Marking PAR’s 100th Anniversary: A Look at Significant Changes to the Industry

Editor’s note: The Pennsylvania Association of Realtors® is celebrating its 100th anniversary this year and we’ll be highlighting some history of the organization.

Appearance may suggest otherwise, but I cannot bear witness to the entire century! Tom Caldwell, my erstwhile senior partner, and I account for over 70 years’ service as general counsel to the association. Several of the century’s significant changes to the industry, however, preceded us both.

The Code of Ethics and the multi listing system are not laws born of any legislature, though they have the affect of law as their requirements are to be observed by members, and their breaches may exact penalties. Together, and over a sweep of many decades, they have done more to transform real estate practice from “brokering” or “curbstoning” to a system of fiduciary representation. They underlie our agency laws and the due diligence that buyers exercise as part of the process of purchase.

Today, though we hear the rallying cry of “less regulation” at campaign time, more regulation has been the experience. Consider these “recent” laws and regulations that all impact the practice of real estate in some measure: Agricultural Area Security Law, Appraisal Management Company Registration Act, Assessors Certification Act, Auctioneer and Auction Licensing Act, Breach of Personal Information Notification Act, Carbon Monoxide Alarm Standards Act, Clean Indoor Air Act, Commercial Broker Lien Act, Electronic Signature Act… and I’m only into the letter e! Fortunately, through the use of association forms, observance of the overwhelming number of laws is practically invisible.

As for the milestones in the past century, the selection is easy. Act 112 of 1998, effective Nov. 25, 1999, is No. 1 based on impact. If you began working with a buyer on Nov. 24, you were required to advise the buyer that you represented the seller! A day later and you had to provide a consumer notice, describing among other things, buyer agency! What a turnabout and not all members were happy. I well remember PAR Legal Hotline callers comparing buyer agents to communists!

That same law that amended the Real Estate Licensing and Registration Act in 1999 also imposed minimum standards on licensees that were very much patterned on standards imposed by the Code of Ethics. Licensees must have engagement contracts signed by consumers that spell out the services to be provided and the fees that may be charged. By law, licensees must keep consumers advised of the status of transactions, conflicts of interest as they arise, other laws ancillary to transactions that must be satisfied and they must maintain confidential information. These minimum standards, and others not mentioned here, make the “limited service broker” a status largely out of reach in Pennsylvania.

Further, and very significantly, the 1999 amendments to RELRA made clear that the misrepresentations and bad acts of a principal (buyer or seller) would not inculpate the real estate agent unless the principal was acting at the direction of the agent, and that licensees were permitted to rely on the reasonable representations of their clients without incurring liability.

No. 2 is the Real Estate Seller’s Disclosure Law that mandated delivery of completed seller disclosure forms starting in September 1996. While earlier case law in Pennsylvania made clear that sellers were to disclose material defects not readily observable to the common buyer, claims of nondisclosure and concealment were common. Before passage of the law, sellers were given two lines on their listing agreement to describe the material defects. “None” was the common entry. It was believed that by completing a detailed form, sellers would be more apt to recall conditions and defects, resulting in a meaningful disclosure. The form, when completed fully and clearly, results in less suits against sellers and licensees. When poorly completed, the forms provide convincing evidence that may make suit superfluous as the evidence is “in the bag.”

An unintended consequence of seller disclosure is that the standard home offered for sale is in better condition than prior to mandatory disclosure. That too may be partially the result of home inspections becoming commonplace.

I’d be remiss if did not mention Milliken v. Jacono, decided by the Pennsylvania Supreme Court in 2014. The court concluded that the Seller Disclosure Law did not require mention of a murder/suicide that took place in the home absent a specific question from the buyer or agent. Court cases can also create binding law.

Several laws have their place on the list, though their impact is less significant. Certainly, the Commercial Broker Lien Act is to be counted, though the requirement of serving prior notice of intent to file, tends to resolve fee issues without much more. It’s an important tool that occasionally saves the day in a big way.

Another is the Home Inspection Law. The law requires that home inspectors engaged as part of the homebuying process possess certain qualifications. The law does not establish licensure requirements for inspectors but assures that they carry insurance. On the downside, inspectors have a foreshortened statute of limitations, one year from delivery of the report, within which they can be sued. Often suits are lost because of this limitation, putting more pressure on remaining defendants, usually the seller and listing agent.

Lastly, and not to diminish their significance, my list includes the tech laws. The electronic signature laws are an example. Laws like these tend to accommodate emerging technologies and practices. We are particularly mindful of what is emerging at an accelerating pace as a result of mandated business closures and stay at home orders: virtual site visits and technical inspections, distance notary and acknowledgement services, electronic recording acts and the like. Expect to see laws like these pass at accelerating speeds. There will be a time when everything involved in the purchase and sale process can be accommodated in a near sterile environment.

I am grateful to have been, with the leaders and staff of PAR, a part of the process of change. The practice of real estate is a gratifying profession that requires vigilant tending. Undoubtedly, these laws and the myriad others, serve to complicate and protect. Your state and local associations have and will continue to protect and advance your interests. Please take advantage of the resources they make available.