Monday, May 30, 2016

Seller Liability For Agent Misrepresentations

Buyers of residential real estate in Wisconsin typically receive a Real Estate Condition Report from the previous owners (or sellers) of the property.  In this Real Estate Condition Report, the sellers are required to disclose their awareness of defects or adverse conditions affecting the property.  While the sellers tell buyers everything that is wrong with their home, their real estate agent tells buyers (or their agents) everything that is supposedly good.  The sellers' real estate agent advertises the property on her website; the Multiple Listing Service; other real estate websites such as Realtor, Zillow, and Trulia; and social media.  Could the buyers hold the sellers liable if the real estate agent misrepresents the acreage, the square footage, the number of bedrooms or bathrooms, the age of the roof, the warranty on foundation repairs, the materials used to remodel the kitchen or bathroom, or lake access?

Wis. Stat. s. 452.139(2)(a) attempts to answer this very question:

A client is not liable for a misrepresentation made in connection with the provision of brokerage services by a firm or any licensee associated with the firm, unless the client knows or should have known of the misrepresentation or the firm or licensee is repeating a misrepresentation made by the client.

At first blush, this statute appears to absolve sellers from liability from most real estate agent misrepresentations.  Trouble is, the standard WB-1 Residential Listing Contract includes provisions under which sellers specifically authorize their real estate agent to market the property using certain media and to "do those acts reasonably necessary to effect a sale. . . ."  One could use this language to argue that the sellers should have known of their agent's misrepresentations because they specifically authorized - and even demanded - that their agent advertise their home a certain way.

In order to reduce this risk, I recommend that sellers demand that their listing contract include a provision giving them the right to approve or disapprove the content of all advertising prior to its publication.

Are you considering selling your home?  Please email me at rudolphkuss@stevensandkuss.com for a free initial consultation.    

Sunday, May 29, 2016

Sellers: Get Lien Waivers

I recently wrote a post on LinkedIn explaining the Wisconsin Construction Lien Law from a contractor's perspective.  Since this blog is for homeowners (who I primarily represent anyway), this post will explain the Wisconsin Construction Lien Law from a homeowner's perspective.  In particular, I address this post towards homeowners who are planning on selling their home and are having work done in preparation for that sale.

Many sellers have their home painted to give it a fresh look and make it look more appealing to buyers.  This is generally a good idea, as long as you're not trying to conceal structural defects or signs of leakage.  While some homeowners handle all of the painting themselves, many homeowners choose to hire a professional painter.

You pay the painter in advance for the paint and pay him for his labor after he has painted all of the walls and ceilings in your home.  The painter gives you a handwritten receipt for your cash payment.  Your home looks stunning and sells quickly.  Everything is zen until the title company requires you to sign an affidavit itemizing all work that has been performed on your property during the past six months.  Upon reviewing your affidavit, the title company asks you for the lien waiver from your painter.  Like many homeowners, you ask "what's a lien waiver?"

The Wisconsin Construction Lien Law essentially protects contractors from getting stiffed on payment by property owners.  Wis. Stat. s. 779.01(3) provides as follows:

Any person who performs, furnishes, or procures any work, labor, service, materials, plans, or specifications, used or consumed for the improvement of land, and who complies with s. 779.02, shall have a lien therefor on all interests in the land belonging to its owners

Your painter arguably has a lien or interest in your property.  Your title company and your buyer's mortgage lender do not want anyone else to have an interest in the property at the time of closing.  They will not accept the risk that your contractor could foreclose on the property after closing.

I understand that this requirement makes little sense under some circumstances.  Your painter's work arguably has not been "used or consumed for the improvement of land," though the definition of "improve" under s. 779.01(2)(a)  includes "remodeling."  Your painter may have forfeited his lien rights under Wis. Stat. s. 779.02 by failing to provide you with written notice of his lien rights at the time of contracting or within 10 days after buying the paint.  Besides, you paid him in full and got a receipt!  Trouble is, the title company likely will not care that neither you nor the painter think that the painter has a lien on your property.  You will get a lien waiver or you will not close on your sale.

Wis. Stat. s. 779.05 contains the formal requirements for lien waivers.  Fortunately, this isn't rocket science.  Title companies provide lien waiver forms.  Wisconsin Legal Blank also supplies contractors with these forms.  You simply need to contact your painter and get him to complete and sign a lien waiver.

I represent both buyers and sellers in residential real estate transactions.  Please email me at rudolphkuss@stevensandkuss.com for a free initial consultation.