Friday, April 15, 2016

Exploiting Wis. Stat. s. 452.142's Weaknesses - The Seller's Contribution Claim

This is another post about the "Chapter 452 Modernization Act" and its two-year statute of limitations for claims against real estate agents.  I've written about this new law here, here, here, here, and here.  To review, Wis. Stat. s. 452.142 provides as follows:

(1) Notwithstanding s. 100.18 (11) (b) 3.893.43893.52, or 893.57, an action concerning any act or omission of a firm or any licensee associated with the firm relating to brokerage services shall be commenced within 2 years after whichever of the following that applies occurs first:
(a) A transaction is completed or closed.
(b) An agency agreement is terminated.
(c) An unconsummated transaction is terminated or expires.
(2) The period of limitation under this section may not be reduced by agreement.
(3) The period of limitation under this section does not apply to disciplinary actions initiated by the board.

This new statute looks all-encompassing.  For whatever reason, the Wisconsin REALTORS Association tried really hard to protect the sloppy and careless real estate agents that give the profession a bad name.  Since this new statute exempts claims against real estate agents from Wis. Stat. s. 893.43, buyers and sellers only have two years (instead of six years) to commence breach of contract claims against real estate agents under some circumstances.  Since this new statute exempts claims against real estate agents from Wis. Stat. s. 893.52, buyers and sellers only have two years to commence negligence claims against real estate agents under some circumstances.

Under some circumstances?!? Unfortunately for bad real estate agents, their allies in the WRA and the legislature failed to recognize that many of the claims asserted against real estate agents are asserted by sellers who have already been named as a defendant in a lawsuit.  Here's how the scenario typically plays out:

The seller asks his real estate agent (the listing agent) if he really needs to disclose basement leakage in his Real Estate Condition Report, claiming that he only got water in his basement during the "100 year floods" of 2008 and 2010 and has not seen any since.  The listing agent says "of course not!"  The buyer purchases the property in reliance on the seller's Real Estate Condition Report, in which the seller represented that he was not aware of any basement leakage during his fifteen years of ownership.  The buyer closes on his purchase and moves into the property.  The buyer has to shop vac three inches of water off of the entire basement floor after the first snowmelt and has to deal with some amount of basement leakage after every rain.  The buyer retains my firm, and we commence a misrepresentation lawsuit against the seller.  After getting served with our lawsuit, the seller meets with an attorney and tells him about the listing agent's advice on completing the Real Estate Condition Report.

The seller's case against the listing agent is that the agent's advice on completing the Real Estate Condition Report caused him to get sued for misrepresentation.  This is an action for contribution, which is governed by Wis. Stat. s. 893.92.  The new statute does not mention s. 893.92 and therefore does not exempt contribution causes of action against real estate agents from the existing statute of limitation for contribution claims.  Consequently, the seller could sue his listing agent for contribution after being sued.  Indeed, he could wait until after he is adjudged liable for misrepresentation before suing the listing agent, see Estate of Rille v. Physicians Ins. Co., 2007 WI 36, para. 15, as long as he sues within one year after his cause of action for contribution accrues.  This is true even if the buyer waited two, four, or even six years after the closing to sue the seller.  The seller may have statute of limitations defenses to some or all of the buyer's misrepresentation claims, but that does not affect the seller's contribution claim against the listing agent.

As a practical matter, the new statute should bar very few of the claims that sellers could assert against their real estate agents.  What other reason could a seller have for suing his real estate agent besides getting sued by the buyer due to that agent's bad advice?  Failing to sell a property fast enough or for enough money does not justify a lawsuit.  After all, the seller agreed to the sales price and it would be difficult to prove that some other real estate agent would have sold the property on more favorable terms.  A seller might defend a lawsuit by his real estate agent for unpaid commissions by arguing that his agent did a bad job and is not entitled to any commission, but the new statute would not apply to such a defense because the seller is not commencing an action.  While the new statute will certainly affect buyers' claims against their real estate agents, it should have little effect on sellers' claims against their agents.