Hot Hot Topics for Summer 2012

The hottest topics on the Legal Hotline this summer relate to several recent Wisconsin statutory changes and Administrative Code revisions; summaries of these hot topics follow for your review.


 Tracy Rucka  |    August 01, 2012
HotTopicsLRG

 Commercial Offer to Purchase

Mandatory use date July 1, 2012

The 2012 WB-15 Commercial Offer to Purchase mandatory use date was July 1, 2012. The updated offer reflects changes made in the other WB forms to create uniformity. In terms of customized features, the Proposed Use Contingency has been reorganized to address easements and restrictions, approvals, access and land use approvals, and a Map of the Property Contingency has been added as well. The March 2012 Legal Update discusses changes to the commercial offer in detail at www.wra.org/LU1203.

REEB 24 Rule Changes
Effective July 1, 2012

Although prompted by the need to bring the Wisconsin Administrative Code rules into compliance with changes to Wis. Stat. chapter 452 changes, the changes to chapter REEB 24 affect other areas that will change how brokers engage in daily real estate practice. The two most significant practice issues include (1) the requirement for brokers to obtain signatures on the Broker Disclosure to Customers and (2) how brokers must make disclosures and obtain consent regarding compensation, disclosure of interest and disclosure of licensure. 

REEB 24 revisions also create uniformity in application to both listing brokers and cooperating brokers, where historically they only applied to listing brokers. Other changes include new definitions for agency agreement, builder, party, principal broker and written proposal. The full text of Wis. Admin. Code chapter REEB 24 can be viewed at docs.legis.wisconsin.gov/code/admin_code/reeb/24.pdf.

Broker Disclosure to Customers Needs Signatures
Effective July 1, 2012

A broker cannot negotiate on behalf of a party that is a customer unless the broker first provides the Broker Disclosure to Customers. If the transaction is for a property with 1 to 4 dwelling units, the broker is required to ask for ‚Äúthe party‚Äôs signed acknowledgement‚ÄĚ ‚ÄĒ in other words, a signature. The old WRA Broker Disclosure to Customers form only asked for the customers‚Äô initials, so to comply with the new rule, brokers may:

  1. Use existing paper copies of the WRA Broker Disclosure to Customers form and ask customers to sign the form instead of only initialing it.
  2. Use the WRA Addendum to Broker Disclosure to Customers, which prompts the customer to sign and provides signature lines, along with the old form.
  3. Use the WRA’s revised Broker Disclosure to Customers form, available in both paper copies or on zipForm.

The WRA Addendum to Broker Disclosure to Customers is available on the WRA website at www.wra.org/FormsUpdate and is intended to allow brokers to use existing inventory of paper copies of the WRA Broker Disclosure to Customers.

§ REEB 24.05(5) Disclosure of Licensure

Beginning July 1, 2012, licensees acting as principals in a real estate transaction must, in writing, disclose their license status and intent to act in the transaction as a principal. The disclosure obligation itself has not changed ‚ÄĒ just the necessity to make the disclosure in writing changed. Note that this disclosure applies to all real estate transactions, including sales and rentals.

§ REEB 24.13 Drafting and Submission of Written Proposals

Many of the Wis. Admin. Code ¬ß REEB 24.13 rules were originally drafted addressing prompt presentation of offers and not necessarily all written proposals. ‚ÄúWritten proposal‚ÄĚ is now defined and means any written document provided by one party to another during the course of a transaction, including but not limited to, notices, offers, counter-offers, options, exchanges, rental agreements and amendments. Therefore licensees must not refuse to draft any written proposal unless contrary to the specific instruction of the other party, and licensees must promptly present all written proposals received by the client or customer.¬†

Some of the § Stat. 24.13 rules formerly applied only to the listing broker when engaged in the presentation of offers. Now the rules clearly apply to all licensees, whether working with buyers or sellers. For example, § REEB 24.13(4) now requires all licensees to promptly inform clients and customers whether the other party has accepted, rejected or countered a written proposal.

§ REEB 24.17(5) Duty to Cooperate with the Board and the Department

To assist in expediting the REEB complaint process, licensees and licensee applicants are required to respond to the REEB’s request for information within 30 days of the date of the request. Any broker receiving communication from the REEB should carefully read it and respond in a timely manner. Working with your legal counsel and/or errors and omissions insurance provider may also be appropriate.

Broker education 72 hours effective July 1, 2012

The education requirement to earn a broker’s license in Wisconsin increased from 36 to 72 hours. To earn a broker’s license under the prior education requirement of 36 hours, an applicant who completed the 36-hour education course before July 1, 2012, must pass the state exam and submit a completed application for a broker’s license no later than July 31, 2012 to the Department of Safety and Professional Services. Applicants who have not completed 36 hours of pre-license education prior to July 1, 2012 must complete 72 hours of pre-license education in order to obtain a real estate broker’s license, no matter when they submit an application.

For more information, see www.wra.org/Education/Careers/Broker/Wisconsin_Broker_Pre-License_Education.

REALTOR¬ģ Code of Ethics training

(Formerly titled Quadrennial Ethics training.) All REALTORS¬ģ are required to complete 2.5 hours of ethics training between January 1, 2008 and December 31, 2012, unless they completed the new member Code of Ethics orientation course during that time frame. All continuing members who joined the WRA before January 1, 2008 must comply with this requirement. Failure to do so is a membership violation, which may result in suspension and ultimately in termination of REALTOR¬ģ membership.
Any member who attended the WRA-sponsored 2011-2012 CE Course 4 ‚ÄĒ Business Ethics has met the NAR Code of Ethics training requirements. REALTORS¬ģ may use the ‚ÄúmyWRA‚ÄĚ function at www.wra.org/myWRA/myEducation/myEducation_Overview to see if they completed this course. REALTORS¬ģ attending continuing education provided by another sponsor must contact the sponsor to determine if the course meets NAR standards.¬†

For a schedule of classes as well as registration for the WRA‚Äôs CE Course 4 ‚ÄĒ Business Ethics live classes as well as online and self-study options, visit www.wra.org/RECEinfo. REALTORS¬ģ also may complete the NAR Code of Ethics training online for free, courtesy of NAR. The free online ethics course for existing members is available on NAR‚Äôs website at www.realtor.org/code-of-ethics/training/for-existing-members/code-of-ethics-online-course. Additional information regarding these requirements is found at www.realtor.org/code-of-ethics/training/for-existing-members/code-of-ethics-requirements.

Carbon monoxide detectors: do they stay or do they go? 

Recent changes in Wisconsin’s carbon monoxide detector law have led to some confusion about the seller’s obligations to install and/or leave carbon monoxide detectors in the property. Deliberate inspections and contract drafting can assure the parties have a meeting of the minds about carbon monoxide detectors. 

The law states that most property owners of one and two family dwellings, as well as multifamily dwellings, must install functional smoke and carbon monoxide detectors. Properties built, with a building permit issued on or after February 1, 2011 will have alarms that are interconnected and directly wired to the dwelling’s electrical system. However, for older properties, the owners may comply by using removable detectors. For information about proper installation of smoke and carbon monoxide alarms, see the Department of Safety and Professional Service Carbon Monoxide and Smoke Detector brochure at dsps.wi.gov/sb/docs/SB-UdcAlarmsFeb11.pdf . 

When the property owner installs carbon monoxide units that are battery-powered or not hardwired into the electrical system, they may consider the alarms personal property and may want to take the detectors with them when selling the property. When the listing agent conducts the pre-listing property inspection, the agent should see if the seller has installed carbon monoxide detectors and if they are permanently installed or are the easily-removable plug-in variety. The agent can discuss this with the seller, and agree how to handle it in the listing contract and then in the offer. For example, will the detectors remain on the property, do the required detectors need to be installed, or will the seller not provide detectors? Whatever the scenario, make sure that the buyer is informed. The offer may be drafted to address who will install any missing detectors and whether detectors presently on the property will remain or be removed by the seller. 

If a property does not have required smoke and carbon monoxide detectors, a seller can note this on a Real Estate Condition Report as conditions that are not compliant with state law and require correction. For sellers who do not complete a RECR, the definition of Conditions Affecting the Property or Transaction in the offer includes, ‚Äúdd. Violation of state or local smoke and carbon monoxide detector laws‚ÄĚ so that the seller would still have the obligation to disclose if the required smoke and carbon monoxide detectors are not installed on the property.

If either agent knows there are missing detectors, they arguably need to disclose this health risk to property occupants as a material adverse fact under Wis. Admin. Code § REEB 24.07(2), which requires the licensee to timely disclose the fact in writing to all parties to the transaction.

When the offer is negotiated to address the detectors, disputes will be avoided, however sometimes the concern will not be discovered until the home inspection. If a buyer’s offer includes a home inspection contingency, the home inspector is to indicate in the inspection report if the property is not compliant with the carbon monoxide and smoke detector laws. If the seller did not previously disclose missing detectors, the buyer could give a notice of defects relating to the missing detectors because it is a human safety issue and a building code violation.

A seller may argue that the seller is not required to install detectors because there is no law that specifically requires that detectors be in place as a prerequisite to a real estate conveyance, even though it is a code violation. The seller might observe that the battery-operated or plug-in types of detectors are really personal property and can be taken with the seller when moving out; this would not be an issue in newer homes where the detectors are required to be tied into the home’s electrical system. In the end, this is a safety analysis versus a personal property analysis, and there is no clear-cut answer. By addressing the issue in the listing and the offer, any such debate can be avoided.

Tracy Rucka is Director of Professional Standards and Practices for the WRA.

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