In a marketplace where sellers are upside down in a home, it may be difficult to have them see the benefits of spending money to utilize the services of an attorney, and I understand you may not always be able to persuade them. However, the fact that a seller or purchaser cannot afford legal counsel does not permit a real estate licensee to assume the role of an attorney.
In Wisconsin, the role of an attorney is saved for those that are licensed to practice law in Wisconsin and are a member of the Wisconsin State Bar. And if you do not meet those criteria, then repeat after me: “call an attorney.”
A real estate licensee’s role is to complete offers and other contracts for their clients and customers using preprinted forms. A real estate licensee can handle all of the negotiations between buyers and sellers as well as assist with arranging financing, inspections and closings. A real estate licensee cannot provide legal or tax advice, unless that real estate licensee is also an attorney.
A few examples of questions a real estate licensee cannot answer are:
1. How should I take title?
2. Is this a defect?
3. What are the tax consequences of a 1031 exchange?
Only an attorney can advise the parties as to their legal rights under the terms of the transaction documents.
A licensee should encourage a consumer to seek out the opinion of an attorney before a buyer submits an offer to a seller and before a seller accepts an offer from a buyer. While a real estate licensee can provide general explanation of the provisions of an approved form, the licensee is limited in giving their opinion or advice concerning a consumer’s legal rights under an offer.
Wis. Admin. Code § 16.05 provides licensees a reminder that a licensee may give a general explanation of the provisions in an approved form to the parties but not to give any advice or opinions as to the legal effects of a specific contract or conveyance, or as to the legal rights or obligations of the parties. In addition, all of the state-approved (WB) forms include a note relaying the licensee’s limited role involving the provisions of the offer to purchase.
The following excerpt is from lines 294-297 of the WB-11 Residential Offer to Purchase:
Brokers may provide a general explanation of the provisions of the offer but are prohibited by law from giving advice or opinions concerning your legal rights under this offer or how title should be taken at closing. An attorney should be consulted if legal advice is needed.
In the 2011 revisions to the state-approved offers, this entire note was placed in bold. This formatting modification allows the language to pop off the page, thus providing licensees the opportunity to highlight to the consumer the licensee’s limited role relating to the transaction documents and to encourage the consumer to seek out legal expertise.
Wis. Admin. Code RL § § 24.06 (1), “Licensees shall not engage in activities that constitute the unauthorized practice of law. (2) Licensees shall not discourage any person from retaining an attorney.”
In the early 1960s, by a 4-3 decision, the Supreme Court confirmed the real estate licensee’s limited right to practice law in a real estate transaction. In State ex rel. Reynolds v. Dinger in 1961, the Supreme Court held that when a licensee uses the state-approved forms to accomplish the intent of the consumer, it is the practice of law and provides a useful benefit to the public.
For almost 50 years, Dinger has afforded real estate licensees the right to draft state-approved forms on behalf of consumers. On June 1, 2010, the Wisconsin Supreme Court unanimously voted to adopt SCR Chapter 23 Regulation of Unauthorized Practice of Law, which included specific language allowing licensees to continue their ability to draft real estate contracts on behalf of consumers. The coupling of Dinger and SCR 23 solidifies the real estate licensee’s role in the transaction, but does not permit licensees to provide legal advice.
A great source for information regarding the role of attorneys and attorney referrals is the State Bar of Wisconsin. For real estate attorney referrals and other consumer information, visit www.legalexplorer.com.
As one last final reminder, the WRA Legal Hotline is a service provided exclusively for WRA members and their attorneys. WRA members pay for this service in their dues and this is not a service available to the public. WRA members should not refer their customers or clients to the WRA Hotline for information or guidance. The WRA Legal Hotline is a legal information service and not an attorney-client relationship and is not available for personal legal advice. In order to provide legal advice, a complete understanding of your practice and the particular transaction would be required and that is not possible in the Hotline format. For more information relating to the WRA Hotline services, go to www.wra.org/HotlineHelp.
Cori Lamont is Director of Brokerage Regulation and Licensing for the WRA.