In January 2015, a new voluntary option became available in Wisconsin that permitted a Wisconsin firm, or an in-state licensee (ISL), to allow an out-of-state broker (OSL) to provide limited brokerage services in Wisconsin. Wis. Stat. § 452.137 allowed Wisconsin listing firms to either enter into a referral arrangement with an OSL or enter into a cooperative agreement with an OSL. Therefore, the ISL remains at the helm of the transaction while offering flexibility, if desired, to an ISL that is okay with an OSL participating in a transaction.
Since the passage of Wis. Stat. § 452.137, we learned the voluntary new option worked fine for the majority of those who utilize the cooperation. This cooperation was available to all transactions, residential and commercial.
A new but narrow opportunity
However, commercial practitioners indicated the current OSL law created one situation in which an ISL could arguably practice outside of the permitted Wisconsin laws because Wis. Stat. § 452.137 only allowed cooperation when the ISL has the property listed. This limitation exists when an OSL reaches out to an ISL who does not have a property listed. It is common for the OSL and OSL’s buyer or tenant to want to cooperate with someone other than the Wisconsin listing firm to ensure the OSL’s buyer/tenant has assistance of an expert in that specific market area, but not relying on the listing agent who is representing the seller.
Therefore, the WRA worked with legislators to create a new voluntary commercial option for ISLs who do not have a property listed but wish to cooperate with OSLs working with commercial buyers and tenants.
The legislation
This new voluntary option for ISLs is for those who want to cooperate with OSLs working with or representing a buyer/tenant, but in which the property is not listed by an ISL or the OSL wants to cooperate with someone other than the listing ISL. Basically, this voluntary option exists for when an OSL is working with a commercial buyer or tenant and the OSL wants to cooperate with an ISL.
Under this new provision of the law combined with current law, the following will be able to exist*:
- A Wisconsin firm that has a listing can enter into a WB-28 Cooperative Agreement with an OSL. This option is currently available under the law for all types of transactions.
- A Wisconsin firm that does not have a listing can enter into a commercial cooperative agreement with an OSL who has a buyer/tenant. This new provision of the law is limited to commercial transactions only.
* The Wisconsin firm can always choose to enter into a referral arrangement rather than cooperation.
Under this new commercial cooperation opportunity, all of the current OSL cooperation laws would apply. As a reminder of the current OSL parameters, see the following WRA publications:
The following provides a simple summary of the new law’s provisions:
- The new law is limited to Wisconsin commercial transactions. Under the law, commercial transactions are any property other than any real property containing one to four dwelling units or real property zoned for agricultural use. However, commercial transaction does not include any transaction concerning a dwelling unit that is a part of real property containing more than four dwelling units and that is being sold on a unit-by-unit basis.
- Creates a new, separate WB-commercial cooperative form.
- Each WB-commercial cooperative agreement will specify the property type, function, general geographic location, approximate size and functional limitations or geographic limitations on location of the buyer or tenant’s transaction project search.
- A separate WB-commercial cooperative form is required for each type of property.
- Require either the OSL or ISL to engage the buyer or tenant in a client relationship. Either the OSL or the ISL can enter into an agency agreement with the prospective buyer or tenant. The cooperative agreement shall acknowledge whether the OSL broker or ISL firm has the agency agreement. If the OSL broker has entered into the agency agreement with the prospective buyer or tenant, the OSL broker and the prospective buyer or tenant shall be considered to be a principal firm and client for purposes of this chapter, and the ISL firm shall be a subagent. When the ISL is the subagent, the ISL shall provide the OSL broker with a copy of the disclosure statement under Wis. Stat. § 452.135(2) to be given to the client. The OSL broker is not required to request that the client sign the statement. In summary as to agency:
The WB commercial cooperative agreement must acknowledge if the OSL or ISL has the client relationship.
If the OSL solely has the client relationship, the law acknowledges the ISL is a subagent of the OSL and the ISL must provide the OSL a Disclosure to Clients form to be given to the OSL’s client. The OSL is not required to request the client sign the Disclosure to Clients form.
- The OSL shall not negotiate with the seller or landlord unless authorized under the WB-commercial cooperative agreement. If a property is not listed with an ISL firm, the ISL must conduct all negotiations with the seller or landlord.
- The OSL shall not view or show commercial property for sale or lease without the ISL unless authorized under a WB commercial cooperative agreement. If the property is not listed with an ISL listing firm, the ISL must view the property with the OSL.
- The OSL shall not have contact with another ISL, another ISL’s seller or landlord unless otherwise agreed to in the WB commercial cooperative agreement.
Status
At this time, the Senate and Assembly have both passed 2017 SB 455 that, in addition to other practice changes, creates the new voluntary commercial option for ISLs who do not have a property listed but wish to cooperate with OSLs working with commercial buyers and tenants.
The bill is available at docs.legis.wisconsin.gov/2017/related/proposals/sb455.pdf and will be put forward to the governor’s desk for signature soon. Once signed by the governor, the OSL provision will be effective March 1, 2018. This slight delay is to allow the Real Estate Examining Board time to create the new WB commercial cooperative form.
We will continue to update you through WRA Legal Updates, LegalTalks videos and more.
Cori Lamont is Director of Corporate and Regulatory Affairs for the WRA.