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Legal Hotline Attorney Vern Jarboe answers frequently asked questions from Kansas REALTORS® about their transactions.
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Question: You asked about a situation where your broker, because of her age, has decided to retire and is going to turn the business over to you. She will continue as an associate broker. You wanted to know if the best time to do this would be when her license came up for renewal.
Answer: This would seem to be the logical time. You also wanted to know how you should operate the business. It would probably be best to place the business in a limited liability company which would protect you from personal liability if a claim is brought against the business. You would need to contact a lawyer to prepare the documents for setting up the limited liability company.
Question: You asked about a situation where you had a buyer's agency agreement. The agreement states that you will be paid a commission. The buyer has contracted to buy a home in foreclosure. The seller is going to pay a co-op fee less than your contract with the buyer provides and you wanted to know if you could collect the remaining amount from the buyer.
Answer: Under the terms of the buyer's agency agreement, you are entitled to your commission and therefore are entitled to collect the amount not paid by the seller from the buyer.
Question: You asked about a situation where you were acting as a buyer's agent for a friend. The parties entered into an agreement pursuant to which the buyers were buying a house "as is." The sellers represented that they had paid for the grinder system so that the house could be hooked up to the county sewage system. The sellers have since learned that the sellers did not pay for the grinder system and that the county is saying the current septic system can no longer be used.
Answer: Even though the house is being sold "as is," the sellers are still responsible for any matters or problems of which they had knowledge and which were not disclosed. The buyers are relying on the disclosed information when they make an offer, and any material information as to the condition of the property should be disclosed. The sellers may be liable for remedying those problems of which they knew and should have disclosed. The buyers may need to consult with their own attorney as to their rights under the contract.
Question: You have a situation where an out-of-state broker wants to represent himself in a transaction. The purpose of that self representation is a claim for the selling side commission.
Answer: I don't believe that you can legally pay the selling side commission to a person not licensed in the state of Kansas. However, you could pay a referral fee to such a person and he could represent himself as an unlicensed person although the fact that he is licensed in Arizona should be disclosed to the seller. There is no regulation of the size of a referral fee.
Question: You have a situation where you E and O policy has required you to pay your deductible even though your case was successfully defended. Under the terms of the policy the obligation for attorney's fees even in a successfully defended case count against your deductible and is therefore an obligation you have to meet.
Answer: This has become a fairly standard requirement in most errors and omissions policies. It is unlikely you would be able to collect the payment you have to make from the plaintiff who filed the apparently bogus case against you. The collection of attorney's fees based upon litigation proving to be without merit has an extremely high standard which is unlikely to be met in most cases.
Question: You have a situation where closing will occur substantially before possession. The seller will therefore have an insurable risk in the property and specifically the personal property which would remain within the property until possession is eventually delivered. Similarly, the buyer has an insurable interest in the improvements to the real estate.
Answer: Both parties should discuss this issue with their respective insurance companies to determine whether the seller should in effect acquire a renter's policy and whether or not the buyer can acquire typical homeowner's insurance even though they will not be in possession for a brief period.
Question: You have a question about whether or not you can charge for your time in situations which do not necessarily involve the sale of real property. Some customers are looking for information and assistance with short sales and refinances which in effect requires you to provide clerical assistance.
Answer: You need to be careful in working with such situations because some of what you may be invited to do will be the same as lenders or legal work. Obviously, you don't have a license for those types of work and therefore should avoid doing anything which advises people about their rights or remedies in specific transactions. Nothing in the real estate license law would prevent you from charging someone for providing them with assistance which is tantamount to clerical help. Advertising how such assistance is available may, if there is any claim of misrepresentation, still involve the Real Estate Commission in looking over your shoulder.
Question: You have a situation where you have shown a buyer numerous homes. Apparently, the buyer signed a contract with a for-sale-by-owner to acquire their property, but has now determined that contract not to be in the buyer's best interest.
Answer: You need to be careful about interfering with that contract and the buyer probably needs to cancel that agreement before signing a new contract to buy alternative property that you have matched them up with. If the buyer intentionally enters into a second contract without canceling the first and by virtue of the second contract make them unqualified for purchasing the home identified in the first contract, the seller in the first contract may well make a breach of contract claim. They need an attorney to evaluate those risks.
Question: You have a situation where an individual signed on behalf of an LLC to list property. That individual has also been involved in negotiations with respect to the property and was residing in the property. You now have a situation where a second person claims to be the true owner of that LLC and that the first person does not have authority to negotiate on behalf of or sign contracts for the LLC.
Answer: When dealing with corporations, partnerships, limited liability companies or other entities, it is always important to try to make sure you are dealing with the person in authority. In this instance, it would appear you were justified in assuming the person with whom you were dealing had authority. In order to resolve the current controversy, it would be wise to have the person who now claims to have authority to sign something specifically confirming to you their claim of right to sign on behalf of the entity.
