Soon there will be an updated WB-36 Buyer Agency/Tenant Representation Agreement for buyer’s agents to use. What are the most important things real estate practitioners should know?

1. Split personality: the WB-36 Buyer Agency/Tenant Representation Agreement has had a commercial offspring!

Going forward, there are two different REEB-approved buyer agency/tenant representation agreements for Wisconsin buyer practitioners and tenant representatives to use: the WB-36 Buyer Agency/Tenant Representation Agreement and the WB-38 Commercial Buyer Agency/Tenant Representation Agreement. Either agreement may be used in any transaction regardless of the type of property or the type of property interest a buyer client or a tenant client may be looking for, despite the fact the WB-38 includes “commercial” in the title of the form and it was developed to facilitate commercial transactions. While the WB-36 may have been designed with a residential scenario in mind, it clearly is not limited in the preprinted provisions to residential property searches or transactions.
A careful review reveals that these two agreements are different, but the difference is based more in the style, layout and functional formatting and not necessarily the kind of property involved. These two agreements also share several similarities as far as core operational provisions and legally mandated features.

2. Two agreements: one set of use dates

The WB-36 Buyer Agency/Tenant Representation Agreement and the WB-38 Commercial Buyer Agency/Tenant Representation Agreement both have an optional use date of July 1, 2017, and a mandatory use date of October 1, 2017.
On or before October 1, real estate licensees should purge any of the old buyer agency agreements and embrace the new world where there is a choice when selecting a buyer agency or tenant representation agreement, just as there has been with the REEB-approved variety of listing contracts for many years. While the listings sort themselves out based on the type of property or property use, the buyer agency/tenant representation agreements may be used based on personal preference, firm policy, client needs or other considerations.

3. The WB-36: buyer or tenant or both 

Right out of the gate, the WB-36 presents the practitioner and the client with a choice to be made: will their relationship be buyer agency or tenant representation or both? If there is a distinct mission and the client is interested in purchasing a property such as a home and is not looking for a rental situation, then the choice may be very clear. This pair will strike “tenant’s representative” on line 1 and will complete the balance of the agreement except for the rental provisions on page 6, which will not apply.

On the other hand, if the client is looking for a property to rent or lease and is not interested in purchasing property, then this duo will strike “buyer’s agent” from line 1 and skip the purchase provisions on the first page and work with the rest of the agreement, paying particular attention to the rental provisions on page 6. These actions create an agency relationship where the firm is adopting the role of a tenant’s representative.

There also may be other situations where the client believes he is interested in only a purchase or only a lease but is not willing to entirely rule out the possibility of encountering an opportunity that might cause him to change his mind. In such a situation, the client, perhaps upon the suggestion of the broker, may think it best to strike nothing on line 1 of the WB-36 and complete both the purchase and rental portions of the WB-36. This will allow the broker to act as either a buyer’s agent or a tenant representative, as needed, as the client explores properties.

4. Commercial fluidity: from buyer to lessee and back

The WB-38 assumes that the client is not necessarily predisposed to a lease or a purchase but rather is more focused on the property the client is looking for in terms of function, utility, location and other criteria. Commercial practitioners report that their clients often are more interested in finding the property that best serves their needs and are far less concerned with whether that turns out to be a property that they buy or a space that is leased. This mindset is basically the model of the WB-38, which simply assumes that the firm will act as a buyer’s agent and/or tenant’s representative on an interchangeable basis as is needed throughout the property search and ensuing transaction and closing.

This is most clearly illustrated by the search guidelines on the first page of the WB-38 where the client may indicate what the client is looking for in terms of type of property, location, function, size and/or other criteria. This feature is not found in the WB-36, which, like its predecessor, only roughly indicates what property the client may wish to look for or acquire by indicating what is excluded from the agreement.

5. Disclosure to clients back where it belongs

The wait is over! Those who were frustrated with the need to provide a separate Disclosure to Clients document along with the buyer agency agreement in order to provide the legally mandated language may breathe a sigh of relief. The WB-36 and the WB-38 both include the legally required agency disclosure language as it is stated in the Wis. Stat. Chap. 452 revisions enacted in 2016. Having a current agency agreement with up-to-date provisions will bring an end to the lined-out language that has appeared in zipForm to preserve accuracy, albeit at the cost of a professional appearance.

6. Delivery dynamics 

The WB-36 and WB-38 have been brought into the modern era as far as delivery provisions and have the delivery options and provisions seen in the offers to purchase and other REEB-approved contracts. This will create an easy ability to choose electronic means of communications as well as other means of delivery. Email may be readily selected. Addendum D is done as far as buyer agency and tenant representation agreements!

7. Modernized WB-47 amendment keeps in step

Not unlike the recent revisions to the WB-42 Amendment to Listing Contract to make it more globally applicable to all sorts of the listing contracts, the WB-47 Amendment to Buyer Agency/Tenant Representation Agreement has been modified for use with any buyer agency or tenant representation agreement. There are more blank lines, there is a space for a client entity to sign, and the bottom of the form may be used to facilitate a termination of the agency agreement by the firm under the signature of the supervising broker. This is required in the WB-36 and the WB-38 just as it is in the listing contracts.

The WB-47 Amendment to Buyer Agency/Tenant Representation Agreement has an optional use date of July 1, 2017, and a mandatory use date of October 1, 2017. Thus it is being released together with the WB-36 and the WB-38 as a group of related and revised forms.

8. Compensation calculations

The compensation provisions of the WB-36 have been revamped and restated in a manner reminiscent of the WB-1 Residential Listing Contract. The client is reassured that he or she need not pay the firm’s fees if the owner or the owner’s agent pays the firm. Compensation is broken down into steps: what is the commission, how is it earned, when is it due and payable, and how is it calculated. There are separate compensation sections for purchase commission and lease commission as those may need to be computed in different ways. Stating the two different means of compensation separately should also make it easier for licensees and clients to understand what applies and when. These sections also explicitly state that commission is earned regardless if the property interest acquired falls within any price or rent range stated. 

The WB-38 echoes this strategy and includes separate sections and provisions for purchase commission and lease commission, once again with the reassurance that the client need not pay if the owner and/or owner’s agent does. The WB-38 also provides that an acquired property interest does not have to fall within the search guidelines, as well as in any price or rent range, in order to earn commission.

9. Excluded properties

The WB-36 Buyer Agency/Tenant Representation agreement Wisconsin practitioners have been working with over the past several years is clear enough in indicating that the WB-36, and the broker’s authority to act, apply to all properties except for those specifically excluded. The trouble was that there was one section with a group of blank lines where the client was to exclude anything and everything that did not belong in the agency agreement, including types of properties the client was not interested in, geographic limitations, specific properties protected under other agreements, particular properties where there has been prior negotiation and properties possibly owned by friends, family or neighbors. All of this was essentially lumped together on seven or eight blank lines.

The revised WB-36 and the WB-38 attempt to break this down and create small, separate subsections for different types of exclusions. Both forms have an excluded properties subsection prompting the client to indicate any limitations on the scope of the agreement with regard to geographic, property type and/or other limitations. The WB-36 has a subsection for Excluded Properties Subject to a Prior Agreement, in other words, protected properties. This subsection comes complete with a caution pointing out to the client the pitfalls of not excluding properties protected under other agency agreements. Clients thus may understand what they need to do to avoid possibly having to pay commission twice. Finally there is another subsection for Limited Excluded Properties for other specific properties excluded for reasons other than property protection. In the WB-38, there is only one subsection for any excluded properties.

All such excluded properties are outside the scope of the agreements and thus a purchase or lease of such excluded properties does not earn a commission.

10. Chapter 452 terminology 

The terminology throughout this form is modified to match the Wis. Stat. Chap. 452 revisions wherein a “Firm” means either a broker entity or a sole proprietor broker. 

All three forms may be found on the Department of Safety and Professional Services website and will be available from the WRA in mid-July.

Debbi Conrad is Senior Attorney and Director of Legal Affairs for the WRA.