Just before sitting down to write this month’s “Best of the Legal Hotline” article, I finished reading the “Hunger Games” trilogy. Avoiding any spoilers, one question posed by Peeta is, “real or not real?” This question got me thinking about legal hotline callers who ask a question assuming the answer is based on a regulation or law when in fact the answer is established by contract, office policy or possibly tradition. So this month’s article relates to the question of “regulation or not regulation?”
Real estate practice is regulated in myriad ways: Wisconsin statutes, administrative code rules, federal law, contracts, office policies and the Code of Ethics. Oftentimes these controlling frameworks overlap; in other instances, how you practice real estate is not based on actual regulation but instead on agency contracts, myths, office policy or participation in an MLS.
No holiday or winter evictions: not regulation
A tenant has a month-to-month lease. The landlord gave notice to the tenant to end the tenancy, but the tenant says it is illegal to evict a tenant near the holidays or at any time in the winter. How should the landlord proceed?
This scenario actually involves two related concerns: one is the landlord’s choice to not continue the month-to-month tenancy, and the second is when the landlord could begin eviction action in the event the tenant refuses to vacate. Wis. Stat Ch. 704 sets forth the process for a landlord to give a month-to-month tenant notice to terminate the tenancy. The landlord’s notice will be effective at the end of the next full rental period. If the tenant refuses to vacate, the landlord would need to commence an eviction action. There is no statewide prohibition against evicting tenants during the winter months or during the holiday season. The landlord may refer to legal counsel to inquire as to local ordinances, local customs and local court calendars that may limit when an eviction action may be commenced. Practically, if the court is not scheduling hearings during or close to the holidays, the landlord may have to delay the commencement of the eviction action.
Listing protection and protected buyers: not regulation
A broker is working with a potential seller who wants to modify line 61 of the WB-1 Residential Listing Contract Exclusive Right to Sell. The seller wants the extension period to be six months. Can line 61 be modified to reflect this request? Other agents who may have shown the property would expect that any buyer would be protected for one year.
Listing protection and protected buyer status is based on the terms and conditions of the WB listing agreements — not license law or regulation. On a case-by-case basis, the listing contract may be modified by agreement of the seller and listing broker because the extension of listing provisions relate to the contractual relationship between the listing broker and the seller, not regulation. Prior to modifying the listing, the listing broker may wish to consider the potential implications for cooperative commissions.
For examples of unique commission implications, the broker may obtain more information on the interplay between the listing compensation and cooperative commissions in “The 3 P’s of Commission; Procuring Cause, Protected Buyers and Procurement,” in the November 2013 issue of Wisconsin Real Estate Magazine online at www.wra.org/WREM/Nov13/Hotline.
Procuring cause: not regulation
A broker worked with a buyer on a commercial deal where the property was listed by another REALTOR® broker. The cooperating broker was procuring cause of the sale, but at the closing, no cooperative commission was paid. During the transaction, the listing broker said he would work with the cooperating broker. The listing broker then has to pay the commission, correct?
Broker-to-broker compensation may not be assumed because there is no statutory obligation for a listing broker to pay commission. The REALTOR® Code of Ethics distinguishes cooperation from compensation:
Article 3
REALTORS® shall cooperate with other brokers except when cooperation is not in the client’s best interest. The obligation to cooperate does not include the obligation to share commissions, fees, or to otherwise compensate another broker. (Amended 1/95)
Therefore a cooperating broker’s expectation of commission is based on what, if any, commission has been offered by the listing broker. In a commercial transaction where the property is not in the MLS, there is no MLS offer of compensation. Procuring cause is the MLS standard of performance to earn the MLS offer of compensation; it is not based on statutes or regulation. Even if the cooperating broker was involved in the uninterrupted series of events that resulted in the sale of the property to the buyer, with the procuring cause standard of performance, if the listing broker did not offer compensation in the MLS, there was no offer of compensation. Before providing brokerage services, know what you will be paid. For more information about non-MLS transactions and commission, see the January 2002 Legal Update, “Getting Paid Outside the MLS,” at www.wra.org/LU0201.
Buyer's three-day right to rescind the offer: not regulation
A broker wrote an offer to purchase with no contingencies for a buyer. The seller accepted and delivered the offer for binding acceptance. The buyer called the next day and said he wanted to withdraw the offer because he decided he didn’t want the property and has a three-day right to rescind. How should the broker proceed?
Wis. Stat. § 423.201 provides for a three-day right of rescission in consumer approval transactions. However, the statute specifically excludes transactions for the sale and lease of real estate. The broker may refer the buyer to the terms of the offer, the default provisions and legal counsel as necessary. The applicable text from Wis. Stat. § 423.201 states:
“423.201 Definition. In this subchapter:
(1) 'Consumer approval transaction' means a consumer transaction other than a sale or lease or listing for sale of real property or a sale of goods at auction that:
(a) Is initiated by face-to-face solicitation ...”
Agency disclosure: regulation and not regulation
The offer to purchase is completed by the cooperating agent saying who they work for on lines 1 and 2. Is it required to give the listing broker a copy of the Broker Disclosure to Customers form for the listing broker’s file?
Possibly a trick question — regulation and not regulation are both correct answers to this question. Under Wisconsin real estate law, the cooperating agent is required to provide a Broker Disclosure to Customers form and obtain the customer’s signature in residential transactions.
Likewise the agent drafting an offer is required at the time of drafting to confirm the agency relationship to the buyer in the offer. Giving proper agency disclosure to customers is required prior to starting negotiations with a person that you do not have an agency agreement with.
A licensee working with a buyer-customer must provide a written agency disclosure statement to the buyer prior to negotiations. Negotiations, simply stated, would include acting as an intermediary, drafting approved forms and presenting approved forms. Therefore, a subagent or an agent of the seller would be responsible to provide the buyer-customer with a copy of the Broker Disclosure to Customers form at the latest prior to drafting the offer to purchase.
What is not required by license law is providing the listing agent a copy of the Broker Disclosure to Customers form. Although Wisconsin’s licensing laws do not specifically address this type of policy, NAR’s Code of Ethics in Standard of Practice 3-5 state that subagents must provide listing agents with all pertinent facts relating to the transaction. This may include providing a copy of the Broker Disclosure to Customers form to the listing broker.
Tracy Rucka is Director of Professional Standards and Practices for the WRA.