Legal Lines

WE’RE TAKING ON simple, routine, non-controversial topics this time, involving the Attorney General, the Real Estate and Appraiser boards, foreclosures, fraud – things like that.Support the troops

Q. Have you heard from the Attorney General lately?

A. I got a nice call a couple of weeks ago, thanks. Actually, an attorney from the Coast Guard called and asked me to remind all REALTORS® that regardless of what your landlord’s lease provides, a landlord subject to the Residential Landlord Tenant Act may not charge members of the military for early termination of their leases, if termination is done in accordance with the Act. Mitigation is no longer permitted, even if the lease so provides. (The Act was amended a year or two ago, but old leases may still be in effect.) According to the Coast Guard, the AG is watching Virginia property managers and landlords closely, so remember that whatever your lease says, mitigation is no longer permitted, and you may not charge active duty tenants for early termination. Please be sure that all new leases are consistent with the Act as amended.

No licensed agent? no open house

Q. May my unlicensed assistant conduct open houses if she merely permits access and hands out general information about the property and does not answer any questions about the house or give advice to the visitors?

A. There are two theories about how unlicensed assistants can legally do open houses in Virginia. Unfortunately, neither works. The Real Estate Board (REB) has long considered holding open houses to be the practice of real estate, and thus appropriate only for licensees, regardless of whatever is said or done at the open house. When the subject was raised again recently, I asked REB to revisit the issue and let us know whether its position had changed. The board confirmed its long-standing position that only licensees may hold houses open. I realize there has been quite a bit of information disseminated lately to the opposite effect, in articles, on blogs, in continuing education courses and elsewhere. In many cases, this information deals with the law in other states where the law may be different. In Virginia, however, at least in the opinion of the REB, this practice requires a license.

Pay up…dead or alive (or retired)

Q. An agent left my firm with several deals pending, but was not affiliated with another firm by the time the deals closed. If the agent’s license is inactive, may I legally pay him the commission he is owed on these deals as they close? If he has affiliated with a new firm, must I pay the commission to his new broker?

A. There is a great deal of confusion on this matter, so let’s clear it up once and for all. The only relevant issue is whether the agent was actively licensed at the time he performed the act for which the commission is due (obtaining the listing or buyer agency relationship, obtaining a purchase contract or lease, or whatever it is that gives rise to the entitlement to a commission). His license status at the time of payment is irrelevant. So if, for example, he obtains a listing, and it goes under contract while he is at your firm, you may pay him at closing whatever his status. The verity of this can best be illustrated with the following example. Suppose a commercial agent obtains a ten-year lease with a ten-year renewal, on which the firm is to be paid its commission monthly as rent is received from the tenant. Can we really require the agent to remain actively licensed for the next 20 years to receive his monthly commission split? What if he died during the term of the lease? Obviously, we can’t outlaw retirement or death for this fellow, but may pay him, or his estate, or his designee, whatever his license status at the time of payment. It is license status at the time of his actions giving rise to the entitlement that matters, not what he decides to do thereafter. He can go to Tahiti and paint the natives while basking like a lizard on a rock, or he can keep working. You can pay him either way. By the way, if he joins another firm, you pay him, not his new broker. Your debt is to him, and the new firm has no entitlement to any of his fee. The broker of the firm receiving the commission on the deal is the broker the REB regulations are speaking of when they require all fees to be received through the firm’s broker.

An exemption…with exception

Q. Do foreclosing lenders have to provide disclosure statements, Property owners Association (PoA) packets or condominium resale certificates to buyers who buy at the foreclosure?

A. No. The relevant statutes exempt foreclosing lenders and their trustees from these requirements. As to REO, the lender is likewise exempt from the requirements of the Residential Property Disclosure Act, and thus does not have to provide a disclosure statement. Lenders selling REO must provide the POA packet and the condominium resale certificate, but buyers may waive the right to receive the condominium resale certificate, although they may not waive the right to receive the POA packet. Got that? I knew you would. Be very careful about language in REO contracts attempting to affect a waiver as to these documents.

These provisions often say something like “to the fullest extent allowed by law” buyer waives the right to receive the information, but Virginia law is clear that contract waiver language is unenforceable against buyers of POA property. The Condominium Act has no such prohibition against waiver, so I assume the right to receive the resale certificate can be waived by contract.

This entry was posted in Uncategorized. Bookmark the permalink.

5 Responses to Legal Lines

  1. Steve says:

    RE: Commonwealth magazine page 8.

    In legal lines, it states that REO properties are exempt from the Residential Property Disclosure Act.

    I understood that Trustee sales (sales at the courthouse steps) were exempt, because that is a transfer by foreclosure which is an exemption. At that Trustee sale, normally the lender foreclosing on the property will start the bidding and if no one else bids, the bank will be the new owner of the home.

    An REO property is a separate sale from the trustee sale, and is not a foreclosure sale, so why are REO properties exempt?

    Thanks,

    Steve

  2. Bob Jurgensen says:

    Lem: Can you help me understand something that I think impacts our profession every minute of every day? WHY does the state of Virginia feel that it is appropriate to permit ‘2 week wonders’ to inflict themselves on the general public without so much as any mentoring or apprenticing under an associate broker – similar to the way appraisers and even home inspectors work? I mean, WHY is it that you can get a license (and perhaps not even speak good English?) in two short weeks then start practicing with no REAL supervision (let me tell you there is NO supervision on about 90% of these agents today!) or REAL training. Why not have BROKER licensure (like so many other states do now) and require a three year mentoring or apprenticeship before ever being permitted to put your name on a contract or get paid anything more than a referral fee? I mean, THAT WOULD GET RID OF SOME OF THE IDIOTS that call themselves Realtors, wouldn’t it? But alas, that would mean less dues and licensing fees (which I would gladly pay higher IF…) and that surely would not be acceptable to the money driven motivations of the local associations and even DPOR, would it. I’m angry – and honestly, I don’t think we, as a profession, can take much more of this nonsense. WAKE UP DPOR, NAR and VAR – it’s time for change – real, meaningful change in this industry!

    Stepping off my soapbox now…

  3. Blake Hegeman, VAR Associate Counsel says:

    Steve:

    The General Assembly exempted REO sellers from the Virginia Residential Property Disclosure Act (55-518(2)) because such sellers are not expected to have sufficient knowledge about the property they are selling to provide the disclosure.

  4. Lem/Blake

    Thanks for posting these thoughts on VARBuzz, it’s been a great resource for members who call in with questions, both this and the similar section on VARealtor.com.

    Thanks, again!

  5. Marcus Simon says:

    I would be intersted in hearing why Lem thinks the Condo Act Resale requirements are waivable in light of the Code Section quoted below.

    http://leg1.state.va.us/cgi-bin/legp504.exe?000+cod+55-79.41C1

    § 55-79.41:1. Variation by agreement.

    Except as expressly provided in this chapter, provisions of this chapter may not be varied by agreement, and rights conferred by this chapter may not be waived. A declarant may not act under power of attorney or use any other device to evade the limitations or prohibitions of this chapter or of the condominium instruments.

    (1982, c. 545.)

Leave a Reply

Your email address will not be published. Required fields are marked *