Friday, June 24, 2016

Understanding New Wis. Stat. s. 452.133(4m)

I have written much recently about the Chapter 452 Modernization Act.  In my last post, I introduced the Act's distinction between "firms" and "licensees" to explain real estate firm responsibility for misrepresentations made by licensees associated with that firm.  To review, buyers and sellers enter into contracts with real estate firms, such as Shorewest, First Weber, Re/Max, or EXIT.  The individual real estate agent providing services to the buyer or seller is known as a licensee - he or she is individually licensed as a Real Estate Broker or Real Estate Salesperson by the State of Wisconsin.

Wis. Stat. s. 452.133 has long spelled out the duties of real estate agents.  As of right now (most of the Chapter 452 Modernization Act does not take effect until July 1st), this section is titled "Duties of brokers."  Wis. Stat. s. 452.133(1) spells out broker duties to all parties in a transaction, while s. 452.133(2) sets forth broker duties to clients.  The word "broker" is somewhat confusing.  Wis. Stat. s. 452.01(2)(a) defines "broker" in terms of a "person," while the standard WB-1 Residential Listing Contract uses "broker" in terms of a firm with real estate agents.

At first glance, Wis. Stat. s. 452.133(1) and (2) appear to clarify that it is the firm that owes duties to parties and clients:
(1) Duties to all parties to a transaction. A firm providing brokerage services to a party to a transaction owes all of the following duties to the party:
(a) The duty to provide brokerage services honestly and fairly.
(b) The duty to provide brokerage services with reasonable skill and care.
(c) The duty to timely disclose in writing all material adverse facts that the firm knows and that the party does not know or cannot discover through reasonably vigilant observation, unless the disclosure of a material adverse fact is prohibited by law.
(d) The duty to keep confidential any information given to the firm in confidence, or any information obtained by the firm that the firm knows a reasonable person would want to be kept confidential, unless the information must be disclosed by law or the person whose interests may be adversely affected by the disclosure specifically authorizes the disclosure of particular information. The firm shall continue to keep the information confidential after the transaction is complete and after the firm is no longer providing brokerage services to the party.
(e) The duty to provide accurate information about market conditions that affect the transaction, within a reasonable time after a request for such information by the party, unless disclosure of the information is prohibited by law.
(f) The duty to safeguard trust funds and other property held as required by rules promulgated under s. 452.13 (5).
(g) When the firm is negotiating on behalf of a party, the duty to present contract proposals in an objective and unbiased manner and disclose the advantages and disadvantages of the proposals.
(2)Duties to clients. A firm providing brokerage services to a client owes the client the duties that the firm owes to a party under sub. (1) and all of the following additional duties:
(a) The duty to loyally represent the client's interests by doing all of the following:
1. Placing the client's interests ahead of the interests of the firm.
2. Placing the client's interests ahead of the interests of persons in the transaction who are not the firm's clients by not disclosing to persons in the transaction other than the firm's clients information or advice the disclosure of which is contrary to the interests of a client of the firm, unless the disclosure is required by law.
(am) The duty to provide, when requested by the client, information and advice to the client on matters that are material to the client's transaction and that are within the scope of the knowledge, skills, and training required under this chapter.
(b) The duty to disclose to the client all information known by the firm that is material to the transaction and that is not known by the client or discoverable by the client through reasonably vigilant observation, except for confidential information under sub. (1) (d) and other information the disclosure of which is prohibited by law.
(c) The duty to fulfill any obligation required by the agency agreement, and any order of the client that is within the scope of the agency agreement, that is not inconsistent with another duty that the firm has under this chapter or any other law.
(d) The duty to negotiate on behalf of the client.

OK, so licensees are responsible for their own misrepresentations, but firms are solely responsible for brokerage services?  Not exactly.  Enter brand new s. 452.133(4m):

Duties and prohibitions; application to licensees.
(a) Subject to par. (d), a firm's duties under sub. (1) extend to each licensee associated with that firm, and each licensee associated with a firm owes the same duties to a party that the firm owes to that party under sub. (1).
(b) Except as provided in s. 452.134 (3) (b) and subject to par. (d), a firm's duties under sub. (2) extend to each licensee associated with that firm, and each licensee associated with a firm owes the same duties to a client of the firm that the firm owes to that client under sub. (2).
(c)
1. Subject to par. (d), a subagent's duties under sub. (4) (a) extend to each licensee associated with that subagent, and each licensee associated with a subagent owes the same duties to a party that the subagent owes to that party under sub. (4) (a).
2. Subject to par. (d), the prohibitions that apply to a subagent under sub. (4) (b) extend to each licensee associated with that subagent, and no licensee associated with a subagent may take any action that the subagent is prohibited from taking under sub. (4) (b).
(d) The duties and prohibitions under pars. (a) to (c) extend only to a licensee providing brokerage services to a party to the transaction.

While the phrasing is rather clumsy, the gist appears to be that both real estate firms and individual licensees can be held responsible for breaching the duties owed under ss. 452.133(1) and (2).  In fact, even licensees affiliated with the firm who do not provide actual brokerage services to anyone in the transaction can still be held personally responsible if they violate confidentiality, provide inaccurate information about market conditions per a party's request, or fail to safeguard trust funds.  In sum, personal responsibility (and thus personal liability) for both real estate firms and individual licensees will apparently be the rule under Wis. Stat. s. 452.133.