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Weekly Q&As

Can a counteroffer be accepted without a client’s signature?

Release Date: 03/15/2016

QUESTION: Yesterday, I sent a signed standard form Offer to Purchase and Contract to a listing agent through email. The listing agent emailed me back with a counteroffer, but his email did not have a contract attached with the sellers’ signatures on it. My buyers liked the counteroffer, so I emailed the listing agent back, without attaching a new contract, and told him that my clients had accepted the sellers’ counteroffer.

The listing agent contacted me today and said that the sellers have received another offer and that the sellers will be re-opening the listing to accept the highest and best offer. I explained to him that he could not do that since we were under contract, but he claims that we are not. My clients are very upset. Is the listing agent correct?

ANSWER: As a general rule, a real estate agent in North Carolina does not have the power to bind his client to a contract to convey real property unless the agent has special authority. An agent would have “special authority” in circumstances where a client gave the agent actual authority to act, such as through a power of attorney.

In your example, if your only authority to act for your clients was established through the standard form Buyer Agency Agreement, then you did not have actual authority to bind your clients to a contract. Likewise, if the listing agent’s authority was limited to the powers outlined in the standard form Exclusive Right to Sell Listing Agreement, then he did not have the right to bind his clients to the counteroffer that he made on his clients’ behalf. This means that absent any other facts, your buyers did not have a valid, binding contract for the sellers’ property.

This answer, however, is not the end of the road. The answers to questions like yours are very fact specific, and in some cases it might be possible that there is a contract if you and the listing agent were acting with apparent authority. Apparent authority can occur if your client informs the other party that you have the authority to act for them. So, before you take any action, make sure your clients consult with an attorney to advise them after hearing all the facts. And, in the future be sure to inform your clients that there is no contract until all the parties to the contract have agreed to all the contractual terms and signed the contract.

 

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. 

 

 

If my LLC joins a "team", do I need to designate myself as broker-in-charge?

Release Date: 03/08/2016

QUESTION:  I am a broker with XYZ Real Estate. At the suggestion of my accountant, I formed a Limited Liability Company for the purpose of receiving the compensation paid to me by XYZ. Although my LLC is licensed, I have never had anyone else associated with me and have never had to designate myself as broker-in-charge. I am now thinking of forming a "team" with another XYZ agent (John) to work together on transactions. XYZ's broker-in-charge has told me that I should officially associate John with my LLC on the Real Estate Commission's records. Doesn't that mean I would have to designate myself as the broker-in-charge of my firm (and complete the required 12 hour course)?

ANSWER:  The answer is yes. The broker-in-charge rule includes a provision - Rule A.0110(d) - which states that a licensed real estate firm is not required to have a broker-in-charge if it meets four tests. One of those tests is that the firm "has no licensed or unlicensed person associated with it other than its qualifying broker". If John associates with your firm, your firm no longer qualifies for the exemption.

In the Real Estate Commission's 2013-2014 Broker-in-Charge Course Materials relating to "Advertising Issues", the Commission suggests that there is a way for you to avoid the broker-in-charge requirement in the team context: do not have a separate licensed entity involved in your "team". The Course Materials point out that some teams are comprised of brokers who are associated solely with one company but who have agreed to cooperate on transactions in some form, and to have all production reported primarily under one broker's name. The Course Materials note: "So long as the team leader does not create an entity (thus requiring a firm license), she and all members of her team still only have one official affiliation in Commission records and that is with XYZ Realty under (its) broker-in-charge."

If your LLC is not used to receive shared "team" compensation from XYZ, then XYZ's broker-in-charge would bear full responsibility for fulfilling all of the broker-in-charge duties relating to its affiliated agents. 

 

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. 

 

 

Who’s responsible for paying special assessments?

Release Date: 03/01/2016

QUESTION: In paragraph 7(c) of the Offer to Purchase and Contract, there are two blanks regarding Proposed and Confirmed Special Assessments.  I’ve always filled those blanks with “None known, if any seller to pay at closing.”

I was recently told by a listing agent whose listing I’d submitted an offer on that I wasn’t supposed to fill those two blanks in that way.  She says they’re just supposed to say “None.”  Is she right?  If so, who pays if a proposed or confirmed special assessment turns up after the Contract has been signed and the blanks say “None?”

ANSWER: The listing agent is right.  Paragraph 7 is the “Seller Representations” section of the Contract.  Paragraph 7(c) is where the seller should identify any Pending or Confirmed Special Assessments.  If the seller is unaware of any Pending or Confirmed Special Assessments, the parenthetical instruction immediately preceding both blanks directs that the word “None” be inserted.

To answer your question about who is obligated to pay for a Proposed or Confirmed Special Assessment, look in the ‘Buyer Obligations” and “Seller Obligations” sections of the Contract (paragraphs 6 and 8).  Paragraph 6(b) clearly states that the buyer takes title subject to all Proposed Special Assessments, and paragraph 8(k) clearly states that the seller pays all Confirmed Special Assessments. 

Since paragraphs 6(b) and 8(k) establish responsibility between the parties for Pending and Confirmed Special Assessments, an agent should not put extra verbiage in the blanks in paragraph 7(c) that the seller will pay any assessments that may exist.  Paragraph 8(k) already makes the seller responsible for Confirmed Special Assessments, so your extra wording is redundant.  On the other hand, your extra wording is in conflict with paragraph 6(b), which makes the buyer responsible for any Pending Special Assessments.  That conceivably could be interpreted as a modification of the pre-printed wording of the Contract, which of course the parties can agree to. But such a modification raises potentially big practical questions.  A Pending Special Assessment is by definition one that hasn’t been approved as of Settlement (see paragraph 1(n)).  How can the seller pay a Special Assessment at Settlement/Closing that hasn’t even been approved?  Would the obligation survive Closing?  If so, what if the seller refuses to pay it?  Your extra wording has the potential to cause a dispute between the parties and should not be used.

 

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. 

 

 

Security Deposits and Joint and Several Liability

Release Date: 02/23/2016

QUESTION: Our property management firm rented an apartment to an elderly couple, Joe and Susan. Joe paid the security deposit when the lease was executed.

Joe just recently passed away, and some of his family members are asking whether the estate will receive the security deposit. Susan is still in the apartment, but she cannot afford the rent by herself. Can I apply the security deposit toward any unpaid rent if Susan defaults, or does the security deposit need to be turned over to the estate because Joe paid it?

ANSWER: Paragraph 27 of the Standard Form Lease (Form 410-T) provides that multiple tenants are jointly and severally liable for any liability arising under the lease agreement. This means that when the lease was signed, both Joe and Susan both agreed to be fully responsible for any unpaid rent or damages, regardless of which one of them was actually at fault.

Because the security deposit was given to secure any potential joint and several obligations, including the obligation to pay rent, the security deposit can be applied toward any unpaid rent if Susan defaults and the lease is terminated.

 

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. 

 

 

Do I have to retain copies of my Facebook posts describing my listings?

Release Date: 02/16/2016

QUESTION:  I recently attended an update class that included a discussion of the Real Estate Commission's record retention rule. The instructor mentioned that brokers are required to retain copies of all advertising materials concerning any property they have listed for a period of three years, regardless of the medium. Does that mean I have to keep copies of any listing information I post on social media such as Facebook? Do I also have to copy and retain all of my tweets describing my listings?

ANSWER:  The answer is yes and yes. Although the Commission's record retention rule (Rule A.0108) does not specifically mention advertising materials, the rule includes a "catch-all" provision which requires the retention of "any other records pertaining to real estate transactions." The Commission interprets this language to require brokers to retain copies of all advertising documents pertaining to a marketed property.

In November, the Real Estate Commission proposed an amendment to Rule A.0108 to codify this interpretation. The change would add a new-subparagraph to the rule explicitly requiring the retention of copies of "advertising used to market a property". This proposed rule change will be submitted to the Commission for consideration and adoption at its meeting on March 16, 2016.

The course materials for this year's Update program confirm that the requirement to retain all advertising used to market a property applies without regard to the medium used. In the Commission's words, "Brokers are reminded that they must retain copies of all advertising, marketing or other promotional materials concerning any property for at least three years following the conclusion of the transaction... This includes not only print media, but (also) internet, and social media, such as Facebook, Twitter and Instagram if it contains information about a listed property."

 

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.