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Weekly Q&As

Is there a contract if the earnest money deposit hasn’t been paid?

Release Date: 07/26/2016

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

QUESTION: One of my listings recently went under contract using the Offer to Purchase and Contract (form 2-T).  The Initial Earnest Money Deposit was to be paid by personal check and delivered within 5 days of the Effective Date.  The EMD is now 2 days late.  I’ve been contacted by a buyer agent who says she has a buyer who wants to make a full-price offer.  My seller wants to know if there a binding contract on the property with the first buyer since the EMD hasn’t been timely delivered, and if so, may he terminate the contract and sign a contract with the second buyer?

ANSWER: In our opinion, there is a binding contact on the property.  See the wording immediately above the signature/date lines in the Contract: “Buyer’s failure to timely deliver any fee, deposit or other payment provided for herein shall not prevent this offer from becoming a binding contract, provided that any such failure shall give Seller certain rights to terminate the contract as described herein or as otherwise provided by law.”

The answer to your seller’s second question is yes, he can terminate the contract.  However, he must follow the 2-step process set forth in the Contract if the Initial EMD or Due Diligence Fee is not delivered by its due date.  According to paragraph 1(d), the buyer has one banking day following written notice to deliver “immediately available funds” (i.e., cash, wire transfer, certified check, etc.) to the payee. If such funds are not timely delivered, the seller can terminate the contract by written notice to the buyer. A new form called the “Notice to Deliver Cash or Immediately Available Funds” (form 355-T) may be used to satisfy the first step of the termination process.  The “Notice to Buyer” (form 352-T or 353-T, depending on whether the parties used contract form 2-T or 12-T) may be used to satisfy the second step of the process.

The seller should be advised to seek legal counsel regarding his rights and obligations in this situation. Standard of Practice 1-7 of the REALTOR® Code of Ethics provides that after a seller accepts an offer, “REALTORS® shall recommend that sellers…obtain the advice of legal counsel prior to acceptance of a subsequent offer except where the acceptance is contingent on the termination of the pre-existing purchase contract…” (i.e., a back-up offer).

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 I use a last name different from the one on my real estate license for advertising?

Release Date: 07/19/2016

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

QUESTION: I am the broker-in-charge, and one of my provisional brokers has always said her name was “Claire Eliott-Carter.” Claire recently passed her license exam, and when my firm received a copy of her real estate license, it stated that her name was only “Claire Eliott.” When I asked Claire about the discrepancy, she informed me that her legal name is the one on her license, but everyone in the community has known her for years as “Claire Eliott-Carter.”

I need to order business cards and create Claire’s advertising signage. Can I use “Claire Eliott-Carter” since that’s how everyone knows her, or do I have to use her legal name?

ANSWER: Until Claire has taken the proper steps, you must use her legal name for any advertising you create for her. Under 21 NCAC 58A .0103, a broker is required “[u]pon initial licensure . . . [to] notify the Commission of the broker's current personal name, firm name, trade name, residence address, firm address, telephone number, and email address.” If any of this initial information changes, then the broker must inform the Commission within 10 days. Rule 21 NCAC 58A .0103 also mandates that “[a]n individual broker shall not advertise or operate in any manner that would mislead a consumer as to the broker's actual identity or as to the identity of the firm with which he or she is affiliated.”

There are some instances where a broker can use a different first name than their legal first name. However, when it comes to last names, the Commission has said that “using a surname that is not your own is not allowed.” If Claire wishes to advertise herself as “Claire Eliott-Carter,” she can do a name change proceeding through the clerk of court, but the Commission has been clear that if she does not “want to go to the trouble of changing [her] name legally, then [she] should use [her] legal name in all aspects of [her] business.” The Commission has also said that using a d/b/a designation will not work, because that procedure is only to be used for business names, not individual names.

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 I provide a tenant's credit report to my landlord-client?

Release Date: 07/13/2016

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

QUESTION:  I am a property manager. I recently had to evict a tenant based on his failure to pay rent. After the case was over, my property owner client asked me to send him the credit report that my firm ordered when we processed the tenant's lease application. Am I obligated to share that credit report with my client? If not, am I permitted to share that report with my client.     

ANSWER:  For the reasons discussed below, the answers to your questions are no and yes. First, it is helpful to summarize some of the laws that govern the proper handling of consumer credit information.

Obviously, screening prospective tenants is one of the principal duties of property managers. As part of the screening process, it has become common practice for property managers to verify a prospective tenant's ability to pay rent by obtaining a credit report. Businesses that assemble credit reports for other businesses are known as Credit Reporting Agencies, or CRAs. The Fair Credit Reporting Act ("FCRA") is a federal statute passed in 1970 that was designed to protect the accuracy and the privacy of consumer information supplied by CRAs.

A second statute dealing with credit reports is North Carolina's Identity Theft Protection Act ("ITPA"). This statute requires for-profit businesses to take reasonable steps, (i.e. to implement policies and procedures) to dispose of certain personal information about consumers. In 2005, the Federal Trade Commission issued a "Disposal Rule" which similarly requires proper disposal of information derived from consumer credit reports.

Turning back to your questions, the FCRA specifies that businesses must have a "permissible purpose" to see a consumer's credit report. One such purpose is a "business transaction initiated by the consumer". A lease application is such a transaction. If a property manager obtains a credit report while acting on behalf of a landlord, both the landlord and the property manager are permitted users of the report under the FRCA.

Although your landlord client is permitted to see a tenant's credit report, you may have no obligation to provide that report. Since July 2015, NCAR's Exclusive Property Management Agreement for long-term rental property (Form 401) has included a provision covering the subject of "tenant information". Paragraph 16 of Form 401 notes that there are state and federal laws that regulate the maintenance and disposal of certain personal information of consumers. Paragraph 16 then states: "Owner agrees that Agent shall not be required to disclose any such information to Owner about a tenant or prospective tenant."   

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.

 

 

Does the Contract’s “Notice Information” section have to be filled out?

Release Date: 07/05/2016

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

QUESTION: The Q&A two weeks ago was about whether notices required or permitted under the Offer to Purchase and Contract (form 2-T) can be sent electronically.  The answer to the question was “yes.”  The Q&A pointed out that paragraph 21 of the Contract permits the use of electronic means for any notice or communication in connection with the Contract, provided that the “Notice Information” section on page 11 has been completed. 

It’s not uncommon to see contracts where none of the contact information for either the parties or their agents/firms is filled in.  Is that okay? 

ANSWER: No, it’s not okay.  Leaving the contact information on page 11 blank is sloppy and should be avoided.  Paragraph 21 of the Contract states that “[a]ny written notice or communication may be transmitted to any mailing address, e-mail address or fax number set forth in the “Notice Information” section” on page 11.  If no contact information for either of the parties or their agents has been filled in, it could raise a legal question as to whether a notice has been effectively sent.  For example, assume that a buyer decides to terminate the Contract on the last day of the Due Diligence Period.  The buyer agent emails a copy of a signed “Notice to Seller” (form 350-T) to the listing agent.  If the listing agent’s email address hasn’t been filled in on page 11, it could raise a legal question as to whether the Contract has been properly terminated during the Due Diligence Period since the seller arguably has not agreed that notices or communications may be transmitted to the listing agent by email.

The absence of the listing agent’s email address on page 11 is not necessarily fatal.  The Uniform Electronic Transactions Act (“UETA”) is the NC law that permits transactions to be conducted by electronic means.  UETA provides that “[w]hether the parties agree to conduct a transaction by electronic means is determined from the context and surrounding circumstances.”  If it can be established that the agents had communicated regularly with each other via email throughout the course of the transaction, an argument can be made that it was clear from the context and the surrounding circumstances that there was an implicit agreement that any written notice could be sent by email to the agents via the email addresses they had been using to communicate with each other.   However, this sort of legal argument would not be necessary at all if the agents involved had simply taken the time to fill in contact information on page 11.  Failing to do so opens the door to potential controversy.

It is a common practice for agents not to provide email addresses or other contact information for their clients because the agents do not want their clients being contacted directly by either the other agent or the other party to the transaction. That is understandable and fine.  But there is no excuse for failing to fill in contact information for the 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.

 

 

Can a REALTOR® include one of my listings in her print advertising without my consent?

Release Date: 06/28/2016

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

QUESTION:  I recently received a postcard that was sent out by a REALTOR® who lives in my neighborhood (I'll call her "Jane"). The postcard contained a list of 15-20 houses in the neighborhood and identified them as either sold, listed or under contract. While some of the "listed" properties were Jane's listings, many were not. For those active listings that were not hers, Jane did include the name and telephone number of the listing agent. One of those listings was mine. I never authorized Jane to advertise my listing and, while my client and I both appreciate the exposure of my client's property, I feel like Jane's advertising without my consent is improper. Am I right about that?     

ANSWER:  You are. While Jane's postcard does not violate the advertising provision in the North Carolina Real Estate Commission Rules, her advertising of your listing without your express permission is a violation of the REALTOR® Code of Ethics.

Article 12 of the Code of Ethics governs advertising by REALTORS®. That provision requires REALTORS® to be honest and truthful in their real estate communications. Standard of Practice 12-4 provides guidance that is relevant here. It provides, in part, that REALTORS® shall not advertise property without authority.

One of the Case Interpretations published in the Code of Ethics and Arbitration Manual provides additional guidance. Case #12-16 discusses the subject of "Copying and Publishing other Brokers' Advertisements". In that case, REALTOR® A had advertised certain listings of other brokers on his website. He had been careful to list the company name and phone number of the listing company with each ad of his competitors' listings. When one of those competitors ("REALTOR® B") found out about REALTOR® A's advertising, she filed an ethics complaint. The Hearing Panel found REALTOR® A in violation of Article 12. In their finding of facts, the Hearing Panel noted that even though REALTOR® B's clients might not object to such advertising, "the lack of objection could not be assumed and would not relieve REALTOR® A of the obligation to obtain REALTOR® B's specific authority and consent to advertise her listings."

 

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.