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Weekly Q&As

Can a broker make an offer on her own listing?

Release Date: 09/27/2016

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

QUESTION: One of my brokers has a listing that she personally wants to make an offer on.  She has also received an inquiry from an individual with no representation and it's likely he will want to make an offer too. Please let me know how we should handle this situation so we don't get in trouble.

ANSWER: First of all, Real Estate Commission Rule 58A.0104(p) applies to this situation.  According to the Rule, your agent cannot enter into a contract to purchase her seller’s property unless she does the following: (i) discloses in writing to the seller that she has a conflict of interest and that the seller may want to seek independent counsel of an attorney or another licensed broker, and (ii) the listing agreement is terminated or transferred to another broker affiliated with your firm.  She should also tell the seller about the inquiry that’s been made about the property if she hasn’t done so already.

Regardless whether the listing is terminated or transferred to another agent, we would advise against your agent working with the individual who has made inquiry about the property, given your agent’s interest in making an offer on the property herself.  If the listing is transferred to another agent with your firm, the individual who made inquiry should be advised to communicate directly with the agent to whom the listing has been transferred, and the new agent handling the listing should of course not disclose the terms of any offer that the individual may make to the former listing agent since she would be considered a competing party. See Commission Rule 58A.0115

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.

 

 

May a buyer inspect existing tenant leases when purchasing a rental or investment property?

Release Date: 09/20/2016

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

QUESTION: My client entered into a contract to purchase a townhome that was advertised as an investment or rental property. The Standard Form 2A11-T was filled out and made part of the contract, but the listing agent is now refusing to provide us with the current lease because of privacy laws. Is my client allowed to inspect the lease of the existing tenant? Is there some privacy law that would bar the seller from allowing us to see the lease pursuant to the contract?

ANSWER: If the seller collected personal information as part of the rental application process, then he or she has a duty under both federal and North Carolina privacy laws to not disclose such information to unauthorized third parties. “Personal information” includes, but is not limited to, social security numbers, driver’s license numbers, banking information, credit card numbers, and credit reports.

When the seller agreed to the terms of Standard Form 2A11-T, he or she agreed to provide your client with “true and complete copies of all existing leases, rental agreements, outstanding tenant notices, written statements of all oral tenant agreements, statement of all tenant’s deposits, uncured defaults by Seller or tenants, and claims made by or to tenants.” Some of these items may have a tenant’s personal information on them, but most of them likely would not. As long as there is no personal information on the lease agreement in question, then current privacy laws would not prevent the seller from allowing your client to inspect the existing lease in conformance with the contract.

If there is personal information on the lease, the seller can simply redact the personal information before turning it over for inspection. It should also be noted that if the seller used the Standard Form 410-T lease agreement, then the tenant has already agreed to the disclosure your client is seeking. Paragraph 30 of the 410-T allows a landlord to provide information about a tenant to third parties “in accordance with applicable laws.” If your client wants to inspect the tenant’s entire file, including the tenant’s personal information, then he or she should consult with an attorney to make sure they are authorized.

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.

 

 

Can brokers check the "no representation" boxes on the Residential Property Disclosure Statement when selling their own property?

Release Date: 09/13/2016

Bill Gifford, Martin & Gifford, PLLC

QUESTION:  I am a licensed broker. I am about to list a residential property for sale that I have owned for several years. Am I allowed to check any of the "No Representation" boxes on the Residential Property Disclosure Statement?

ANSWER:  Our view is that a property owner who has an active real estate license may lawfully choose to check the "No Representation" boxes on the Disclosure Statement. However, that broker retains an obligation to disclose all material facts about the property being sold, including facts that the broker knows about, and facts that the broker reasonably should know about.

Essentially, we see a technical distinction between a property owner's obligations under the Residential Property Disclosure Act and a broker/owner's obligations under the Real Estate License Law.

The Residential Property Disclosure Act (the "RPDA") requires most owners of residential property to deliver a disclosure statement to a purchaser no later than the time the purchaser makes an offer for the property. However, the RPDA allows those owners to either make disclosures concerning specified "characteristics and conditions" of the property, or state that the owner makes no representations as to those "characteristics and conditions". There is no exemption in the RPDA for real estate broker-sellers. Therefore, the RPDA gives brokers the same right to check the "No Representation" boxes as any other seller.

That fact does not excuse brokers from their obligations under the License Law (and Article 2 of the REALTOR® Code of Ethics). Section 93A-6(a)(1) of the License Law obligates brokers to disclose material facts about a transaction in which they are engaged. Section 93A-6(b)(3) makes it clear that this obligation extends to transactions in which the broker is a party (and not necessarily acting as a broker). It states that brokers may be disciplined when: "[t]he licensee has violated any of the provisions of G.S. 93A-6(a) when selling, leasing, or buying the licensee's own property".

Practically speaking, a broker-seller whose license is active has a duty to disclose material facts about his or her property, whether it is accomplished by completing the Disclosure Statement or otherwise.

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 pays owner association “transfer fees?”

Release Date: 09/06/2016

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

QUESTION: I’m representing a buyer who is closing on a property that has an owner’s association.  I am trying to figure out who is responsible for the payment of a “transfer fee” that’s being charged by the association’s management company.  I’ve reviewed the Offer to Purchase and Contract (form 2-T) and I don’t see any reference to transfer fees on the Contract anymore.  Who is supposed to pay it, my buyer or the seller?

ANSWER:  Assuming that what is meant by the term “transfer fee” is a fee for updating the association’s records to reflect the transfer of the property from the seller to the buyer, the fee is the seller’s responsibility in our opinion.

To understand the basis for our answer to your question, it is important to understand the way in which the latest version of the Contract (released July 2016) assigns responsibility for the payment of the various fees imposed by owner associations and their management companies when a property regulated by the association is bought and sold. 

According to the Contract, the buyer is responsible for the fees that are listed in paragraph 6(b).  These include fees for providing information required by the buyer’s lender and fees charged for the buyer’s future use and enjoyment of the property. 

The seller’s responsibility for association fees is addressed in paragraph 8(j).  In addition to being responsible for fees required to confirm the status of seller’s account regarding dues or assessments, and fees for completing the Disclosure Statement and resale or other certificates relating to a sale of the property, the seller is responsible for fees “…other than those fees required to be paid by Buyer under paragraph 6(b) above.” In other words, any fee not allocated to the buyer in paragraph 6(b) is the seller’s responsibility under the “catch-all” provision in paragraph 8(j)(ii). 

Applying this framework to your question, in our view a fee for updating the association’s records to reflect the change in ownership is not covered under paragraph 6(b) and therefore is the responsibility of the seller.

You are correct that the term “transfer fee” has been taken out of the Contract.  This was done primarily to avoid potential confusion with the term “transfer fee” as defined in a statute that prohibits the practice of including in an association’s governing documents fees that are payable in perpetuity to the association’s developer on all transfers of property in the development.  

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.

 

 

Is a contract terminated if the buyer and seller exchange competing termination forms and cannot agree on who gets the due diligence fee?

Release Date: 08/30/2016

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

QUESTION: During the due diligence period, my seller received a Form 390-T signed by the buyer stating that the buyer would receive both the earnest money deposit and the due diligence fee on termination. My client disagreed with the due diligence fee portion of the buyer’s 390-T, and responded by sending the buyer a revised 390-T signed by the seller stating that the buyer would only receive the earnest money deposit on termination.

It seems like the parties both agree as to termination and who gets the earnest money, and I just received another offer. Is the contract terminated? Do I need to advise my client to seek legal counsel before he signs the new offer?

ANSWER: We don’t believe the contract is terminated yet based on your facts. Paragraph 6 of Form 390-T states: “This Termination of Contract and Release shall be effective on the date that it has been signed by all of the Parties.” Even though both parties have signed the same form, they disagree about the terms on which they will agree to terminate the contract. This means that both forms are merely an offer from each side to terminate, and unless one of them signs the other’s form, then the offer remains unaccepted.

Although paragraph 5 of Form 390-T only addresses disbursement of the EMD, the buyer has modified it to provide for a refund of the due diligence fee as well.  That’s okay, but unless and until the parties are on the same page regarding all terms of their agreement to terminate, their contract hasn’t been effectively terminated in our view.

You might want to inform the buyer’s agent that the buyer has no right to a refund of the due diligence fee absent a breach of the contract by your client; and if they continue to delay termination, they will risk losing their earnest money deposit as well. As for your client, Standard of Practice 1-7 requires you to advise them to seek legal advice before accepting the second offer, unless the acceptance of the second offer is contingent on the termination of the existing 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.