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Weekly Q&As

Do heirs have to sign the disclosure statements?

Release Date: 9/15/2015

QUESTION:  I’m representing a brother and sister who have inherited a condo from a parent who just passed away.  Aren’t the heirs of estate property exempt from the requirement to provide either the Residential Property and Owners’ Association Disclosure Statement or the Mineral and Oil and Gas Rights Mandatory Disclosure Statement to prospective buyers?

ANSWER:  No, they are not exempt from either requirement. To determine whether a particular owner is exempt from the disclosure requirements of the Residential Property Disclosure Act, you should consult Section 47E-2 of the Act.  There are eleven exemptions listed.  The first 8 exemptions listed in subsection (a) apply to both the Residential Property and Owners’ Association Disclosure Statement and the Mineral and Oil and Gas Rights Mandatory Disclosure Statement.  The last 3 exemptions listed in subsection (b) apply only to the Residential Property and Owners Association Disclosure Statement.  Thus, for example, the owner of a dwelling that’s never been inhabited and that is being sold for the first time would not have to provide a Residential Property and Owners Association Disclosure Statement, but he or she would have to provide a Mineral and Oil and Gas Rights Mandatory Disclosure Statement.  See subsection (b)(1).

Regarding your situation, the exemption listed in subsection (a)(3) would exempt the administrator of the deceased parent’s estate from having to provide either disclosure statement, but it would not exempt the heirs.  Thus, if the signatures of the heirs will be required to transfer ownership of the property, they will be required to provide both disclosure statements.  Depending on a number of factors, including the existence of a will and what it says or whether the property may need to be sold to satisfy obligations of the estate, ownership of estate property may sometimes be transferred by the estate administrator rather than the heirs, and sometimes by both the administrator and the heirs.  If there is any question about who will be required to transfer ownership of the condo property in your question, a lawyer should be consulted.  

 

NCAR 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.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.

© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.

 

 

I’m representing a brother and sister who have inherited a condo from a parent who just passed away.  Aren’t the heirs of estate property exempt from the requirement to provide either the Residential Property and Owners’ Association Disclosure Statement or the Mineral and Oil and Gas Rights Mandatory Disclosure Statement to prospective buyers?

Is a free-standing stove a fixture that will convey with the property?

Release Date: 9/8/2015

QUESTION:  I represent buyers who have a property under contract. The parties used the standard Offer to Purchase and Contract (Standard Form 2-T). In paragraph 2(a), where the parties are given an opportunity to list any items that are not owned by the sellers, and therefore will not convey, the word "none" was inserted. In paragraph 2(d), where the parties are given an opportunity to list any seller-owned items that will not convey, the word "none" was inserted again. The listing agent just informed me that the sellers do not own the stove that is in the property (they claim their son owns it). The sellers are also claiming that the stove is not a fixture because it is not "built-in". My understanding is that it does not matter if the stove is free standing or built-in and that all stoves convey with the property unless they are identified in either paragraph 2 (a) or 2(d). Am I correct about that? If so, what is the remedy for my buyers if the sellers refuse to convey the stove?

ANSWER:  You are correct. Paragraph 2 of Form 2-T is entitled "Fixtures and Exclusions". Paragraph 2(b) begins with the following language: "Unless identified in subparagraph (d) below the following items, if any, are deemed fixtures and are included in the Purchase Price free of liens". The very first "item" in the list that follows is "range/stove/oven". No distinction is made between ranges, stoves and ovens that are free-standing and those that are built in. They are all considered fixtures and they will all convey unless they are otherwise expressly excluded. Because the sellers did not list the stove in paragraph 2(a) or paragraph 2(d), they have a contractual obligation to convey the stove to your clients.

The question of remedy is more difficult. The sellers' refusal to convey the stove is a breach of the contract between the parties. Arguably, that refusal is a material breach that would entitle your clients to terminate the contract (see paragraph 8(n)) and recover their earnest money deposit, their due diligence fee, their due diligence expenses and perhaps other remedies. But what if your clients do not want to terminate the contract? If they proceed to closing without an agreement in place, they could lose any legal remedy against the sellers. Paragraph 4(g) of Form 2-T notes, in bold, capital letters: "CLOSING SHALL CONSTITUTE ACCEPTANCE OF THE PROPERTY IN ITS THEN EXISTING CONDITION UNLESS PROVISION IS OTHERWISE MADE IN WRITING."  We suggest that if your buyers want to proceed with their purchase of the property, and the sellers insist on keeping the stove, the buyers should reach some sort of agreement with the sellers, and then reduce that agreement to writing. You should not participate in the drafting of such an agreement as that would constitute the practice of law. Instead, an attorney should be consulted to insure that any agreement reached will be enforceable if the sellers ultimately refuse to perform.  

 

NCAR 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.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.

© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.

 

 

May a referral fee be paid to an agent with an inactive license?

Release Date: 9/1/2015

QUESTION: Our firm entered into a referral agreement with another firm that referred a prospective seller to us.  We got the listing and the property has just closed.  The individual agent who made the referral had an active real estate license at the time of the referral; however, sometime after she made the referral but before closing, her license went on inactive status. Can we pay the referral fee to the other firm if the referring agent’s license was inactive at the time of closing?

ANSWER: Yes, based on the facts of your situation.  According to the Real Estate Commission’s Broker-in-Charge Guide, the general rule is that in order to receive compensation for brokerage services, the recipient must have a license that is current (meaning his or her renewal fee has been paid) and that is on active status.  The term “brokerage services” includes the referral of real estate business in consideration for the payment of compensation.  Real Estate Commission Rule 58A.0504(a) provides that a broker whose license is on inactive status “…shall not engage in any activity requiring a real estate license, including the referral for compensation of a prospective seller, buyer, landlord or tenant to another real estate broker or any other party.”

However, the BIC Guide goes on explain that the “key question” is whether the broker was entitled to engage in brokerage activities throughout the period when the services for which he or she is seeking compensation were rendered.  In the situation you describe, the brokerage service rendered was simply the referral of the seller prospect.  Since, at the time of the referral, the referring broker’s license was on active status, in our view it would be appropriate to pay the agreed-upon referral fee.  It should be paid to the other firm, which may then pay the referring agent according to its agreement with the agent.

 

NCAR 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.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.

© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.

 

 

Are "resold" contents of a fuel tank a fixture that is included in the purchase price?

Release Date: 8/25/2015

QUESTION:  I represent the sellers in a transaction. The propane tank on the property is leased. Prior to closing, the sellers called the propane company and agreed to re-sell the propane in their tank back to the propane company. The propane company wrote a check to the sellers in payment for the propane and then locked the tank. After the buyers took possession of the property they received a bill from the propane company for the propane in the tank. They sent the bill to the sellers as they believe the propane that was in the tank on the date of Settlement was a "fixture" that was included in the purchase price they paid for the home. Are the buyers correct?

ANSWER:  Because of new language in the Fixtures paragraph of the standard Offer to Purchase and Contract (Standard Form 2-T), the answer may depend on whether the parties used the 1/2015 revision or the 7/2015 revision of Form 2-T.

In the 1/2015 version of Form 2-T, paragraph 2 lists the various items that are deemed fixtures and are included in the purchase price. The list includes "fuel tank(s) whether attached or buried and including contents, if any, as of Settlement". At the end of the laundry list of items, the parties are given a blank line on which to note any items that they want to exclude from the pre-printed list of fixtures. A "NOTE" at the end of paragraph 2 reminds parties, in all capital letters: "FUEL TANKS AND ANY FUEL IN THEM WHICH ARE NOT TO CONVEY SHOULD BE NOTED IN THE BLANK ABOVE."

If your sellers signed the 1/2015 version of Form 2-T, and did not note the contents of their propane tank in the blank space in paragraph 2, then those contents were conveyed to the buyers as a fixture and the sellers should pay the fuel provider's invoice.

In the 7/2015 version of Form 2-T,  the language describing the fuel tanks and their contents that are deemed fixtures has been significantly revised. That language now reads as follows: "fuel tank(s) whether attached or buried and including any contents that have not been used, removed or resold to the fuel provider as of Settlement."

Because of this new language, if the contract signed by your sellers was the 7/2015 version of Form 2-T, then they were free to re-sell the fuel in their propane tank to the fuel provider prior to Settlement (subject to their obligation under paragraph 8(c) of the contract to provide working utilities through the earlier of Closing or possession by the buyer). This means that if the buyers used the 7/2015 version of Form 2-T, any re-sold propane that was still in the tank on the date of Settlement was not deemed a fixture and was not included in the purchase price, and the buyers will have to pay the fuel provider's invoice themselves. 

 

NCAR 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.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.

© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.

 

 

Can a buyer seek different financing after a contract is signed?

Release Date: 8/18/2015

QUESTION: If buyers state in an Offer to Purchase and Contract that they are getting a conventional loan, can they switch to a VA loan after the contract is signed by all parties?  Would the contract need to be amended?  If the seller does not allow a VA appraiser into their home because they do not want to agree to the buyers switching to a VA loan, are they in breach of contract?

ANSWER: The loan representation in paragraph 5(a) of the Contract is a statement of the buyer’s intent with respect to financing at the time they make their offer.  If the buyers were acting in good faith and intended to obtain a conventional loan at the time they submitted their offer, it would not be a breach of contract for them to seek a different type of financing after the offer becomes a contract, whether or not the seller agrees.  However, if the buyer seeks VA financing, the buyer’s lender may well require the contract to be amended to add the FHA/VA Financing Addendum (form 2A4-T) to the contract, and the seller would be under no obligation to agree to such an amendment.  If the buyers are able to proceed with VA financing, though, the seller’s refusal to allow a VA appraiser on the property could be characterized as a breach of contract since the Contract permits the buyers during the Due Diligence Period “to conduct all desired tests, appraisals, investigations, examinations and inspections of the Property as Buyer deems appropriate” (see paragraph 4(b)).

 

NCAR 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.  If you or a client requires legal advice, the services of a private attorney should be sought.  Always consult your broker-in-charge when faced with a question relating to the practice of real estate brokerage.

© Copyright  2015. North Carolina Association of REALTORS®, Inc. All rights reserved. No reproduction of any part may be made without the prior written consent of the copyright holder. Any unauthorized reproduction, use, disclosure or distribution is strictly prohibited.