Wisconsin REALTORS® Association - Legal Hotline Hottips
Legal Hottips - November 16, 2009 Fannie Mae Announces Deed for Lease™ Program To participate in the program, borrowers must live in the home as their primary residence and must be released from any subordinate liens on the property. Tenants of borrowers in this circumstance may also be eligible for leases under the program. Leases under the new program may be up to 12 months, with the possibility of term renewal or month-to-month extensions after that period. For additional information about the Deed for Lease Program, including full details on program eligibility, visit https://www.efanniemae.com/sf/servicing/d4l/. 1.) Mortgage Banking/Finance - General Finance From NAR's soon-to-be-revised Q & A on the tax credit extension: “8. As a repeat buyer, am I required to sell my current home or can I keep it and use it as rental or other purpose? READ MORE ABOUT IT: 2.) Offer to Purchase - Inspection Contingency QUESTION: The accepted offer to purchase has an inspection contingency that provides that “the seller shall not have the right to cure.” After the inspection, the buyers decide that they would rather have the seller cure the defects rather than ask for a credit. An amendment was prepared asking for the items to be cured by the seller. The listing agent said the seller can’t cure them whether they want to or not. The listing agent feels that since the offer says the seller does not have the right to cure, that they cannot cure any defects, even if the buyers are asking them to in an amendment. Can the seller agree to cure the defects and sign the amendment, even if the offer was written with no right to cure? ANSWER: Requesting an amendment is different than, and independent from, giving a notice of defects. The standard WB-14 Residential Condominium Offer to Purchase inspection contingency specifically states that a proposed amendment does not satisfy the notice requirement. The right to cure provision in the inspection contingency describes the process to be followed by the seller in response to a notice of defects – it is not an overall limitation on the seller’s rights. The buyer may propose a solution outside of the notice of defects/right to cure procedure stated on the inspection contingency by asking the seller, for example, to repair or replace specific items or to provide a monetary credit. It is the seller’s choice whether to agree to the amendment or not. If not, and if there is still time left in the home inspection contingency, the buyer can give a notice of defects that will make the offer null and void per lines 339-340 of the WB-14. 3.) Commissions - Miscellaneous Commission Issues QUESTION: The broker listed an apartment building and the owner has a non-contingent offer that is scheduled to close November 30th. Last week the owner told the broker that his partners will not approve the sale and therefore he can’t proceed. The broker also understands that the seller may be in the process refinancing the property - probably with the intention of holding the property. On November 5th, the broker filed a Notice of Intent to Claim Broker Lien. How soon can the broker file the Notice of Broker Lien? ANSWER: The good news is that brokers engaged in commercial transactions are able to use the statutory broker lien law to protect their interests in commissions. The bad news is the requirements to perfect the broker lien are somewhat involved. Also, there are different timelines for giving notices and recording and delivering documentation to perfect commission liens, depending on whether the commercial transaction involves a sales, buyer agency, lease listing or property management situation. Given the complexity and stringent requirements under Wis. Stat. § 779.32, the lien statute, as well as potential counter-claims for slander of title, it is best to seek legal counsel to assist in the process of filing the lien. 4.) Office Management - General Office Management QUESTION: Re: Worker’s compensation. Is a broker/company required to have worker’s compensation for agents? ANSWER: The Wisconsin Worker’s Compensation Act requires most employers to maintain worker’s compensation insurance for all workers classified as employees. Covered employers include every employer who usually employs three or more employees or who has paid wages of $500 or more per calendar quarter. Generally speaking, all real estate brokers, salespeople and personal assistants working for a broker/company are considered employees for worker’s compensation purposes. The Department of Workforce Development (DWD) maintains that all real estate agents working for a broker/company are employees because of the broker/company’s supervisory duties. The DWD’s interpretation of the relationship between a broker/company and its agents appears online at www.dwd.state.wi.us/wc/employers/realestate.htm. Wis. Stat. § 102.07(8) provides that every independent contractor is an employee for purposes of workers' compensation - with one exception. If an independent contractor maintains a separate business with his or her own office, materials and facilities, holds a federal employer identification number, and meets the other seven criteria listed in the statutes, the employer will not be responsible for providing workers' compensation for this person. While it may seem that there are some real estate agents operating on such a truly independent, almost free-lance basis, the DWD has taken the position the all real estate licensees working for a broker are employees for purposes of worker’s compensation. Accordingly, any brokers seeking to take the position that their sales staff are independent contractors for worker’s compensation purposes may wish to confirm that all the criteria of the exception have been met, and get a formal opinion from a tax attorney or one familiar with this law regarding the status of the broker’s sales force for purposes of worker's compensation, before not paying for workers' compensation insurance for independent contractor salespeople. Personal assistants, both unlicensed and licensed, are also classified as employees for purposes of worker’s compensation law, provided they are hired with the knowledge of the broker/company. Broker/employers cannot deduct worker’s compensation payments or premiums from their agents or other personnel per Wis. Stat. § 102.16(3). Employers without worker’s compensation insurance are subject to benefit reimbursement and penalties. For more information, contact the DWD Worker’s Compensation Division at (608) 266-1340 or online at http://www.dwd.state.wi.us/wc/employers/default.htm. 5.) General Real Estate - Condominiums QUESTION: The seller accepted an offer on his 2nd floor condominium unit which has a basement. Nothing adverse was found during the inspection, but radon was found in the basement, presumably coming from the sump pump which is owned by the condominium association. The buyer delivered a proposed amendment to the seller whereby the seller would hire a qualified person to undertake mitigation and submit any receipts and a lien waiver to the buyer at least three days before closing. The seller does not own the sump and has no authority to make any alterations to the building in order to comply with this proposal. He contacted the condominium association president who has agreed to address the problem, but there will need to be condominium meetings, bids taken, etc. This will not happen before the closing date set by the buyer and the seller has no control over who the association hires to get the job done. Is the buyer asking the seller to do something potentially illegal since the sump does not belong to him? Inasmuch as the buyer is asking the seller to act on something over which the seller has no control can the buyer then cancel out of the contract on the basis of his amendment? ANSWER: The buyer may request radon mitigation. If, however, the basement is a limited common element, the condominium association, not the seller personally, would have the authority to complete mitigation. The seller has properly provided the results of the radon test to the condominium association and they intend to address the matter. Depending on the timing, the seller may not be able to sign the buyer’s offered amendment knowing the work would not be performed within the time requested by the buyer. The seller may offer an alternative amendment indicating what the condominium association plans to do. It is difficult for the seller to promise much in such an amendment and the buyer may wish to directly contact the condominium association. If the parties cannot reach an agreement the original testing contingency provisions may be implemented.
Debbi Conrad |