The Best of the Legal Hotline: There’s a Complaint for That!


 Debbi Conrad  |    September 13, 2021
Legal Hotline

We want real estate professionals to have a good reputation among buyers and sellers throughout Wisconsin. Real estate licensees should act legally — follow the law — and of course, behave professionally! Although there is reluctance at times to file a complaint, sometimes that is the only way to get the point across, particularly when friendly discussions and broker-to-broker conversations have not changed the negative behavior. This becomes more important when the other agent’s actions are impacting a member of the public. There is a risk the negative impression will spread throughout the community.

The following questions and answers describe issues worthy of a complaint to the Department of Safety and Professional Services (DSPS). In fact, some of them describe scenarios where a complaint recently was filed. For each situation, the appropriate “punchline” at the end of each answer would be, “file a complaint.”

Waiting too long on the return of earnest money

The deal went bad. The seller presented a signed Cancellation Agreement and Mutual Release (CAMR). The buyers also signed, and then it was returned to the listing agent. How long does he have to turn the CAMR into the listing office so the earnest money can be disbursed? Also how long does the listing firm have to distribute the earnest money? The agent is not certain if there are hard deadlines with regards to this and any consequences if they are not met. For example, a landlord has 21 days to return the security deposit and, if he does not, then he could be liable for damages.

Although there is no specific time frame in license law, it can be assumed the earnest money is to be returned within a reasonable time once the CAMR has been fully executed. Here both parties have signed the CAMR, but the listing agent has not turned it in to the office. The buyer’s agent can ask to have his broker speak to the listing broker about this situation. Another choice may be to send a copy of the signed CAMR to the listing broker. If the listing broker does not promptly disburse the earnest money, the buyer or cooperating agent/firm may wish to file a complaint with the REEB against the listing firm. The complaint might be for violation of the trust account rules in Wis. Admin. Code § REEB 18.09 and the licensee duties in Wis. Stat. § 452.133 because they are not disbursing as directed by the parties in writing and they are not providing services with reasonable skill and care. The complaint might also cite a failure to perform in a competent manner per Wis. Stat. § 452.14(3)(i) and Wis. Admin. Code § REEB 24.03 because they are refusing to make an authorized disbursement. 

For further discussion of earnest money issues, see Legal Update 00.10, “Trust Account Basics,” at www.wra.org/LU0010 and the fall 2011 WRA Broker Supervision Newsletter, “Trust Accounts: Are You Prepared for an Audit?” 
at www.wra.org/bsnfall11

Paying for leads 

What’s the proper way to deal with agents who are paying people for leads? The firm’s agents are seeing more and more people in the general public holding potential referrals basically hostage until they get the highest price. The broker for the firm was contacted and offered a referral, but first the person wanted to know much they’d get for the referral fee. “What percent will I get?” The person evidently gets paid $1000s from other agents. He said he would not give the broker the name unless she would pay. How is the firm supposed to deal with this if the firm finds out which agents are doing this?
 
Payment of referral fees to unlicensed individuals is a violation of license law. Wis. Stat. § 452.19 provides the following with regard to fees and commissions:

(1) No licensee may pay a fee or a commission or any part thereof for performing any act specified in this chapter or as compensation for a referral or as a finder’s fee to any person who is not licensed under this chapter or who is not regularly and lawfully engaged in the real estate brokerage business in another state, a territory or possession of the United States, or a foreign country.

(2) If a licensee is associated with a firm, all fees or commissions and any part thereof for performing any act specified in this chapter and all compensation for a referral or as a finder’s fee shall be paid to the firm.

If the supervising broker or any of her agents can determine which licensees are paying referral fees to unlicensed individuals, the supervising broker may contact that agent or the agent’s supervising broker and remind them that the payment of referral fees to unlicensed individuals is prohibited. If that does not yield results, they should file a complaint with the DSPS.

No permission for radon testing

What recourse does a listing agent have when a buyer does an unauthorized radon test? The listing agent informed the buyer’s agent that this was requested by the home inspector, and the buyer’s agent confirmed the test was canceled, but it wasn’t. The property is vacant, so the seller didn’t know the canister was placed in the home. The seller later received an amendment to pay for a radon mitigation system because the test came back high. Now if the transaction falls apart, the seller is required to disclose and is not happy. 
 
The Inspection Contingency in the residential offer is designed for inspections only, not testing. In addition, at lines 184-185, the WB-11 Residential Offer to Purchase states: “Except as otherwise provided, Seller’s authorization for inspections does not authorize buyer to conduct testing on the Property.”

Unless a testing contingency was included, the offer to purchase does not grant the buyer, or his home inspector, authority to test for radon. If testing is not authorized in the offer to purchase, the buyer should not be permitted to do a radon test. Arguably, unauthorized testing constitutes trespass. 
A complaint for trespass against the buyer or home inspector may be a bit extreme, but not necessarily impossible.

If the seller rejects the buyer’s amendment, the ball, so to speak, is in the buyer’s court. The buyer may, for example, choose to complete the transaction notwithstanding the elevated radon. If the transaction ends, the parties may negotiate regarding the disbursement of earnest money given the unauthorized testing and the high radon levels.  

The seller has different options regarding the unauthorized testing. The seller may request compensation from the buyer, the home inspector, the cooperating licensee or a combination thereof. As credential holders, the home inspector and cooperating firm may, depending on the facts and circumstances, have a complaint filed against them with the DSPS. The licensee can refer the seller to legal counsel about their options.

No agency disclosure

The broker has a buyer agency agreement with a buyer who is looking at a FSBO. The buyers want to write an offer. However, the seller was not provided with the Broker Disclosure to Customers or any other disclosures. Is there a fine/penalty for that?

The buyer’s broker must, upon first contact, disclose buyer agency to the unrepresented seller. Prior to negotiations, the broker must provide the seller with a Broker Disclosure to Customers if any services will be provided for the seller, and for residential transactions involving one- to four-family properties, the broker must ask the seller to sign the form.

While there is not a fine or financial penalty for failing to provide agency disclosure to a customer, it may be a violation of license law or the NAR Code of Ethics. To report license law violations, the licensee can make a complaint to the DSPS. To report a violation of the Code of Ethics, the licensee could contact the listing agent’s local REALTOR® association. 

Time to respond to a DSPS complaint

Can the DSPS require a licensee to respond to a complaint or other request in less than 30 days?
 
Wis. Admin. Code § REEB 24.17(5) DUTY TO COOPERATE WITH THE BOARD AND THE DEPARTMENT reads, “Licensees and applicants shall respond to the department and the board regarding any request for information within 30 days of the date of the request.”

However, the DSPS provisions for complaint procedure in Wis. Admin. Code § SPS 2.09 give a different, specific time frame,
 as follows:

(1) An answer to a complaint shall state in short and plain terms the defenses to each cause asserted and shall admit or deny the allegations upon which the complainant relies. If the respondent is without knowledge or information sufficient to form a belief as to the truth of the allegation, the respondent shall so state and this has the effect of a denial. Denials shall fairly meet the substance of the allegations denied. The respondent shall make denials as specific denials of designated allegations or paragraphs but if the respondent intends in good faith to deny only a part or a qualification of an allegation, the respondent shall specify so much of it as true and material and shall deny only the remainder.

(2) The respondent shall set forth affirmatively in the answer any matter constituting an affirmative defense.

(3) Allegations in a complaint are admitted when not denied in the answer.

(4) An answer to a complaint shall be filed within 20 days from the date of service of the complaint.

See the Information About Your Hearing — Class 2 — Disciplinary Proceeding brochure at dsps.wi.gov/Documents/DisciplinaryProceedingBrochure.pdf. To be prudent, a licensee should respond to the DSPS within whatever time frame they request. 

Administrative warnings

The firm received an Administrative Warning letter in the mail from the DSPS, indicating there is evidence of professional misconduct for not having a written and signed Property Management Agreement to manage a property from 2016 to 2017. The broker never received any prior notice and does not believe it is true. Can the DSPS issue an administrative warning without prior notice of the complaint and without giving the office the opportunity to respond to their allegations? Also, is it normal for them to wait over three years to issue a warning?
 
A complaint can be filed against a real estate licensee at the DSPS at any time. 

The Administrative Warning process is found in Wis. Admin. Code Chap. SPS 8. See the information about administrative warnings on page 12 of this magazine.

If the firm wishes to challenge the administrative warnings, the procedures for an administrative warning review in SPS 8.06 state:

(1) Within 45 calendar days of receipt of a request for review, the disciplinary authority shall notify the credential holder of the time and place of the review.

(2) No discovery is permitted. A credential holder may inspect records under s. 19.35, Stats., the public records law.

(3) The disciplinary authority or its designee shall preside over the review. The review shall be recorded by audio tape unless otherwise specified by the disciplinary authority.

(4) The disciplinary authority shall provide the credential holder with an opportunity to make a personal appearance before the disciplinary authority and present a statement. The disciplinary authority may request the division to appear and present a statement on issues raised by the credential holder. The disciplinary authority may establish a time limit for making a presentation. Unless otherwise determined by the disciplinary authority, the time for making a personal appearance shall be 20 minutes.

(5) If the credential holder fails to appear for a review, or withdraws the request for a review, the disciplinary authority may note the failure to appear in the minutes and leave the administrative warning in effect without further action.

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

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