We’ve had a lot of conversation about the newly revised WB-1 Residential Listing Contract. One of the best improvements to the WB-1 is in the Disclosure to Clients section, formerly called the Broker Disclosure to Clients.
The Disclosure to Clients section first lists the duties owed to all parties in a transaction and the duties owed to the client. It goes on to explain multiple representation and designated agency in a manner that is now more consumer-friendly and a bit easier to work with. The possible agency relationships between a brokerage firm and two or more clients in the same transaction did not change, but the selection method within the form is vastly improved. Rather than have each individual seller initial a blank line, which often had insufficient room for multiple parties, the sellers instead must agree to one selection and check the appropriate box. The check boxes eliminate the logistical challenge of trying to place multiple client initials on a line electronically.
A lot of these improvements were the product of the changes made to Chapter 452 of the Wisconsin Statutes. The impact of the improved Disclosure to Clients reaches farther than just the WB-1. Those clarifications and changes in terminology also affect the agency disclosure forms.
The following forms also were updated effective July 1 to reflect the new legislation:
- WRA-BDCL Disclosure to Clients.
- WRA-BDCU Disclosure to Customers.
- WRA-BDNC Disclosure to Non-Residential Customers.
Disclosure to clients
A sample copy of the revised Disclosure to Clients appears on pages 19-20. The WRA’s Disclosure to Clients form resembles the Broker Disclosure to Clients form used in the past: the name is changed because the new terminology refers to firms, not brokers. Lines 1-27 and 38-77 contain the updated disclosure language from Wis. Stat. § 452.135 that went into effect July 1, 2016. The definition of “adverse facts” and “material adverse facts” are on lines 28-37 for reference in those instances where the document is used on a free-standing basis, and lines 78-96 address confidential information. The information on lines 97-99 explains the firm’s obligation to ask for a signature.
A person, business or other party becomes a client when that party executes an agency agreement. Wis. Stat. § 452.135 requires that the prospective client also be provided with a written copy of the mandatory Disclosure to Clients disclosure statement when the client enters into an agency agreement, such as a listing or buyer agency, if the correct Disclosure to Clients language is not incorporated within the agency agreement. If the Disclosure to Clients is not included and the brokerage services shall be provided with regard to property primarily intended for use as a one- to four-family residential property, then per Wis. Stat. § 452.135(2)(b), the firm must also ask the client to sign to acknowledge receipt of the separate Disclosure to Clients.
Step by step
When asking a client to complete and sign the Disclosure to Clients, the agent should review the agency relationship choices with the client. The form includes mandatory disclosure language explaining multiple representation and subagency and a section where the clients check a box to indicate their selection of an agency representation model. The agent should be familiar with these models and stand ready to answer questions so clients may make informed decisions. When the client is ready, print the firm name on line 100. Prompt the client to check his or her agency representation preference at the top of the second page, write in any confidential or nonconfidential information, print his or her name(s) on line 103, and then sign and date the form at line 101.
Updating agency agreements
The Broker Disclosure to Clients language in the present state-approved listing contracts and buyer agency agreement forms became obsolete as of July 1, 2016. The new Disclosure to Clients should be used in conjunction with all new agency agreements as the interim measure that will ensure that all clients receive current information about agency and representation relationships.
The Disclosure to Clients form will need to be used with all listing contracts and other agency agreements that have not been revised to incorporate the new mandatory agency disclosure language required by Wis. Stat. § 452.135. At this point in time, the Disclosure to Clients has been incorporated into only the WB-1 Residential Listing Contract.
Starting July 1, 2016, zipForm will line out outdated agency disclosure language in these forms and automatically pair the agency agreement with a Disclosure to Clients form that can be executed concurrently with the agency agreement. Additional provisions will state, for example, “The Broker Disclosure to Clients provisions at lines xx-xx are deleted and have been replaced by the Disclosure to Clients form.” This will continue until the particular form is revised to incorporate the correct Disclosure to Clients language.
Beginning July 1, 2016, and until the REEB creates revised listing contracts and buyer agency agreements that include the new mandatory agency disclosure language for clients, Wisconsin REALTORS® using paper forms should follow a similar process and pair a new Disclosure to Clients form with every listing contract, buyer agency agreement and any other agency agreement used with clients. Again, the one exception to this is the WB-1 Residential Listing Contract with a mandatory use date of July 1, 2016, because it contains the new Disclosure to Clients language.
Clients should be asked to complete and sign the new Disclosure to Clients form, and then the firm and the client should modify and execute the agency agreement. The “Broker Disclosure to Clients” portions of the agency agreements will be obsolete so it is advisable to delete those provisions that are no longer applicable, either by lining them out in a manner so that the language is still legible and/or by including language in Additional Provisions removing the obsolete provisions by reference to their line numbers.
For example, if an agent was taking a vacant land listing, the following language may be inserted in the Additional Provisions section beginning at line 254 of the WB-3: “The Broker Disclosure to Clients provisions at lines 96-173 are deleted and have been replaced by the Disclosure to Clients form.” This same sentence may be used in other listings and agency agreements by plugging in the correct line numbers for that particular form. See the table in the update instructions at www.wra.org/BDClientInstructions for a list of agency agreements and line numbers.
Disclosure to clients resources
Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.