Release Date: 01/17/2017
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.
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