July 1 means we’re half-way through 2008. It also means there are several new laws, rules and regulations going into effect that impact the real estate business in Virginia. Here are some of the highlights in case you missed them in earlier VAR communications:

1. A bushel of new Virginia laws affecting real estate professionals will be enforced beginning tomorrow. You can download a convenient two-sided legal-size summary (PDF) of the new laws to get more information. If the print is too small for your taste, try the whitepaper version (PDF).
2. Changes to the laws governing property owners associations passed in the 2008 Virginia General Assembly (also effective beginning July 1) are so sweeping, we’ve created a special webcast with VAR’s special counsel Lem Marshall to address them. Watch it here.
3. Related to the property owners association act, VREB has just released an FAQ document about the Common Interest Community Board and the Office of the Common Interest Community Ombudsman. Download it (PDF) here.
4. All real estate brokers with VREB license renewals due on or after July 1, 2008 must complete eight hours of broker management and agent supervision CE in their two year renewal cycle. Download a letter (PDF) from VREB for full details.
5. The IRS raises its mileage reimbursement rate tomorrow to $0.585 per mile.
6. Tomorrow (but not before), you can toast all these new rules and regulations with a glass of sangria at your favorite Spanish tapas restaurant. That’s right, Virginia restaurants can serve drinks that mix beer or wine with liquors without fear of prosecution beginning tomorrow.

It all started with a simple question to VAR legal guru Lem Marshall concerning a proposed major change to our county zoning ordinance. Without getting into all the details of the zoning change, suffice it to say this is a major change for our county from a fairly simple two acre minimum building lot to the sliding scale as shown.

STANDARD SUBDIVISIONS
Parcel Acreage # Lots
4 -10acres = 2 lots 140.01 - 180 = 10 lots
10.01 - 20 = 3 lots 180.01 - 220 = 11 lots
20.01 - 30 = 4 lots 220.01 - 260 = 12 lots
30.01 - 40 = 5 lots 260.01 - 320 = 13 lots
40.01 - 60 = 6 lots 320.01 - 380 = 14 lots
60.01 - 80 = 7 lots 380.01 - 440 = 15lots
80.01 - 100 = 8 lots 440.01 - 500 = 16lots
100.01 - 140 = 9 lots 500.01=16 lots+ 1/100 acres

Lem: Our county is about to pass this new sliding scale zoning: http://www.co.rockbridge.va.us/pubhearings/JPH080501.pdf. We need to know our obligations as REALTORS® for disclosure – how they are different – what about existing listings – what about under contract properties …

Lem’s quick response:

I don’t see that it’s the listing agent’s job to do the buyer’s due diligence as to zoning or the suitability of the land for buyer’s purposes.

The agent of the buyer buying development property, on the other hand, should be up to speed on this kind of change, and bring it to the attention of the buyer client. But even then the contract (if one has been entered into) should speak to buyer’s obtaining certain assurances as to zoning and planning approval, and if the buyer has not already reserved that due diligence right, he’s in trouble even before this change.

Like all land-use issues, the commercial broker needs to be able to guide buyers in the basics of due diligence (assuming the buyer is not represented by competent real estate counsel) and to suggest the appropriate provisions be included in the offer. Otherwise, I don’t see the need for any special disclosures, especially by the listing agent.

I’m relieved to check this off my “to do list” and report back to our Association Board of Directors Lem’s note along with my thoughts “…seems to follow along with the “Buyer Beware.”

But not so fast, we have member questions & further concerns. The following are excerpts from a string of emails that I found to be a very interesting lesson on Agency.

Member concerns & questions:

We need to get our membership educated on the new law and how it will affect our business practices. We need to be sure that we do not expose ourselves to an liability for passing along incorrect information to sellers or buyers.

Lem, I’m very concerned about liability for our agents on either side of any transaction and believe that disclosure backed up by documentation is need for this to work.

Lem’s Response:

Pursuant to what requirement do sellers and listing agents have to inform buyers about zoning issues? There has never been such a requirement, and the latest changes to the Code of Virginia make specifically clear that land use issues are beyond the disclosure obligations of listing agents. See Section 54.1-2131.

This is the buyer’s responsibility. Any buyer who buys land to build on should not expect seller or the seller’s agent to determine and inform buyer about how many lots can be carved out of the land purchased. This is the buyer’s responsibility, and the buyer’s alone. (Buyer agents might have some responsibility to alert buyers to the need to check, but even our buyer agents are not expected to be zoning experts.) This information is available from the locality, and if the buyer wants it, that’s where he gets it. He and the buyer agent can determine the role the buyer agent is expected to play, but to my mind, the proper role is not to play zoning expert, but to remind the buyer (if he needs reminding) that the buyer needs to do due diligence about the suitability of the property for the buyer’s purposes.

I would even go further. Listing agents who take it upon themselves to make representations about zoning may do so, but they do so at their considerable risk. If they’re going to render zoning opinions to the buyer, they had better be right. Why would they take on this responsibility?

Further member concerns:

Actually, I’m relieved to know that there is no requirement that listing agents reveal in advertising or mls listings the maximum number of building rights a parcel may have by law and that buyer agents may direct their clients to do their own due diligence in that regard.

I don’t see this as a zoning issue. When a seller, for instance, wants to sell off a portion of his property he will have to clearly state how many building rights are going to convey with it… When it comes to advising a seller client about a suggested listing price or a buyer client on an appropriate offer amount, shouldn’t agents consider this type of information? Should we direct our clients to produce this information for us before we can provide such advice?

Isn’t this information a material fact about a property just like some uncommon easements (mineral rights) or covenants (conservation easements)? If not, please help me to understand why it isn’t. I know a number of experienced agents who see this just as I do.

Is it possible that we practice the profession locally a bit differently than some in other parts of Virginia?

Lem’s response

I think I understand what you’re saying about the importance of the zoning/building lot issue, but where I think we’re getting crossed up is in determining whose responsibility it is to protect the buyer here. Certainly listing agents need to be able to counsel sellers about their affairs in this regard, and buyer agents need to be able to help buyers. But the original inquiry was as to whether listing agents have a duty to buyers to disclose how many houses can be built on a particular piece of land being sold. Ultimately, this is a land-use and zoning issue, because the number of units that can be built on a particular lot is a function of the zoning ordinance you are dealing with. (Building density is always a zoning issue.) I don’t know how else to say it except that sellers of real estate and their agents have no duty to make determinations and then representations to buyers about land-use issues.

Section 54.1-2131 B of the Code of Virginia provides: “A licensee engaged by a seller shall disclose to prospective buyers all material adverse facts pertaining to the physical condition of the property which are actually known by the licensee. As used in this section, the term ‘physical condition of the property’ shall refer to the physical condition of the land and any improvements thereon, and shall not refer to: … (ii) matters relating to governmental land use regulations ….”

I think this is the main confusion. What you say about the advice agents are expected to give their clients is true, but you shouldn’t take it further to impose on listing agents an obligation to do land-use due diligence for buyers. If it’s in the seller’s interest for the listing agent to be involved in the buyer’s affairs, so be it. But the legal duty just isn’t there, other than as necessary to achieve the seller’s objectives. And as I said earlier, there’s substantial risk in making zoning and other land-use representations to anybody.

A member’s conclusion:

It isn’t the listing agent’s responsibility to disclose to a prospective buyer how many building rights a listed property may have just as it isn’t the buyer agent’s responsibility to do the same for his client. If needed, they should both refer their clients to the appropriate authorities or professionals for accurate information.

As agents we all strive to serve our clients to the best of our abilities. The member questions were all good questions, coming from a seasoned agent that works hard for their clients. They take the time to get to know the clients requirements and use for the property, they take their responsibility and duties to their client seriously. This exchange illustrates just how easy it is to overstep our agency obligations; not only exposing ourselves to unnecessary liability but also actually not representing our clients best interest.

Moral of the story : Be the source of the source not the source.

Note: Bold and italics added by Candy Lynn for emphasis.

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.

Congratulations to Alexandria REALTOR Brian Block, one of the newest real estate brokers in the Commonwealth of Virginia. Fortunately for us, Brian wrote a blog post about his experience preparing for the exam and about the process of actually taking the exam. For anyone considering taking the plunge and taking the broker’s exam, this is a must read post.

Well, we knew it was good, we just didn’t expect this overwhelming response!

After just a few months of availability, VAR’s Broker Tool Kit has crossed a significant milestone: 2000 downloads. VAR’s Broker Tool Kit is a comprehensive guide to everything you need to know about starting a real estate brokerage in Virginia. Even if you’ve managed a brokerage for years, you’ll want to keep this resource handy for the times you run up against situations you’ve never encountered. Developed collaboratively by VAR staff attorneys and the Virginia Manager’s Council, this convenient desk reference is free for all VAR members.

Another popular VAR resource making the rounds these days is our 10 Things you should know about today’s Virginia real estate markets. It’s title isn’t concise, but this colorful, engaging piece covers 10 important things to keep in mind about today’s housing market in just a few words. You, your agents, and clients will find facts and figures to put the current housing market into context in a way that acknowledges the flattening market. We encourage you to download a high-quality full-color PDF of this piece, print it, and share it at your next sales meeting and client appointment.

Other pages at VARealtor.com getting lots of traffic recently are the Standard Forms area, our Rookie REALTORS® section, and the REALTOR® Institute page.

Are you taking advantage of us? When it comes to the products and services we aim to provide to REALTORS®, we wish you would! Be sure you get your money’s worth from your investment in VAR by using the benefits we work hard to provide.