Duplex or condominium?
The broker is working with a buyer who has an accepted offer for one side of a duplex. The offer was drafted on a WB-11 Residential Offer to Purchase. The title company stated the unit is part of a two-unit condominium. What is the best way to proceed in this situation?
A condominium is defined as a property subject to a condominium declaration established under Chapter 703 of the Wisconsin Statutes. If there are two condominium units in the property, then an unofficial real estate term, “twindominum,” may be used to refer to a duplex held in condominium ownership. The form of ownership of a property is not identifiable by looking at the property. This situation highlights the value of conducting a search and hold or other investigation into how title is held prior to or at the time of listing and not relying on appearances.
If the unit is in fact a condominium, as discovered by the title company, the transaction and ownership are significantly different. When a condominium unit is sold, the statutes create requirements for disclosures, and there is a different state-approved offer: the WB-14 Residential Condominium Offer to Purchase. The availability of financing and insurance for the property are also distinct.
Although the buyer and seller have an accepted offer, the residential offer does not reflect the nature of condominium ownership. The WB-11 may be amended to add provisions regarding condominium ownership, buyer rescission rights and the seller’s obligation to provide condominium disclosure documents; and buyer rescission rights and other provisions might be copied from the WB-14 and added to the WB-11. The buyer should notify the lender and amend the loan application to reflect the condominium form of ownership. In addition, when applying for insurance, the buyer should inform the insurance provider that the unit is in a condominium.
Condominium documents
The seller signed a listing contract with a firm for the sale of their condominium unit. The listing agent provided the seller the list of statutory condominium documents that will need to be provided to the buyer. In addition, the listing agent educated the seller about possible condominium information for which a potential buyer may request. The seller requested the documents from the condominium association management, but it has been unresponsive. How can the seller move forward?
In essence, there are two sets of documents:
- The statutory required documents.
- The additional documents a buyer may request as a condition of the offer.
Per Wis. Stat. § 703.33(2m), the condominium association is required to provide the executive summary and statutory required documents, including the information required under Wis. Stat. § 703.33, within 10 days after a written request from the unit seller.
Associations that do not have an executive summary or other disclosure materials prepared may delay the sales process for any of the unit owners and possibly cause unit owners to lose buyers. The unit owner may educate the condominium association about the statutory requirements — the earlier in the transaction, the better. If the association refuses to provide documents, the seller may need to be referred to private legal counsel for questions relating to compliance with state law.
Right to rescind
A condominium unit has an accepted offer, but the buyer contacted the cooperating agent and expressed buyer’s remorse and indicated that the buyer wants out the deal. Within days of acceptance, the seller has not yet provided the condominium documents for review. What should be the next steps?
The buyer’s rescission rights under Wis. Stat. § 703.33(4) provide a buyer may rescind a condominium offer within five business days after receipt of all required condominium disclosure documents without stating any reason, or in essence, for any reason or no reason.
Wis. Stat. § 703.33(4)(a) states the following:
Any purchaser may at any time within 5 business days following receipt of all of the documents required under sub. (1) and within 5 business days following receipt of any amendment required under sub. (3m), rescind in writing a contract of sale without stating any reason and without any liability on his or her part.
The WB-14 provides that:
The Parties agree that the 5 business days begin upon the earlier of: (1) Buyer’s Actual Receipt of the disclosure materials, requested missing documents or material changes or (2) upon the deadline for Seller’s delivery of the disclosure materials or the requested missing documents.
Practically in this situation, given the timing, the buyer will have statutory rescission rights once the seller delivers the condominium disclosure documents. Therefore, the buyer may initiate a Cancellation Agreement and Mutual Release (CAMR) for the seller’s consideration. The seller would presumably sign the CAMR, understanding the buyer will have statutory rescission rights once the documents are delivered.
Waiver right to rescind
A buyer submitted an offer on a condominium unit. The seller countered, requiring the buyer submit a waiver of the buyer’s five-day right to rescind based on the condominium documents. Can a seller require a waiver or an affirmative notification of acceptance of documents from a potential buyer as a part of an offer?
Wis. Stat. § 703.33(6) plainly states:
Waiver of purchaser’s right. Rights of purchasers under this section may not be waived in the contract of sale and any attempt to waive those rights is void. However, notwithstanding sub. (4)(d), if the purchaser proceeds to closing, the purchaser’s right under this section to rescind is terminated.
The right to rescind is statutory and is for the buyer’s protection. A seller wishing to limit the amount of time for buyer rescission would timely deliver the condominium documents. If all the statutory disclosure documents are not delivered, the buyer may make a request in writing for the missing documents. This request thereby extends the amount of time the buyer has to rescind the offer. Therefore, delivering the documents by an authorized method with no missing documents will minimize the time the buyer has in which to rescind. Based on what the statute says, the only way the buyer’s right to rescind is terminated would be if the buyer did nothing to exercise those rights and proceeded to closing.
Material changes
The buyer has an accepted offer on a condominium and intends to use the condominium as a rental property. Prior to closing, the buyer learned that the condominium association changed the rules and regulations, limiting the use of units for owner occupancy only. How can the buyer proceed in this scenario?
Generally, there are three ways a buyer of a condominium unit has the right to rescind an offer. Rescission could be based upon review of condominium documents, an amended real estate condition report (RECR) or material changes to condominium disclosure materials provided by the seller. Once the buyer has received documentation from the seller, the buyer may review the materials to see if either Wis. Stat. § 709.05 or Wis. Stat. § 703.033 affords the buyer a rescission opportunity. The buyer in this transaction should be referred to private legal counsel to review the documents provided. Notwithstanding the applicability of these statutory provisions, the buyer and seller could, by mutual agreement, agree to amend the offer or cancel the offer in light of the new information.
Wis. Stat. § 703.33(3m) and § 703.33(4) address changes in condominium disclosure materials. If there is a material change to the disclosure materials, the buyer has a right to rescind the transaction.
703.33(3m) CHANGE IN MATERIAL FOLLOWING DELIVERY TO PURCHASER. Any material furnished under sub. (1) may not be changed or amended following delivery to a purchaser, if the change or amendment would affect materially the rights of the purchaser, without first obtaining approval of the purchaser. A copy of amendments shall be delivered promptly to the purchaser.
The buyer may discuss with their attorney whether the new prohibition on unit rental is a material change that allows the buyer to rescind the transaction within five days of receipt of the amendment.
Vacant land transaction
The listing agent has a seller who owns a vacant parcel of land, which is part of a condominium. What are the appropriate forms?
The Real Estate Examining Board (REEB) does not have a listing or offer form dedicated to vacant land condominiums. The REEB has suggested in such scenarios that real estate licensees use the state-approved WB form that requires the least amount of modifications. It is a matter of the licensee’s judgment as to which form best fits the individual circumstances.
WB forms may be modified to accomplish the intent of the buyer and/or seller. The WB-14 Residential Condominium Offer to Purchase form may be used and modified to address the vacant land nature of the transaction. Alternately, if a WB-13 Vacant Land Offer to Purchase is used, it would need to be modified to address the condominium nature of the transaction, including the correct legal description and the condominium disclosures — both mandatory and optional. Given the extent of disclosures and statutory provisions for the sale of a condominium, starting with the WB-14 may be more efficient. Also, using the WB-14 assures the buyer and the lender are aware of the form of ownership, statutory disclosures and the right to rescind, among other details.