to include many activities not normally considered to be renovations. The definition includes any activity that disturbs painted surfaces and includes most repair, remodeling, and maintenance activities, including painting and window replacement. Under the new Wisconsin DHS rules, renovators must provide the pamphlet “Renovate Right” to property owners and occupants before starting work. Beginning April 22, 2010, company certification will be required and at least one trained and certified renovator must oversee each regulated project. Renovators will be required to train untrained workers, ensure the use of lead-safe work practices and proper cleaning and conduct cleaning verification after each project to ensure that lead hazards are not left behind. 1.) Disclosure - Material Adverse Facts Real estate licensees are required to disclose material adverse facts and information suggesting material adverse facts. However, an appraiser’s opinion of value is not a fact and thus it does not have to be disclosed as a material adverse fact. If the seller or licensee is aware of negative comparables that led to the appraiser’s opinion of value, these may need to be disclosed if they were current and accurate and if either a buyer requested them or the licensee volunteered to provide them. Any factual information such as current price comparables used to arrive at appraised value may need to be disclosed by a licensee if they constitute material adverse facts. In addition, the determination of value in an appraisal might arguably be considered confidential information. On the other hand, a disclosure may be needed because of the apparent FHA policies with regard to appraisals. The FHA appraisal rules allow an appraisal to be used for six months. The intent is to minimize costs to subsequent buyers and there does not appear to be a prohibition against obtaining a new appraisal in a subsequent transaction. However, if there are FHA policies or other factors at work such that another FHA appraisal will not be made available for six months – and that low first appraisal may mean that FHA financing will not be an option for that transaction – that may need to be disclosed. 2.) Listing Contracts - Termination/Withdrawal QUESTION: An agent has a commercial listing and it expires in December. The seller called saying he double listed with another company. The agent asked the seller if the agent brought a buyer would the seller cancel the other listing and the seller said yes. This morning the seller called and said he will terminate the listing contract with the other company but he first wants the name of the buyer. How to proceed? ANSWER: A licensee who coaches a seller about how to terminate a listing or otherwise interferes with an existing listing contract may be accused of license law and ethical violations and sued in court for damages. It may be seen as interference with the other broker’s agency contract in violation of Article 16 of the Code of Ethics. A person who interferes with a contract may also be sued in civil court if damages can be proved. Such conduct also may be viewed as giving legal advice in violation of Wis. Admin. Code § RL 24.06(1) and Article 13 of the Code of Ethics. The following information is provided for the broker’s information only. The seller may be referred to legal counsel or to the other broker to discuss the seller’s rights and obligations per the other listing contract. The agent may also want to consult with an attorney before taking any further steps to help protect the agent from liability. Regardless of the type of listing, sellers have the power to revoke a listing contract at any time. The listing is a personal services contract which establishes a fiduciary relationship of trust and confidence with the broker. Because the contract reflects the agency relationship, the seller possesses the power to revoke or terminate the listing contract at any time. The seller (the principal) cannot be compelled to remain in the agency relationship with the broker (the agent) with whom the seller no longer wishes to work. The power to revoke or cancel the listing contract, however, must be distinguished from the right to do so. The seller always has the power to cancel the listing contract but may not have the right to declare an early termination to the listing. Canceling the listing before its expiration date will typically constitute a breach of the contract terms and thus violate the broker’s rights. The broker may then demand compensation for the damages sustained as a result of the early listing cancellation. The broker cannot, however, sue the seller for specific performance because of the agency relationship. These damages may include the costs of advertising, reimbursement for other expenses incurred by the broker in the process of listing and marketing the property, and the value of services rendered, assuming the broker can sufficiently prove this. Commission will be due only if the broker can prove that the broker had procured a buyer ready, willing and able to purchase the property upon the terms and conditions specified in the listing contract, or on terms otherwise acceptable to the seller. Note that some brokers are adding provisions to their listing contracts specifically describing a procedure for the early termination of the listing. If so, as long as the seller follows the contract provisions for termination, the seller may generally cancel the listing without fear of being charged for any damages. That is not the case, however, if the early termination provision calls for an early termination fee or other damages. Note also that the seller may cancel the listing without risk of damages if the termination is for cause. For example, if the listing broker fails to perform according to the terms of the listing contract or otherwise fails to act in good faith, then the seller will have the right, not just the power, to terminate the listing. Then the broker cannot claim any damages based upon the early termination because the broker was in breach of contract. The seller may terminate the listing by verbal notice (only for old listings -- written notice of termination is required under the 2008 listings), by written letter or notice, or by amendment of the listing contract (changing the expiration date to a current date). Upon receipt of such notice from the seller, the broker has no right to refuse the seller or exact any price or penalty for the cancellation unless originally stated in the listing contract (other than the action for damages discussed above). Once the seller has notified the broker that the listing is terminated, preferably in writing (written notice of termination is required under the 2008 listings), the other listing broker will have no further rights with respect to the listing, other than any listing protection or override rights it establishes with respect to properly qualified buyers. 3.) Advertising - Advertising Other Company's Listings QUESTION: Re: Web sites. Is it legal to advertise other offices’ listings on a broker’s web site? ANSWER: The advertising of another company’s listings on a broker’s web site will be subject to compliance with Wis. Admin. Code § RL 24.04, Article 12 of the Code of Ethics, company policy and MLS policy including the Internet Data Exchange (IDX) rules. IDX allows for the posting other company’s listings on a broker’s web site when IDX policy is followed. The text of Article 12 and § RL 24.04 are included below. The broker may ask the local MLS for the applicable IDX rules. Article 12 of the Code of Ethics provides, “REALTORS® shall be careful at all times to present a true picture in their advertising and representations to the public. REALTORS® shall also ensure that their professional status (e.g., broker, appraiser, property manager, etc.) or status as REALTORS® is clearly identifiable in any such advertising. (Amended 1/93)” Wis. Admin. Code § RL 24.04 Advertising. 4.) Contract Issues & Forms - Approved Forms QUESTION: Can lines 24-26 on the WB-11 Residential Offer to Purchase be stricken if the parties do not wish to authorize the use of U.S. Mail or commercial delivery services as a means for delivery of notices or documents? ANSWER: Yes, per Wis. Adm. Code § RL 16.06(3), a licensee may cross our provisions on approved forms to reflect the agreement of the parties, provided the deleted language remains legible. 5.) Contract Issues & Forms - Miscellaneous Contract Issues QUESTION: Re: Buyer’s social security number. The buyer is supposed to close tomorrow and she does not want to disclose her social security number. However, the closing agent is insisting that the buyer must disclose her social security number because it is required on the transfer return and they can’t close without it. What are the buyer’s rights? ANSWER: The register of deeds office will refuse to record a deed without a completed Wisconsin Real Estate Transfer Return. The return does require that the buyer provide a social security number. As a suggestion, the buyer may want to discuss the matter directly with the title company so the information is disclosed to a limited number to individuals. The printed receipts for the new returns only display the last four digits of the social security number to provide greater security. Finally, if the buyer refuses to provide the information, she should be directed to discuss the matter with her attorney and obtain personal legal advice on how to proceed. Debbi Conrad |