In my last post, I discussed seller liability for misrepresentations made by real estate agents. Today, I discuss firm responsibility for these misrepresentations.
In my series of posts discussing the Chapter 452 Modernization Act, I have consistently used the legally meaningless term "real estate agent" because I wanted to focus on the important changes to Chapter 452 rather than the technical distinctions between "licensees," "brokers," and "firms." As a practical matter, buyers and sellers need to know that their listing contract or buyers' agency agreement is not with an individual real estate agent. Buyers and sellers contract with business entities such as Shorewest REALTORS, First Weber Group, RE/MAX, and EXIT Realty. Your individual real estate agent is an associate of the business entity that you contracted with. That's an important distinction for buyers and sellers to bear in mind in the event that they want to terminate their contract.
The Chapter 452 Modernization Act reduces the broker or real estate firm's responsibility for the actions of its real estate agents.
Wis. Stat. s. 452.12(3) used to state the following: "Subject to s. 452.139 (3), each broker shall supervise, and is responsible for, the brokerage services provided on behalf of the broker by any broker, salesperson, or time-share salesperson who is an employee of the broker."
The new s. 452.12(3) says, "Subject to s. 452.139 (3), a firm is responsible for the brokerage services provided on behalf of the firm by a licensee associated with the firm only to the extent that the firm fails to comply with s. 452.132 and any rules promulgated under s. 452.07 (1m) with respect to that licensee."
While the old statute appeared to presume broker or firm responsibility for the acts of individual real estate agents, the new statute appears to presume the exact opposite.
The "shall supervise" language from the old statute is gone, though it has been replaced by Wis. Stat. s. 452.132:
In short, the Chapter 452 Modernization Act clearly tells real estate firms what they must do in order to properly supervise their licensees and avoid liability for negligent supervision. None of these supervisory requirements appear designed to prevent misrepresentations made by individual real estate agents.
While it is tempting to cite this provision of the Chapter 452 Modernization Act as another example of how the legislature protected campaign contributors at the expense of Wisconsin homeowners, we must bear in mind that real estate agents are independent contractors. Imposing broad supervisory requirements on real estate firms creates the risk that independent real estate agents will be treated as employees for tax and regulatory purposes. While I continue to believe that real estate agents should be allowed to pursue wage claims against their firms for unpaid commissions, many other labor laws make absolutely no sense as applied to real estate agents, such as minimum wage laws. The application of labor laws to independent real estate agents would deter real estate firms from using such agents, which would in turn reduce the number of real estate agents that buyers and sellers can choose from. The risk of courts and federal agencies treating independent real estate agents as "employees" is real, see, e.g., Monell v. Boston Pads LLC, 471 Mass. 566 (2015), so I can understand why the WRA acted to preserve the independent contractor status of real estate agents through convincing the legislature to amend Wis. Stat. s. 452.12(3) and enact Wis. Stat. ss. 452.132 and 452.38.