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Weekly Q&As

Do all owners need to sign my Property Management Agreement?

Release Date: 01/17/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION:  My firm handles both sales and property management. We have recently been in discussions with a prospective client about listing his residential property for rent. He told us that he has been divorced for several years. However, when we checked the Register of Deeds records online, we discovered that his ex-wife is still on the deed. Should we insist on the ex-wife signing our Property Management Agreement before agreeing to manage the property?       

ANSWER:  Absolutely. A broker can only act on behalf of a property owner if the broker has been authorized to do so by an agency agreement. Real Estate Commission rule 58A.0104(a), the so-called "agency rule", requires that every agreement for brokerage services in a real estate transaction be in writing and signed by the parties. The required written agreement must be in place before a licensee provides any services.

If the ex-wife does not sign a property management agreement, she has not properly authorized your firm to offer her property for rent. Without her signature on a property management agreement, there is no guarantee that she might not assert her own right to enter and possess the property.

If your firm uses Standard Form 401, paragraph 26 includes a representation and warranty by the person(s) signing the agreement that he/she/they "have full authority to enter into (the) Agreement, and that there is no other party with an interest in the Property whose joinder in (the) Agreement is necessary." Under the facts you have described, this representation and warranty would not be accurate unless both owners signed the agreement. Furthermore, your firm would not be authorized to deliver any rental payments to only one of multiple property owners without express written authorization from all of the other owners.

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

Properly completing compensation disclosure section of buyer agency agreement

Release Date: 01/10/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: An agent in my firm has sold one of the firm’s listings. I have reviewed the Exclusive Buyer Agency Agreement (form 201) he entered into with the buyer and I am concerned about the way he filled out the compensation part. In paragraph 4(b), he inserted the percentage fee we customarily expect to receive for services in representing a buyer. However, in paragraph 14(f), he put a zero in blank for the dual agency compensation. Shouldn’t he have put the percentage fee we expect to receive from the seller in the blank? Does his mistake mean that the firm will only be entitled to receive a fee for the buyer side of the transaction if it closes?

ANSWER: The answer to your first question is yes. Your agent apparently does not understand the purpose of paragraph 14(f). The Real Estate Commission’s compensation disclosure rule (Rule 58A.0109) provides in relevant part that a broker in a real estate sales transaction shall not receive compensation from any other person unless the broker provides full and timely disclosure of the compensation to the broker’s principal. The Real Estate Commission has interpreted this language to require a firm acting as a dual agent to disclose to the buyer client the compensation the firm expects to receive from the seller client. Paragraph 14(f) was added to the Exclusive Buyer Agency Agreement to aid a firm in complying with this disclosure obligation.

Regarding your second question, we don’t believe your agent’s mistake should affect the firm’s right to receive the total fee due from the seller under the listing agreement if the transaction closes. The terms of the listing agreement can only be modified by the firm and the seller, and the Buyer Agency Agreement is between the firm and the buyer. However, the buyer agent should promptly disclose to the buyer in writing the fee the firm expects to receive from the seller. We recommend that this be accomplished by amending paragraph 14(f) of the Buyer Agency Agreement and having the parties initial and date the change.

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

Can I stop a former client from using my photos?

Release Date: 01/03/2017

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: A former client has advertised their home as For Sale by Owner on a website, and the FSBO advertisement uses all the pictures that I took of the client’s home when I was their listing agent last year. The listing agreement has expired, and the former client has not asked my permission to use the pictures. Can I tell the former client to take my pictures down from the FSBO advertisement?

ANSWER: If you personally took the photos, then you own the copyright to them. Paragraph 15 of the Exclusive Right to Sell Listing Agreement (Standard Form 101) gives you the right to use photos provided to you by your client, but it does not give the client a right to use material that you create during agency. Standard Form 101 also does not give the client any right to claim that your photos were created as a “work made for hire” under copyright law.

If you have not given the former client permission, either written or verbal, to use your photos, then you have the right to ask that the photos be taken down from the online FSBO advertisement. You should know that you may have other options besides just requesting that the photos be taken down. The U.S. Digital Millennium Copyright Act provides a mechanism for you to notify an internet service provider (ISP) of infringement. You may also have a right to pursue damages. To make sure that all your rights are protected, you should consult with an attorney before taking action.

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2017. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

Do all sellers have to sign the same residential property disclosure statement?

Release Date: 12/27/2016

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION:  I am the listing agent for several residential properties that were owned by an individual who recently passed away. While some of the heirs live nearby, and are familiar with the listed properties, one heir lives out of state, has not seen the listed properties in years, and has no knowledge about their current condition. The out-of-state heir consulted an attorney who advised her to sign a separate residential property disclosure statement and check the "no representation" boxes in response to every question. Would it be permissible for my seller-clients to complete multiple disclosure statements containing answers that, in some cases, will be different?     

ANSWER:  While we do not recommend this practice, the applicable statute does not prohibit the completion and submission of more than one residential property disclosure statement. That statute, known as the Residential Property Disclosure Act, states that the "owner" of any residential real property covered by the Act shall furnish to a purchaser a residential property disclosure statement. The term "owner" is defined to include each person having a recorded present or future interest in the real estate, subject to certain exceptions.

Where property is owned by multiple heirs, they are all considered owners, and all must sign the required disclosure statement. However, the Act does not specify that all owners must sign the same disclosure statement. Under the circumstances you have described, we think the out-of-state heir's reluctance to make any affirmative representations about the properties he now owns is entirely reasonable.

Having said that, if more than one disclosure statement is completed, and the answers given are not consistent, the inconsistencies may well be regarded as "red flags" that the listing agent has a duty to investigate. For this reason, we would encourage listing agents to have their sellers complete only one residential property disclosure statement per property whenever possible.   

 

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2016. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.

 

 

Which form should I use to terminate a contract during the Due Diligence Period?

Release Date: 12/20/2016

This email address is being protected from spambots. You need JavaScript enabled to view it., Martin & Gifford, PLLC

QUESTION: I am representing a buyer who is under contract using the Offer to Purchase and Contract (form 2-T). She paid a Due Diligence Fee of $500 and an Initial Earnest Money Deposit of $2,500. After doing inspections, she has decided she wants to terminate the contract. The Due Diligence Period ends tomorrow at 5 PM. There are two different forms that look like they would work. One is the Notice to Seller that Buyer is Exercising Their Unilateral Right to Terminate the Offer to Purchase and Contract (form 350-T), and the other is the Termination of Contract by Mutual Agreement With Release of Earnest Money (form 390-T). Which one should I use in this situation? 

ANSWER: We recommend you use form 350-T. Either form would work, but 350-T only requires the buyer’s signature to accomplish the termination, while form 390-T requires signature by both the buyer and the seller to be effective. As its name suggests, form 390-T requires mutual consent of the parties. If you transmit a form 390-T signed by the buyer to the listing agent and for some reason the seller fails to sign it before the end of the Due Diligence Period, an argument can be made that the contract was not terminated before the end of the Due Diligence Period and the buyer would not be entitled to a refund of her Earnest Money Deposit if she fails to complete the transaction. 

On the other hand, form 350-T is designed for the buyer to exercise her unilateral (or one-sided) right to terminate the contract for any reason or no reason during the Due Diligence Period (see paragraph 4(f) of the Contract). It’s true that there’s a place for the seller to sign on the second page of form 350-T, but it’s simply an authorization for the Escrow Agent to return the Earnest Money Deposit to the buyer. Transmitting a signed form 350-T to the listing agent before the end of the Due Diligence Period effectively terminates the contract. The seller’s failure to sign the second page doesn’t change that, although it could cause a delay in the return of the EMD. (For a discussion of that issue, see Q&A titled “Can my firm disburse an earnest money deposit without the consent of both parties?” in the archived Q&As under the category “Real Estate License Law and Rules.”)

Form 390-T is a very useful form that can be used to terminate a contract by mutual consent in many different situations, including this one. However, since time is of “of the essence” regarding the end of the Due Diligence Period, we think form 350-T is the better form to use in this situation, given the critical importance of timely and clearly notifying the seller of the buyer’s decision to terminate the contact.

NC REALTORS® provides articles on legal topics as a member service. They are general statements of applicable legal and ethical principles for member education only. They do not constitute legal advice. The services of a private attorney should be sought for legal advice.

© Copyright  2016. North Carolina Association of REALTORS®, Inc. This article is intended solely for the benefit of NC REALTORS® members, who may reproduce and distribute it to other NC REALTORS® members and their clients, provided it is reproduced in its entirety without any change to its format or content, including disclaimer and copyright notice, and provided that any such reproduction is not intended for monetary gain. Any unauthorized reproduction, use or distribution is prohibited.