Best of the legal hotline: August edition

By James Goldsmith | Aug. 25, 2016 | 6 min. read

Normally, these Best of the Hotline articles are modified to emphasize a particular issue to arouse the curiosity and interest of you, the reader; however, the following seven questions are straight from the “horse’s mouth” from a morning of calls. Feel free to draw your own conclusion.

Q. The seller accepted the buyer’s offer, which was contingent on FHA financing. The agreement was also contingent on the outcome of a home inspection, which revealed a number of major and minor problems. The buyer submitted a corrective proposal, which was rejected by the seller who refused to make any repairs, contribute money or reduce the purchase price. Didn’t the seller, knowing that this was an FHA loan that would probably require some seller repairs, breach the agreement by refusing to do anything?
A. No. While it is true that sellers will likely have to make repairs in the average FHA purchase, the Agreement of Sale does not require that sellers do so. The terms of the Agreement of Sale relative to inspection contingencies are clear.

Q. Did the other agent violate the NAR Code of Ethics?
A. Note that I didn’t provide you with any factual basis by which you might decide the answer to this question. The hotline attorneys will give the same answer, regardless of the facts: “whether a Realtor® has violated the Code of Ethics depends on what the three-person hearing panel decides after a fairly conducted hearing.” We might go on to express opinions about the alleged conduct, but keep in mind that the hotline rarely gets both sides of the story.

Q. My name, as registered with the Real Estate Commission, is Alexander Graham Bell. I want to advertise under the name Alex Bell. Can I do so?
A. Yes, but register Alex as a nickname with the Real Estate Commission. You may do so by letter to the Commission. There is not a problem registering a nickname provided it is a variation of your licensed name.

Q. I am working with a buyer whose offer has been accepted by the seller. We are midway into the inspection period. I received an anonymous note from a “neighbor” who warned me that there is an underground home heating oil tank on the property, most likely under the macadam driveway. We found a pipe in the grass to the side of the driveway that is capped and cannot be opened. The seller has lived in the house for two years and was not responsible for the apparent conversion from oil to gas heat that occurred before his purchase. What do we do?
A. First and foremost is advising the buyer that she bears the risk of purchasing the property where there is a suggested, but as of yet unknown, problem. If there is an underground storage tank, and if that tank was not properly and lawfully “deactivated,” then the buyer may ultimately have an environmental nightmare on her hands that could include compensating neighbors for contamination of drinking water and other consequences. Until the problem is identified, significant consequences cannot be ruled out.
An enlargement of time may enable the buyer to properly investigate. This might require a reply to inspections that seeks an extension of the time within which buyer may submit a corrective proposal or terminate the agreement of sale. During that extension, the buyer can engage investigators or contact the previous owner to determine who disconnected the tank and what was done. An environmental audit should be considered. All of this will require an effort and expense.

Q. The Agreement of Sale is contingent upon a sale and settlement of other property contingency. The buyer’s property did not come under agreement of sale before the date of settlement on her purchase. She now seeks a return of her deposit. The seller, however, represented by a listing agent who is also an attorney, claims the buyer is not entitled to her deposit because she is in default. The default is that the buyer did not do everything reasonably necessary to sell her house. There were days when the property was unavailable to be shown and the seller is convinced that the buyer could have sold her home had she made a concerted effort.
A. As a lawyer, there is nothing I can’t make worse with litigation. By that I mean, that while it is conceivable that the buyer did not exercise her good-faith effort to seller her home, you will only make matters worse keeping the deposit and taking your seller into litigation. It may be correct that the buyer breached her obligation to try to sell her home, but no one wins litigating the minutia of that question. Further the cost to litigate will exceed the nominal deposit the seller is holding, $2,000 in this case.

Q. A brokerage wants to hire one of their former salespersons (now retired and unlicensed) to conduct classes for new agents at the real estate office. Can you hire a non-licensee to teach agents?
A. If the licensees who attend the course are not anticipating pre-licensure or continuing education credits, then it is okay. To teach courses that are to be credited toward licensing, or that will satisfy MCE, the instructors have to be approved by the Commission. For general training, Rhodes scholars, chimpanzees and others may offer instruction.

Q. An Agreement of Sale between an investor purchaser and seller was not contingent upon a home inspection. The buyer nevertheless asked if he could perform an inspection because, as a contractor intending to rehab and sell the home, he needed to know “what he was looking at.” The inspection was permitted and performed and now the buyer refuses to proceed with the purchase. Has the buyer breached?
A. Yes, but what is the amount of the deposit you are now about to fight over? In this case, the answer was $1,500, which is an insufficient amount if it will lead to litigation.
It is not uncommon for buyers to ask for inspections, though they do not seek to make their commitment to purchase contingent on the outcome of the inspection. I think this is a damned-if-you-do, damned-if-you-don’t situation. If you say no to the inspection, the buyer may become suspicious or untrusting and refuse to go forward. If the seller allows the non-contingency inspection, the buyer may find problems, and then refuse to proceed with the purchase. My advice is to share the risks with the seller so he or she is not surprised by the outcome. When it comes to accepting offers that come with non-contingency inspections, maybe you have a better answer than I.

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