Inside This Edition
Wisconsin REALTOR®
July 2001
Volume 17, Number 10
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Legal Matters |
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Beware of Trans 233 Regulations in Transactions
By Debbie Conrad
Wis. Admin. Code § Trans 233 regulates the division of land adjacent to state trunk highways, connecting highways, and service roads. Trans 233 represents the Department of Transportation’s (DOT) effort to maintain safe access and to control traffic flow upon state trunk highways and connecting highways.
Trans 233 establishes two different sets of building setbacks depending upon the nature of the highway to which the property is adjacent. On Wisconsin’s most well-traveled highways (as indicated on maps produced by the DOT), the building setback is either (1) 110 feet from the centerline of a state trunk highway, or (2) 50 feet from the outside of the nearest right-of-way line, whichever is furthest from the centerline.
For properties adjacent to less-traveled highways, the building setback is 15 feet. A slightly different test is applied when there is an applicable ordinance that allows structures or improvements to be placed closer to the right-of-way: the building setback is either (1) 100 feet from the centerline, (2) 42 feet from the nearer right-of-way line, or (3) the distance allowed under the ordinance, whichever is the most restrictive. Owners may also have to grant the DOT an easement for vision corners at highway intersections in order to provide an unobstructed view for motorists.
A land division, as defined in Trans 233, occurs any time the number of parcels in a given area is changed — combining parcels into a larger parcel or splitting a parcel into smaller parcels are both considered land divisions under these rules. Land divisions include subdivisions, certified survey maps (CSM), condominium plats, and deeds between adjoining landowners or that change the number of parcels, when the property is contiguous to the state trunk highway (STH) system. Land divisions that do not directly abut the STH system are considered abutting if the intervening property is owned by one or more of the persons who own the land being divided. Land divisions that abut or cross proposed STH corridors are also considered to be abutting and thus covered by the rules.
Trans 233 requires that the plat or other land division map must clearly show the boundaries of the setback area, and any existing structures or improvements (which are allowed to remain if they were lawfully placed in the setback area before the land division).
The plat or map also must include the following restriction: “No improvements or structures are allowed between the right-of-way line and the highway setback line. Improvements and structures include, but are not limited to, signs, parking areas, driveways, wells, septic systems, drainage facilities, buildings, and retaining walls. It is expressly intended that this restriction is for the benefit of the public as provided in section 236.293, Wisconsin Statutes, and shall be enforceable by the Wisconsin Department of Transportation or its assigns. Contact the Wisconsin Department of Transportation for more information. The phone number may be obtained by contacting the County Highway Department.”
Title companies may raise an exception on the title commitment whenever they are insuring a lot or parcel directly affected by a Trans 233 setback or any condominium unit when the condominium plat shows a Trans 233 setback. The title exception may refer to the building setback line, and the restriction against building within the setback area, as stated on the plat, map, or deed.
When asked to insure title to land that has been (since February 1, 1999) or is about to be divided by plat, CSM, or deed, or about to become condominium, the title company may require that either (1) the plat or map contain a DOT approval per rule Trans 233, or (2) a satisfactory affidavit from the surveyor who prepared the plat or map must be recorded, confirming either that the plat or map was submitted to DOT and no response was received from DOT within the 20 days specified in § Trans 233.03, or that no approval from DOT was required.
This process puts the burden on the surveyor to assure compliance with Trans 233, but the owner, attorney and broker may be involved with the land division and the plat or map. If DOT discovers that a map or document that is not in compliance with Trans 233 has been recorded, DOT will contact the owner and surveyor to ask for corrective action. If compliance is not forthcoming, DOT will, as is applicable, notify the county surveyor; complain to the Wisconsin Society of Land Surveyors, the Department of Regulation & Licensing (real estate brokers), and/or the State Bar (attorneys); or request prosecution from the District Attorney.
For more information about Trans 233, contact Bonnie Tripoli at 608/266-2372 or Ernie Peterson at 608/266-3589 at DOT, or go to
www.dot.state.wi.us/dtid/bhd/trans233.html
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Answers to your Questions About Megan’s Law
By Rick Staff
Several questions have arisen in regard to the Megan’s Law changes that took effect on June 1, 2001.
Some WRA members have asked if they must insert the notice language into the approved forms if they do not want to raise the issue. These members are concerned with “alarming” sellers or buyers. The answer is no.
This is because the disclosure duty arises when a buyer, seller, landlord or tenant would ask a broker about sex offenders in the area or about the sex offender registry. One option for licensees is to say nothing until they are asked and then provide the notice to the person asking the question.
However, the reason the language is being preprinted in the forms is that there is immunity from liability if the information is provided in a timely manner.
The risk of not disclosing in advance is that a salesperson may be asked about sex offenders in the area and the agent may say he or she does not have knowledge of any sex offenders in the area.
This is not a safe answer because the disclosure duty is based on the knowledge of everyone in the company. When asked, an agent must either distribute the notice or respond with the information known by all agents in the office in order to properly answer the question.
The second option is not practical and therefore the WRA’s Board of Directors has instructed staff to insert the notice into all agency agreements and agency disclosures.
Other members have asked what to do for transactions that began prior to the availability of the sex offender notice language. Should they amend the listing and the agency disclosures to include the new language?
Once again, it is legally acceptable to respond to a question either with the notice form or the information known by all the agents in the company.
To avoid the risk of an incomplete response to a sex offender question, brokers may deal with current transactions either by: 1) distributing the one-page sex offender disclosure form when a party asks questions; or 2) distribute the form to all parties in current transactions.
Amending the agency agreements or agency disclosures is not necessary if the notice is given in either manner described above.
Finally, some members have asked what the purpose of the Megan’s law disclosure in the listing contracts is? The Megan’s Law disclosure in the listing contracts serves two purposes.
First of all, a broker has the same disclosure duty to sellers as the broker has to tenants and buyers. The notice in the listing provides the broker immunity regarding disclosure to sellers.
Secondly, sellers have the same disclosure duties to buyers as a broker does.
The discussion of the language in the listing puts the seller on notice that the issue will be addressed in the offer. It also means the language in the offer will provide the seller immunity for disclosures regarding sex offenders, which the seller may otherwise be required to provide to the buyer.
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Best of the Legal Hotline
By Debbie Conrad & Tracy
Rucka
The following questions were recently asked of the Legal Hotline:
Forms Use
| Q. Can a licensee give a notice of defects on a fax cover sheet? |
| A. No, licensees are required to use Department of Regulation and Licensing approved forms when acting as an agent or a party in a real estate transaction. The WB-41 Notice Relating To Offer to Purchase is the appropriate form for giving the buyer’s notice of defects. Pursuant to the offer to purchase, a buyer wishing to give a notice of defects must list the defects identified in the inspection report to which they object. The notice and a copy of the inspector’s written inspection report must be submitted to the seller by the deadline stated in the offer.
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Bump Clause
| Q. Can a secondary offer that has a sale of buyer’s property contingency be used to bump a primary offer that is subject to the sale of buyer's property? |
| A. Yes, provided the secondary offer is a bona fide offer to purchase, the seller may give the primary buyer a bump notice. A bona fide offer is a legitimate offer from a serious third-party buyer, not a phony offer artificially created for the sole purpose of bumping the existing primary offer.
In the sale of buyer’s property contingency and the continued marketing provision on lines 278-286 of the WB-11 residential offer, line 282 states that “If Seller accepts a bona fide secondary offer, Seller may give written notice to the Buyer of acceptance.” The word “may” means that it is within sellers’ discretion whether or not they will trigger the bump clause in the first offer if a secondary offer is accepted. It does not matter whether the accepted secondary offer contains a sale of buyer’s property contingency, a bump clause, a financing contingency, and/or other contingencies - it only need be an accepted offer.
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| Q. If a buyer gives a notice to the seller advising that he or she has sold the buyer’s home but the buyer wants to keep the contingency in place to cover the closing of the home, can the seller still give a bump notice if the seller accepts a bona fide secondary offer to purchase? |
| A. The sale of buyer’s property contingency contains two components: (1) the sale and (2) the closing of the buyer’s property. Although the buyer can inform the seller that he or she has an accepted offer to purchase, this notice does not unilaterally transform the contingency into a closing contingency, nor does it remove the entire contingency. Such a change would require an amendment to the offer signed by both parties.
If the buyer gives notice that the buyer has an accepted offer on the buyer’s property and the seller then accepts a secondary offer, the seller may still give a bump notice to the primary buyer. The buyer would then have to remove the entire Sale of Buyer’s Property contingency and any other items included at line 283-284 of the WB-11 Residential Offer to Purchase if the buyer wanted to prevent the buyer’s offer from becoming null and void.
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Mortgage Fraud
| Q. Buyer was using a mortgage broker. In negotiations, the offer had been countered to cover about $2400 of closing credits and the purchase price was raised by the same $2400. Closing is in two days. Lender called yesterday and said Caller needs to draft a new offer just reflecting the higher purchase price and the credits. Is this legal? |
| A. It appears that the mortgage broker may be committing a fraud upon the secondary market - the $2,400 is phantom equity that does not really exist. The fact that a new offer is requested also signals that the originally-negotiated price would never be known to the secondary market.
Caller cannot participate in an act of fraud under Wis. Admin. Code § RL 24.085, which states: “No licensee shall draft or use any document which the licensee knows falsely portrays an interest in real estate.”
Caller may file a complaint with the Department of Financial Institutions in Madison at
www.wdfi.org
or call 608/261-9555. Caller may also alert the Federal Mortgage Fraud Task Force by contacting FBI Special Agent C. Todd Ratcliffe, 330 E. Kilbourn Ave., Suite 600, Milwaukee, WI 53202-6627; 414/276-4684.
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Buyer Agency
| Q. If a buyer initials a disclosure form stating that the agent is representing the buyer as a buyer’s agent, is this adequate to establish a buyer agency relationship? |
| A. No, the mere signing of a disclosure form does not create a buyer agency under real estate license law. Wis. Stat. § 452.135 requires that a broker have an agency agreement before providing any brokerage services. The WB-36 Buyer Agency/Tenant Representation Agreement is the appropriate DRL-approved form to create a buyer’s agency. This is not an issue to be taken lightly, as the DRL has recently disciplined real estate brokers for not properly using a WB-36 in buyer agency transactions.
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| Q. If an agent in office has a property listed and that seller ultimately becomes a buyer, is it mandatory that the buyer be represented under buyer agency? What about when dealing with a customer who is a relative, friend, or past business associate? |
| A. State statutes do not specifically dictate transactions in which a real estate licensee must act as a buyer agent. Under certain circumstances buyer agency may be the most appropriate form of agency, i.e. in transactions with family friends or business associates. Although not mandated by statute, office policy may require buyer agency in these types of transactions.
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Contingency Satisfaction
| Q. In order for a contingency to be satisfied, signatures were to be obtained and delivered to the buyer in a timely manner. However, the delivery of those signatures did not occur by the deadline given for fulfilling the contingency. Is the contract null and void? |
| A. The contract is not null and void; instead, it is no longer enforceable against the buyer. The buyer’s agreement was dependent upon the contingency being met. If the conditions of the contingency are not met, the buyer is no longer legally obligated to buy. The buyer may still proceed with the purchase if he or she wants to (it would be wise to amend the offer to confirm it, if that is the case). The seller, however, cannot force the buyer to proceed with the purchase of the property.
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Defect Disclosure
| Q. When a seller has home pre-inspected and inspection comes up with two defects and then a list of “repair items,” do the repair items have to be disclosed to potential buyers? |
| A. The seller’s disclosure responsibilities on the Real Estate Condition Report (RECR) are to disclose defects, defined as conditions “that would have a significant adverse effect on the value of the property; that would significantly impair the health or safety of future occupants of the property; or that if not repaired, removed or replaced would significantly shorten or adversely affect the expected normal life of the premises.”
If the seller has an inspection report that discloses two defects, the seller should complete an amended RECR or an amendment to the RECR that discloses the defects (and any measures taken to rectify the same). If the items listed on the inspection report as repairs do not fit the definition of a defect, then they need not be disclosed. Although the seller may provide copies of the inspection report to buyers or share the repair items with buyers, this is not required.
The ultimate goal is to have any defects disclosed to buyers. If a seller fails to disclose a defect, the licensee must timely disclose it to the parties in writing if it constitutes a material adverse fact.
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Listing Protection
| Q. Another agency listed a property. During the term of the listing, they showed a party the property. Caller then listed the property and the previous listing broker did not give a list of exclusions. The same party then contacted Caller and wrote an offer with Caller. Now the previous listing broker wants the entire commission. How to proceed? |
A. Buyers may be protected for listing protection in one of four ways. If (1) the buyer submitted a written offer to purchase or (2) if the seller was directly involved in discussions of the buyer’s potential contract terms, the listing protection is automatic and the first listing broker would not have been required to perform any additional steps to protect the buyer for the override period. If, during the term of the listing (3) the buyer attended an individual showing or (4) negotiated with a broker, the buyer will be protected only if the listing broker delivered the buyer’s name to the seller within three days of the expiration of the first listing contract. “Negotiated,” for these purposes, means that the buyer discussed the potential terms upon which the buyer acquired an interest in the property.
If the buyer is protected under the first listing, the first listing broker would then have, in essence, a one-party listing for protected buyers during the override period. Any offer the buyer writes must accordingly be presented to the seller by the first listing broker. The first listing broker will earn the listing commission if this offer is accepted and closes. See Legal Update 99.01 for further discussion of listing protection issues.
If a buyer attended an individual showing and did not submit an offer, and the seller was not directly involved in discussions of the buyer’s potential contract terms during the listing contract term, the buyer would not be protected unless named on a written list submitted to the seller no later than three days after termination of the listing.
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