Le g a l p d a t e UA WRA Publication JANUARY 2013 WB-37 Residential Listing Contract – Exclusive Right to Rent While most REALTORS® think of Wisconsin real estate practice in terms of sales transactions, rental transactions are playing an increasing role in today’s market. Homeowners In This Issue and condominium developers have often turned to rental solutions when they were unable to sell at an acceptable price. When a broker is asked to rent a property such as a The Updated WB-37 Exclusive Listing home or a condominium unit, a licensee must repre- Contract for Lease of Real Property.... 1 sent his or her client’s interests as an agent, and there must be an agency agreement authorizing those broker- Hotline Questions and Answers...... 14 age services and containing the Broker Disclosure to Clients language as required under Wis. Stat. § 452.135. WB-37 Residential Listing Contract – The agency agreement that would be used in such a residential transaction is the WB-37 Residential Listing Exclusive Right to Rent (Draft)...... 17 Contract – Exclusive Right to Rent (rental listing). This Legal Update examines this newly revised agency agreement that may be used by brokers who have been
asked to rent or lease residential real estate. This Update WRA Legal Update © 2013 includes a section-by-section review of the updated rental listing and some helpful practice pointers for those embarking into the world of residential rentals, and concludes with a sampling of Legal Hotline questions The WB-37 rental listing is used when a property owner and answers relating to rental listings and rental issues. hires a real estate broker to lease the owner’s property. Perhaps the new duplex owner would like some assistance getting the units rented. Maybe the homeowner is frus- The Updated WB-37 Exclusive trated that she cannot get her home sold, or the condo- minium developer is resigned to the fact that the time to Listing Contract for Lease of sell his vacant units is not now and that it makes sense to rent them in the interim. The WB-37 rental listing is the Real Property ® While the WB-37 is not a new form, it has been updated form for REALTORS to use in all of these situations. and reformatted, and has grown from three to five pages. The WB-37 will also come into play if an owner of a listed Previously known as the WB-37 Exclusive Listing Contract property is considering a rent-to-own transaction. The for Lease of Real Property, the WB-37 is now sporting a seller is asking the broker to provide two types of real estate new name: the Residential Listing Contract – Exclusive brokerage services: to negotiate a lease together with an Right to Rent. The new title emphasizes that this is a option for the possible sale of the property. The WB-37 listing contract with several similarities to the various would be used to authorize the real estate broker to lease “Exclusive Right to Sell” listings that licensees are already the owner’s property (assuming the owner and the broker familiar with, yet confirms that this is something differ- don’t want a property management relationship) and is ent: this is about renting a property rather than selling it. mandatory with respect to the lease of residential property. Developed in recognition of these Listing Contract – Exclusive Right Co n t a c t s possible scenarios, the revised WB-37 to Rent as soon as the form is reflects, at least in part, the other approved by the REEB (expected Department-approved listing con- on February 21) and becomes available on zipForm and in paper Editorial Staff tracts. This is to be expected because even though it pertains to rentals, form. Please watch the WRA Author it still is a listing contract whereby e-mail Hottips and other WRA communications for specific infor- Debbi Conrad the owner authorizes the broker to mation about forms availability. engage in certain activities and trans- Production Emily Zampardi actions with regard to the property. In the following discussions, the exist Tracy Rucka Thus the 2013 WB-37 has many ing WB-37 Exclusive Listing Contract of the same basic procedural provi- for Lease of Real Property (man- Association sions for exclusions, compensation to datory-use date Oct. 1, 2001) will Management others, broker disclosure to clients, be referred to as the “2001 lease cooperation, access to the property, Chairman listing,” and the recently updated Renny Diedrich, CRB proposal presentation, extension of WB-37 (expected mandatory-use listing, notice about sex offender reg- date April 1, 2013, optional-use date President & CEO istry, non-discrimination, termination Feb. 1, 2013) will be referred to as the Michael Theo, CAE of listing, additional provisions and “2013 rental listing.” All references to addenda – the same basic standards line numbers are to the sample 2013 CONTACT INFORMATION and procedures followed by licensees option unless otherwise designated. ® when real estate is listed. A few of Wisconsin REALTORS The format, layout and sequence of Association the standard provisions are discussed in detail in the following sections. provisions in the 2013 rental listing 4801 Forest Run Road, are somewhat similar to the 2001 Suite 201 The WB-37 also has several unique lease listing, but also closely resemble Madison, WI 53704 provisions addressing rental units and the current listing contracts. At the 608-241-2047 rental terms, broker’s commission, same time, flexibility is the key. The 800-279-1972 marketing and owner authorization, revised WB-37 is designed so that cooperation with marketing efforts, is may be used for a single prop- Legal Hotline owner’s obligation, owner’s warran- erty or rental unit, such as a single- ties, covenants and representations, family home, or for multiple units at Ph: 608-242-2296 termination fee per unit and term of a common address, such as a rental Fax: 608-242-2279 the contract that are new or unlike duplex or side-by-side condominium Web: www.wra.org the provisions seen in other forms units comprising a single structure. approved by the Real Estate Examining Board for use by real estate licensees. New Title The information contained herein is believed accurate as The sample copy of the updated The WB-37 was renamed the of Jan. 31, 2013. The informa- WB-37 Residential Listing Contract Residential Listing Contract tion is of a general nature – Exclusive Right to Rent and should not be considered – Exclusive Right to Rent appearing by any member or subscriber on Pages 17-22 of this issue is await- for an assortment of reasons. as advice on a particular fact ing final approval by the REEB at the Terminology. The 2001 Exclusive situation. Members should Department of Safety and Professional contact the WRA Legal Hotline Listing Contract for Lease of Real with specific questions or for Services. The REEB now has the power Property referred only to leases, which current developments. to approve mandatory real estate forms would appear to be unnecessarily lim- Reproduction, use or inclusion in place of the DSPS or the DSPS iting given the widespread use of peri- ® of this material in other Secretary. However, REALTORS odic tenancies like month-to-month publications, products, services or must understand that there might tenancies and other rental agreements. websites is not permitted without be small, last-minute changes. prior written permission from the When using the updated WB-37, WRA or its Legal Department. ® REALTOR Practice Tip: REALTORS® and owners should REALTORS® may begin using keep in mind the definitions from Wis. the revised WB-37 Residential Stat. § 704.01. Wis. Stat. § 704.01(1)
WRA Legal Update © 2013 2 Legal Update, January 2013 defines “lease” as “an agreement, An owner may benefit from a writ- form for residential rentals, while whether oral or written, for transfer ten agreement for a month-to-month brokers are free to use other attorney- of possession of real property, or tenancy when the owner’s intent is, drafted forms when taking listings both real and personal property, for a for instance, to rent the home until for commercial rentals (such as the definite period of time. A lease is for a the market improves and the home WRA Exclusive Listing Contract for definite period of time if it has a fixed can be sold. The term “lease” would Lease of Commercial Property avail- commencement date and a fixed expi- preclude that and would require, able electronically). The first sen- ration date or if the commencement for instance, a lease for one year or tence was removed because it was and expiration can be ascertained by some other specified time period. self-evident. The 2013 WB-37 does, reference to some event, such as com- however, remind licensees that it is Definitions of “rental agreement” and pletion of a building.” Thus a lease not a property management agree- of “lease” from the statutes is included may be oral or written, but always ment and that it is a listing to be in the Definitions section of the WB-37 must be for a definite period of time. used for rentals but not for sales. to aid in the parties’ understanding. A “rental agreement,” on the Parallel Functionality. Wis. Admin. Broker Authority: Line 1 other hand, is defined in Wis. Stat. Code § REEB 16.02(3) states: § 704.01(3m) as “an oral or written Line 1 of the updated WB-37 says “‘Exclusive right to sell listing’ means agreement between a landlord and ten- that, “Owner gives Broker the exclu- a written listing agreement appointing ant, for the rental or lease of a specific sive right to rent the rental unit(s) a broker the exclusive agent for the dwelling unit or premises, in which located at … under the terms of this sale of property for a specific period the landlord and tenant agree on the Listing.” This is broader and provides of time, and which entitles the listing essential terms of the tenancy, such more flexibility than the language broker to a commission if the proper- as rent. ’Rental agreement’ includes in the 2001 lease listing: “Owner ty is sold by the owner, by the broker a lease. ’Rental agreement’ does not gives Broker the exclusive right to or by anyone else.” By way of analogy, include an agreement to enter into a negotiate a lease or leases of the if the WB-37 is called an “exclusive rental agreement in the future.” Thus property …” The 2013 rental listing right to rent” listing, it will entitle a rental agreement is the broader term will allow the broker to simply market the listing broker to a commission if encompassing both leases and other the rental units and find a tenant, the property is rented by the owner, written or verbal agreements between or to go further and select a tenant, by the broker or by anyone else. landlord and tenant for the renting or negotiate a rental agreement, accept deposits and so forth. Brokers will leasing of a dwelling unit. All rental Since there is broad-based understand- decide how involved in the process agreements are not leases; the term ing among real estate professionals of they want to be, leaving other tasks includes other tenancies such as peri- the WB-1 Residential Listing Contract to the owner or the owner’s attorney. odic tenancies and tenancies at will. – Exclusive Right to Sell, calling the WB-37 the WB-37 Residential Listing Wis. Stat. § 704.01(2) indicates that Contract – Exclusive Right to Rent Premises and Rental Units a “periodic tenant” means “a ten- should contribute to a better under- ant who holds possession without a Terminology: Lines 1-15 standing and less confusion as agents valid lease and pays rent on a peri- At times there can be confusion with enter into what may be a new or less odic basis. It includes a tenant from the terminology in a rental listing if familiar area of real estate practice. day-to-day, week-to-week, month-to- there are multiple units the owner month, year-to-year or other recur- wants to have rented. The 2013 ring interval of time, the period being Note Below the Form rental listing addresses this concern determined by the intent of the par- Title by defining “Premises” on lines 1-4 and “Rental Unit(s)” on lines 5-6. ties under the circumstances, with the The 2001 lease listing included lan- interval between rent-paying dates guage directly below the form title “Owner gives Broker the exclusive normally evidencing that intent.” A and before line 1 that indicated, right to rent the rental unit(s), locat- “tenant at will,” by contrast, is “any “Mandatory for use as an exclusive ed at _____ (street address) in the tenant holding with the permission of listing contract for lease of residential __ of __ County of ____, Wisconsin the tenant’s landlord without a valid property – Do not use as a property (“Premises”), more particularly lease and under circumstances not management agreement or listing for described as: ______(list unit num- involving periodic payment of rent,” sale.” The revised WB-37 is con- bers if applicable) (the “Rental Units”), according to Wis. Stat. § 704.01(5). sidered to be a mandatory REEB under the terms of this Listing.”
Wisconsin REALTORS® Association 3 Legal Update, January 2013 Thus, “Premises” refers to the entire 5-6 to list the individual units to Other Rental Terms may include the property at the stated address or as be rented (the Rental Units). items prompted on lines 8-10 or otherwise described at the beginning any other important provisions the of the WB-37. If there are multiple Property Description: owner may have in mind. If there is units within the Premises, those are Lines 1-15 not enough room on the chart, other identified as “Rental Units,” and they rental terms may also be listed the Lines 1 to 6 of the 2013 rental listing are treated as a subset of the Premises. Additional Rental Terms area on lines identify the property to be rented and The individual units are to be identi- 16-19, under Additional Provisions establish the meaning attached to the fied and listed on lines 5-6 and within (on Page 5) or in an addendum. terms Premises and Rental Unit(s). the chart at lines 8-15. For example, The parties are encouraged to add REALTOR® Practice Tip: if there is a three-unit condominium any additional description under List the Rental Unit(s) in the located at the address given on lines Additional Provisions (on Page 5) or chart and specify proposed rental 1-4 that the condominium developer in an addendum. Additional descrip- terms such as rent, security depos- wishes to rent, the Premises refers to tions might be used if a legal descrip- it, desired length of rental term the entire three-unit property, while tion will be provided or if there are and whether the unit is occupied the individual condominium units or vacant. Also address included multiple unit designations that do would be identified by unit number furniture, appliances, equipment, not fit into the provided blank lines. or other designation at lines 5-6 and designated parking, storage areas, in the chart. Each condominium unit utilities, and restrictions on ten- is a Rental Unit as that terminol- Rental Units and Rental ant’s use and occupancy (pets, ogy is used throughout the balance Terms: Lines 8-15 smoking, etc.). of the form. The same holds true The chart on lines 8 to 15 pro- for other types of rental property. vides some of the owner’s basic rental Delivery of Documents For instance, if the new owner of a terms. Blanks are provided for rent, and Written Notices: duplex is having a broker assist in security deposit, the minimum term, Lines 20-39 finding tenants, the address of the current status and other rental terms. that property (or the legal description Additional rental terms, included The Delivery of Documents and or other appropriate identification) property such as appliances or fur- Written Notices section should look would thereafter be referred to in the niture, amenities such as parking or very familiar because this section is WB-37 as the Premises, while each storage areas, utilities, use and occu- largely based upon the Delivery of duplex unit would be identified on pancy restrictions such as no pets Documents and Written Notices sec- lines 5-6 and would be referred to or no smoking, and specific mar- tion that appears in the offers to throughout the form as a Rental Unit. keting instructions may be placed purchase that have been revised over in the Other Rental Terms column. the past few years. This is the first In the case of a single-family home, time this section has appeared in a the street address of the home will When completing lines 12-15 of the listing contract, making the 2013 be filled in to identify the Premises, chart, each Rental Unit would have rental listing the first listing con- and the home will also be the Rental its own separate line. If the prop- tract to include e-mail delivery in Unit. The broker may wish to fill in erty is a single-family home, line 12 the pre-printed provisions. Essentially the house number, write in “Rental of the chart should be completed, this same delivery section will likely Unit is single-family home,” or perhaps using the house number for be used in other listing contracts and other language on lines 5-6 to make the unit number. The Rent column agency agreements as future revisions it clear that the Premises and the should indicate the monthly rent come down the pipeline, increas- Rental Unit are one in the same. desired by the owner, the Security ing familiarity and hopefully mak- REALTOR® Practice Tip: Deposit column would indicate the ing the REEB forms easier to use. Take care to complete lines 1-6 security deposit expected, and the Minimum Term refers to the owner’s Even though there normally are so the property subject to the fewer documents or notices deliv- WB-37 is properly identified. The proposed length of the rental agree- ered in a listing situation than an street address, legal description ment, for example, three months, offer to purchase setting, the consis- or other identification should be one year, month-to-month, etc. The used to establish the location (the Current Status column would indi- tency and the ease of use the e-mail Premises), while unit numbers or cate if the property is vacant or, if option brings is beneficial for all. The other identifiers are used on lines occupied, when it would be available. delivery of documents and written
Wisconsin REALTORS® Association 4 Legal Update, January 2013 notices in a listing contract transac- to the fax number provided by the Exclusions: Lines 40-45 party in the offer. If there is no fax tion will primarily involve amend- This section is fashioned after the sim- number provided, then fax delivery ments, notices such as a notice of ilar section in the WB-1 Residential cannot be used. The document is termination, and lists of protected Listing Contract. While the WB-1 tenants. This Delivery of Documents deemed delivered when the fax is transmitted, not when it is received. speaks of Protected Buyers, the and Written Notices section is a dra- WB-37 references Protected Tenants. matic contrast to the delivery informa- 5. E-Mail. E-mail is a permitted form Tenants protected under a prior bro- tion found in other listing contracts of delivery of documents and written ker’s rental listing contract are exclud- – within the definition of Delivery. notices to a party who is a consumer ed from the WB-37 rental listing. only if the consumer has first received In the 2013 rental listing, personal This section also provides a blank mandatory disclosures and consented line where the broker may list tenants delivery is the default method of electronically to e-mail delivery as whom the owner wishes to exclude delivery that will always apply. In required by federal law. Just check- because of prior contacts or rela- addition, the parties may authorize ing the box on line 34 of the WB-37 tionships between owner and tenant. other delivery methods by check- is not enough to authorize e-mail ing the boxes in this section. The delivery to the owner if the owner Because courts frown upon putting other delivery choices include com- is a consumer. Each consumer who the owner in jeopardy of paying two mercial delivery, fax, U.S. mail and provides an e-mail address is repre- commissions, the form cautions the e-mail. The parties may choose as senting that he or she has provided broker and the owner to contact prior electronic consent as required by many delivery methods as they like. brokers for more information regard- federal law. 1. Personal Delivery. Personal delivery ing Protected Tenants. In essence, is always a permissible means of See the February 2008 Legal Update, this section works in the same way delivery (unless lined out). “Electronic Commerce and E-Mail as the Exclusions section in the Delivery,” at www.wra.org/LU0802, Department-approved exclusive right 2. U.S. Mail. Commercial delivery and and the E-Commerce REALTOR® to sell listing contracts. Although the U.S. mail are separated because Protected Tenants may not be com- many brokers advise against the U.S. Resource page, online at www.wra. mail method since delivery is often org/ecommerce, for the forms and mon, they will be possible, particularly unreliable and the time of the deliv- procedure for electronic consent. with the introduction of rental listings ery can be difficult to prove without Also see the June 2010 Wisconsin on some Multiple Listing Systems. a receipt from the post office. A doc- Real Estate Magazine article, “Behind ument or notice is deemed delivered the Curtain: E-Commerce and Broker’s Commission: when it is deposited in the mail, not E-Sign Exposed,” at www.wra.org/ Lines 46-49 when it is received. WREM/Jun10/BehindCurtain, and The Commission section in the 2013 the July 2011 Wisconsin Real 3. Commercial Delivery. In commer- rental listing is much shorter and Estate Magazine article, “10 cial delivery, the document or notice simpler than the corresponding sec- Things You Should Know about must be deposited with a commer- tion found in the listing for sales. cial delivery service such as UPS or E-mail Delivery,” at www.wra. Federal Express with all fees prepaid org/WREM/Jul11/10Things. “Owner agrees to pay Broker a commission in the amount of or charged to an account with the REALTOR® Practice Tip: ______which shall be due and delivery service. As with the U.S. When drafting the listing, make payable at the earlier of the execu- mail, the document or notice must sure to complete the owner’s tion of the Rental Agreement or the be addressed to the party’s delivery delivery information. Otherwise occupancy of the Rental Unit(s), address specified in the listing. If the broker will be left with person- unless otherwise agreed in writing, there is no delivery address provided, al delivery as the sole authorized if (a) Owner enters into a Rental then neither commercial delivery delivery method at a point when it Agreement as to a Rental Unit(s); or nor U.S. mail delivery can be used. is too late to amend and add con- (b) Owner allows a tenant to occupy The document or notice is deemed tact information. A broker wishing and pay rent for a Rental Unit(s).” delivered when it is deposited with to deliver a termination notice or the commercial delivery service, not a list of protected tenants is likely There is a blank line for the desig- when it is received. not in a position to expect that nation of the commission amount, 4. Fax. For fax delivery, the document the owner is going to authorize percentage or formula. The WB-37 or notice must be transmitted via fax additional delivery methods for the does not specify how the commission broker’s convenience.
Wisconsin REALTORS® Association 5 Legal Update, January 2013 amount would be calculated. This with a periodic tenancy such as a can each give his or her client advice was intentionally left open-ended to month-to-month tenancy, then the on how to gain advantages in the allow brokers and owners to negoti- tenant’s occupancy of the Rental Unit negotiations even if this advice is not ate whatever form of commission and payment of rent is the bench- in the best interests of the other client arrangement they choose. Each mark for payment of the commission. in the designated agency transaction. broker, of course, must determine REALTOR® Practice Tip: REALTOR® Practice Tip: what commission policy is appro- When working with a WB-37, it is Multiple representation situations priate for that broker, independent- prudent to encourage the owner are rare in rental transactions, and ly of any other real estate office. to utilize written rental agree- occur only when the broker is also Essentially two events trigger the ments, not only for the owner’s representing the tenant under a owner’s obligation to pay commis- protection, but also for the bro- WB-36 Buyer Agency/Tenant ker’s benefit since the signed Representation Agreement. sion to the broker: either there is agreement signals that the com- a rental agreement entered into mission has been earned. Broker Disclosure to Customers between the owner and a tenant with The new Wis. Admin. Code § REEB regard to a Rental Unit, or a tenant Compensation to Others: 24.07(8)(e)2 provides: “A licensee takes occupancy of a Rental Unit shall provide to prospective ten- and pays rent to the owner. Either Lines 50-52 ants a broker disclosure statement occurrence earns commission for the This co-broke commission pro- as required in s. 452.135 (1), Stats., broker. This approach whereby there vision from the other updated when negotiating the terms of a lease is either a Rental Agreement or a Department listing contracts was on behalf of the client.” Thus, a licens- tenant who the owner allows to take added to the WB-37, and will be ee must provide a Broker Disclosure occupancy and pay rent eliminates beneficial if homes for rent are listed to Customers to prospective ten- the need to work with the concept in the MLS or cooperative com- ants when negotiating lease terms of “procure” with regard to tenants. pensation is offered to other bro- on behalf of the client/owner. The kers in some other format or service. It should be easy to discern if the trigger will be whether the licensee is owner has entered into a written rental actually negotiating rental agreement agreement, but a verbal agreement Broker Disclosure to terms or whether a completed, non- may be less obvious and more dif- Clients: Lines 53-123 negotiable rental agreement is simply ficult to pinpoint. In those situations The content of the Broker Disclosure presented to tenants. For example, a a broker might rely upon the tenant’s to Clients language required by Wis. licensee does not negotiate by sim- occupancy coupled with payment of Stat. § 452.135(2), along with the ply showing the unit or present- rent as the signal that commission helpful confidentiality notice sec- ing the tenant with a “non-nego- has been earned. Despite a broker’s tion, is incorporated into the 2013 tiable,” “take-it-or-leave-it” lease. best efforts, owners will sometimes rental listing, appearing on the sec- REALTOR® Practice Tip: If be anxious to receive rent and give ond page and running through the the broker goes beyond finding a a tenant occupancy and accept rent middle of Page 3. REALTORS® will tenant or showing the Rental Unit payments without entering into a no longer need to use the sepa- and is also engaged in negotiating written rental agreement and with- rate Broker Disclosure to Clients a rental agreement for the owner, out notifying the broker. The broker form when they use the WB-37. the broker would need to present might find it helpful to periodically a Broker Disclosure to Customers monitor the Rental Units so as to be This section reviews the duties a bro- to the tenant. aware if there is a tenant in residence. ker owes to all parties and the duties owed to a client. This section also Cooperation, Access Commission is due and payable to gives a detailed explanation of mul- the broker upon the earlier of the tiple representation relationships with to Rental Unit(s) or execution of a rental agreement or and without designated agency before Proposal Presentation: the tenant’s occupancy of a Rental prompting the owner to select an Lines 124-131 Unit. Note that the reference to the agency relationship. In a multiple rep- In this section, which is fashioned execution of a rental agreement sug- resentation with designated agency after the similar section in the WB-1, gests that the rental agreement will be relationship, both clients are entitled the owner agrees that the broker in writing – always a good practice. to full advice and negotiation services will cooperate and work with other If there is a verbal rental agreement, so that the agents working with the agents, including subagents and as many times might be the case tenant and the owner, respectively,
Wisconsin REALTORS® Association 6 Legal Update, January 2013 brokers working with tenants, unless broker may use a multiple listing service, noted on the blank lines (lines 129- internet advertising, a lockbox system on Su b s c r i b e 130) as brokers with whom the listing the Rental Unit(s) and other measures broker will not cooperate. Cooperation written in on the blank line provided to is stated to include providing access for market the property for rent and seek This Legal Update and showings and presenting rental agree- a tenant. In addition, the broker may other Updates beginning ment proposals from cooperating brokers advertise any listed incentives, repairs, to the owner. This section may have build outs or credits offered by owner. with 94.01 are available to somewhat limited application, and will members in the legal sec- The section goes on to indicate that the be used primarily in those markets where tion of www.wra.org. broker may perform the services that rental listings are offered on the MLS. are checked in the list of services. The Wis. Admin. Code § REEB 24.13(2)(a) basic authorization at line 132 is “Owner A Legal Update sub- provides that listing brokers shall give all authorizes Broker and Broker agrees to scription is included buyers and their agents access to a listed use reasonable efforts to rent the Rental with member dues. property for showings unless such access Unit(s).” The breadth of the broker’s Members are alerted via is contrary to the seller’s specific writ- authority is established using the check e-mail when a new issue ten instructions. Similar principles are boxes on lines 139-146. These selections is available online. found in the provision on lines 126-130 include soliciting tenant applications; qual- indicating that access for showings will ifying and approving tenant applicants; be allowed unless otherwise provided on negotiating rental agreements; receiving The non-member lines 129-130. § REEB 24.13(1) indicates application fees, earnest money and/or subscription rate for the that licensees should draft and submit security deposits on behalf of the owner; Legal Update is $75. all written proposals to the owner unless and executing rental agreements on behalf A subscription includes “contrary to the specific instructions of of the owner. If further services such as 12 monthly issues. the owner.” These rules are consistent setting and applying screening standards with Article 3 of the Code of Ethics, and collecting rent were to be provided Contact the Wisconsin ® which provides that REALTORS shall by the broker, the parties may write these REALTORS® cooperate with other brokers unless coop- additional functions in on lines 145-146. Association to subscribe: eration is not in the seller’s best interests. Many of these tasks may be quite formida- 4801 Forest Run Road, If the owner has any objections to uni- ble for homeowners and for licensees with versal cooperation, the owner’s excep- no training or experience with residential Suite 201 tions should be listed on the blank lines rentals. Renting the property may not Madison, WI 53704- provided. This would include brokers be the easy quick fix for cash flow that a 7337 with whom the listing broker should property owner might envision. The prop- 608-241-2047 not cooperate, brokers or tenants who erty owner will become a landlord subject 800-279-1972 are not allowed to attend any show- to the requirements of Wis. Stat. chapter ings, and specific rental agreement terms 704 and Wis. Admin. Code chapter ATCP www.wra.org that should not be presented to the 134. The owner may need to develop owner. The 2013 rental listing warns the tenant selection criteria and obtain credit owner that limiting cooperation may limit reports to qualify potential tenants. The the marketability of the Rental Units. seller will also be wise to consult with his Reproduction, use or or her insurance provider about insurance inclusion of this material Marketing and Owner coverage during the rental period, and in other publications, Authorization: Lines 132-148 prepare a budget for repairs and mainte- products, services or web- nance if, for example, an appliance mal- sites is not permitted with- What had been the Broker’s Duties sec- functions while the property is rented. tion in the 2001 lease listing has been out prior written permis- supplemented with marketing authoriza- A licensee provides real estate brokerage sion from the WRA or its tions to create the Marketing and Owner services, whether for the sale or lease of Legal Department. Authorization section, which now includes property, on behalf of the brokerage com- check boxes. The marketing authorization pany. An agent who has been approached provisions on lines 133-138 indicate the by a homeowner who would like to look
WRA Legal Update © 2013 Wisconsin REALTORS® Association 7 7 Legal Update, January 2013 for a tenant may see if the broker the WB-37? Placing the listing on fair and nondiscriminatory manner is willing to provide rental services. the MLS or other advertising media to avoid accusations of fair housing From the broker’s perspective, the is step one. When prospects respond, discrimination. first question is: what rental services would the broker be comfortable with 3. Handling Applicant and Tenant does the broker want to provide? showings and handing out applica- Funds. Earnest money, security tion forms? Either the broker, the If property management is not a deposits and credit check fees are owner or the owner’s attorney gener- service provided by the broker, the addressed in Wis. Admin. Code ally would need to establish screen- broker can decide whether or not to chapter ATCP 134. ing standards and create or select an expand into this arena of rental list- application form that can be distrib- 4. Credit Checks. The landlord or ings and property management-like uted to prospects. Either the owner, property manager must notify the services, taking into consideration the the broker or the owner’s attorney applicant if a rejection or other demands of customer service, the must review applications and select adverse action is based in whole or risks of entering a new practice field, a tenant. A rental agreement would in part upon information from a the rewards of profitability and the then need to be chosen and com- credit report under the Fair Credit rigors of competent practice. Another Reporting Act (FCRA). pleted. In addition, there should be consideration may be whether spe- consideration as to who would collect 5. Lead-Based Paint Disclosures. cific agents have experience or train- and who would hold any applica- The owner must provide the federal- ing regarding landlord-tenant issues. tion fees, credit check fees, earnest ly mandated lead-based paint (LBP) If not, the agent may refer the owner money, security deposits and rent. disclosures if the property is target to other brokers who provide rental housing. If a potential tenant iden- Different laws and concerns that may services. Or, if the agent has a bro- tifies defects, any repairs would be be unfamiliar to owners and agents ker’s license, he or she may, with the subject to the LBP renovation rules not involved with property manage- broker’s consent, establish an inde- for tenant occupied property. See ment also may enter the picture: pendent practice for property man- the May 2010 Legal Update, “Lead agement or rental services. When an 1. Fair Housing Advertising Based Paint in Target Housing,” at www.wra.org/LU1005. individual has a broker’s license and Concerns. Fair housing laws is working under another broker, impact what may or may not be 6. Rental Forms. Application forms Wis. Admin. Code § REEB 17.03(1) said when advertising property for will be needed as well as a rental permits the licensed individual to rent. For more information, visit the agreement form, presuming the conduct some independent practice. Fair Housing/Equal Opportunity owner will prefer to have a writ- ® The licensed individual must have the REALTOR Resource page ten agreement. There are no written consent of the employing bro- at www.wra.org/fairhousing, the Department-approved rental appli- ker and must avoid conflicts of inter- April 2007 Legal Update, “Avoiding cation or rental agreement forms. est. In addition, the licensed indi- Discrimination in Advertising and Racial Steering,” at www. 7. Occupancy Standards. Read vidual may not engage other licensees wra.org/LU0704, and the April the Department of Housing and in this independent practice. Where a 2005 Legal Update, “Diversity and Urban Development policy on licensed individual conducts indepen- Fair Housing,” at www.wra.org/ occupancy standards at www. dent practice, care should be taken LU0504. nmhc.org/Content/ServeFile. that all of the normal aspects of a bro- cfm?FileID=1545, and see the dis- kerage are provided for. The broker- 2. Tenant Selection Criteria. cussion in the “Best of the Legal age company should have no respon- Landlords and property managers Hotline: Fair Housing” in the sibility for the independent practice if typically screen prospective tenants April 2008 edition of the Wisconsin the licensed individual establishes the with respect to their income and Real Estate Magazine at www. operation as clearly independent. For job stability, credit, personal refer- wra.org/WREM/Apr08/ further information about independent ences, eviction records/references FairHousingMonth. practice, see the March 2008 Legal from prior landlords, and any past 8. Protected Classes, Discrimination Update, “Running a Real Estate criminal record using a written ten- and Fair Housing Laws. In addi- Office,” at www.wra.org/LU0803. ant application form. Some also use CCAP or do criminal background tion to the information referenced Another way of looking at these issues checks. Predetermined consistent in item 1, see the “Best of the is to ask: how far is the broker willing standards in each of these catego- Legal Hotline: April is Fair Housing to go when providing services under ries, ideally provided in writing to Month” in the April 2010 edition of all applicants, should be applied in a the Wisconsin Real Estate Magazine
Wisconsin REALTORS® Association 8 Legal Update, January 2013 at www.wra.org/WREM/Apr10/ REALTOR® Practice If the tenant is protected under the FairHousingMonth and Pages 6-7 Tip: When a seller chooses to WB-37 rental listing, the broker then of the Legal Update 98.03, “Thirty rent his property, one concern has, in essence, a one-party listing Years after the Federal Fair Housing is how much the owner under- for the protected tenants during the Act,” at www.wra.org/LU9803. stands about rental properties. one-year override period established See “I Want to Sell, No I Want in the Extension of Listing provi- See the April 2009 Legal Update, to Rent, No … I Want Both” sion on line 149. This broker must “Wisconsin Rentals,” at www.wra.org/ in the August 2012 Wisconsin present any written rental proposal a LU0904, and Legal Update 03.07, Real Estate Magazine at www. protected tenant writes to the owner, “Residential Rental Primer,” at www. wra.org/WREM/Aug12/ and will earn the listing commission if wra.org/LU0307 for more informa- SimultaneousListing. the owner enters into a rental agree- tion regarding landlord-tenant prac- ment or allows the tenant to take tice. Additional information and dia- Extension of Listing: occupancy and pay rent. This is true grams regarding the tenant screening Lines 149-152 even if the Rental Unit subsequently process can be found in “Tenant has been listed with another broker. Screening: The Ultimate Guide (With This is the section that establishes list- ing protection, in this case, with respect Infographic),” at www.biggerpock- The Protected Tenant definition also to tenants instead of buyers. A lot of ets.com/renewsblog/2013/01/27/ provides that if a one-party rental the information that used to appear in tenant-screening. listing contract specifically names the Extension of Listing section in the the prospective tenant(s) to which Brokers who are considering which of 2001 lease listing now is addressed in it relates, any such tenant qualifying the duties specified at lines 140-144 to the definition of Protected Tenant, for listing protection is automati- undertake should carefully consider the following the pattern of the other cally protected by virtue of his or her potential liability that can result from WB listing contracts. The Extension name appearing on the contract. If unfamiliar activities such as verifying of Listing provision in the 2013 rental there is a tenant who, pursuant to applications, qualifying and approving listing is based upon the language his or her rights under Wisconsin tenants, executing rental agreements in the similar section in the WB-1. agency law, indicates that his or her on behalf of the owner, etc. Each of identity is to remain secret, such a these actions carries a risk of liability As is made clear in the definition of tenant may be protected by timely under fair housing and other laws. Protected Tenant on lines 174-182 delivering to the owner a notice iden- Accordingly, REALTORS® may wish of the 2013 rental listing, tenants tifying the broker with whom the to consult with legal counsel before generally may qualify for rental listing tenant was working and the date(s) of assuming any new types of duties. protection in one of four ways under the WB-37. If, during the term of any showings or other negotiations. REALTOR® Practice Tip: the rental listing (1) the tenant deliv- The definition of a Protected Tenant When determining the tasks to ers a written rental proposal to the adds a new feature not found in the be undertaken by the broker, be owner or the broker, or (2) negoti- 2001 WB-37 lease listing. A pro- specific regarding exactly what ates directly with the owner regarding spective tenant who becomes pro- the broker will do using lines the potential terms upon which the 132-146, and also consider writ- tected for one Rental Unit subject tenant might acquire a rental interest ing in Additional Provisions who to the WB-37 is protected for all in a Rental Unit, listing protection will responsible for activities that Rental Units included in the WB-37 is automatic and the broker is not are not undertaken by the broker. listing. If a tenant sees one Rental required to perform any additional For instance, perhaps it will be Unit subject to the particular rental steps to initially protect the tenant for the owner who shall establish all listing, then the tenant is consid- the one-year override period stated tenant screening standards and ered to be protected for all Rental in the Extension of Listing section. select tenants after the application Units subject to that WB-37. forms provided by the owner’s On the other hand, if (3) the tenant attorney are completed and sub- attends an individual showing of a mitted. Consider stating that fact Rental Unit or (4) discusses possible Attorney Fees Removed within the WB-37 to establish a rental agreement terms with a broker For the sake of consistency with the clear delineation of the respective during the term of the rental listing, other listing contracts, the Attorney areas of responsibility – this helps the tenant is protected only if the bro- Fees provision was removed. guard against the potential for ker delivers the tenant’s name to the Any parties desiring this feature unintended liability. owner within three days of the expi- will have to add it in Additional ration of the rental listing contract. Provisions or in an addendum.
Wisconsin REALTORS® Association 9 Legal Update, January 2013 Notice about Sex This is an important reminder given 2. Enter a dwelling unit during ten- the incidence of fair housing viola- ancy except upon advance notice and Offender Registry: tions that occur during the adver- at reasonable times. Advance notice Lines 153-155 tising and rental application phases means at least 12 hours advance notice unless the tenant, upon being This provision has been added to of the residential rental process. A similar section entitled Fair Housing notified of the proposed entry, con- virtually every form updated by the sents to a shorter time period.” REEB to create maximum protec- appeared in the 2001 lease listing. tion for licensees and property own- Notice may be verbal or written, but ers. This provision comes from the Cooperation with Marketing it is preferable to give written notice other approved WB listings for sale. Efforts: Lines 189-193 to tenants and keep a copy of all entry notices for the file. Under § While the broker’s duties for marketing ATCP 134.02(5), “Landlord” means Definitions; Lines 156-185 the Rental Units is established in the the owner or lessor of a dwelling unit When working with the WB-37, par- Marketing and Owner Authorization under any rental agreement, and any ties should keep in mind the following section on Page 3 of the 2013 rental agent acting on the owner’s or lessor’s terminology: listing, this section enumerates the behalf. Thus, the WB-37, unless mod- owner’s responsibilities to cooperate • Adverse Fact and Material Adverse ified, is calling for the owner to take with the broker’s marketing efforts. Fact. These definitions come from care of providing advance notice to Wis. Stat. § 452.01(1e) & (5g). (1) Showings and Notice to Any any existing tenants for any showings These items appear within the Existing Tenants. The owner agrees conducted by the broker or the owner. Broker Disclosure to Clients section to allow showings at reasonable times on lines 53-107. These same defini- with the owner providing advance (2) Advertising. Regarding another tra- tions appear in the other updated notice to any tenants presently occu- ditional marketing activity, the owner WB listing contracts. pying the property, such notice to agrees to allow the broker to place be given in accordance with appli- signs at the premises and advertise in • Deadlines – Days. This definition cable law. Owners (and their prop- other media. also echoes the WB-1 and the other erly authorized agents) have limited updated WB listing contracts for (3) Relay Tenant Prospect Information. rights to enter a Rental Unit once sale. The final owner obligation is an a tenant takes occupancy. Wis. Stat. important one. Beyond a general • Rental Agreement and Lease. § 704.05(2) establishes the tenant’s overarching agreement to cooperate Because the use of the term “lease” “right to exclusive possession of the with marketing, the last enumerated in the current WB-37 seems to be premises.” This statute requires own- item obligates the owner to provide too narrow, the WB-37 rental listing ers to give advance notice of entry. to the broker, in writing, the names Owners may enter at reasonable instead uses the term “rental agree- and contact information of any pros- times to inspect the premises, make ment” because that is broader and pects known to the owner who con- repairs, or show the property to pro- inclusive of both leases and periodic tact the owner about renting a Rental spective tenants or purchasers. tenancies such as a month-to-month Unit. For instance, if a tenant pros- tenancy. A definition of Rental The residential rental practice rules pect stops by the property because Agreement and of Lease from Wis. found in Wis. Admin. Code § ATCP he saw the “for rent” sign in the Stat. § 704.01 is included in the 134.09(2) provide further details yard and discusses a possible lease, definitions section of the WB-37 at with respect to entry upon rented the owner is obligated to imme- lines 183-185 and 166-169, respec- diately give written notice to the tively, to aid in the parties’ under- premises, “(a) Except as provided under par. (b) or (c), no land- broker that includes the prospect’s standing. For other landlord-tenant name and any contact information lord may do any of the following: law definitions, see https://docs. the prospect left with the owner. This legis.wisconsin.gov/statutes/stat- 1. Enter a dwelling unit during ten- language is stronger than the simi- utes/704.pdf. ancy except to inspect the premises, lar language found in other listing make repairs, or show the premises contracts because creative owners in Non-Discrimination: to prospective tenants or purchasers, the past have been tempted to try to Lines 186-188 as authorized under s. 704.05 (2), side step this obligation and preserve Stats. A landlord may enter for the the possibility of working directly Lines 186-188 state that each party amount of time reasonably required with the prospect, without paying to the WB-37 agrees not to partici- to inspect the premises, make repairs, any commission, once the listing has pate in any unlawful act of discrimi- or show the premises to prospective expired. nation against prospective tenants. tenants or purchasers.
Wisconsin REALTORS® Association 10 Legal Update, January 2013 Owner’s Obligations: forms should ensure that any form that the owner has no notice or provided complies with the rules knowledge regarding any of the con- Lines 194-198 regulating rental practices and ditions specified by the rule. The Lines 194-198 provide a general state- identifies the drafter. For example, broker should carefully review these ® ment of the property owner’s respon- a REALTOR entering a WB-37 lines with the owner as the broker sibilities to the broker who has listed might recommend that a property may be responsible for disclosing this owner use WRA Residential Lease the property for rent. These provisions information to prospective tenants. or Residential Rental Contract require the owner to provide all neces- If any of these statements are untrue forms. sary information and documentation and the owner has information or regarding the condition of the prop- Owner’s Warranties, knowledge regarding the presence erty, and any rental forms approved of any listed condition, that must be by the owner for the broker’s use. Covenants and explained in the WB-37 or other doc- umentation provided to the broker. If the broker is going to properly Representations: portray the Rental Units in advertis- Lines 199-229 Wis. Admin. Code § ATCP 134.04(2) ing and in any other representations Hold Harmless (a) indicates that landlords must regarding the condition of the prop- disclose to prospective tenants “All The initial warranties and representa- erty, the broker will want to have cop- uncorrected building and housing tions on lines 199-203 of the WB-37 ies of the owner’s pertinent records, code violations of which the landlord relate to any information, materials or documents, code violation orders has received notice from code enforce- forms the owner provides the broker. and notices, records and information ment authorities, and which affect the The owner represents that all such regarding any LBP on the premises, individual dwelling unit and common materials and information is true and and other documents relating to con- areas of the premises. Disclosure shall complete and that all forms comply ditions affecting the premises. In gen- be made by exhibiting to the pro- with applicable law. In addition, the eral terms it is important for the bro- spective tenant those portions of the owner agrees to indemnify the broker ker to be fully informed. Should the building and housing code notices and hold the broker harmless for any broker be responsible for or involved or orders which have not been fully loss resulting from the broker’s use of in making other specific representa- complied with. Code violations shall the provided information and forms tions to prospective tenants concern- not be considered corrected until in conformance with the terms of the ing the property, for instance, the their correction has been reported WB-37. These provisions are intended LBP disclosures such as Addendum to code enforcement authorities.” L, it is critical that the broker be made to shift liability from the broker to the aware of all relevant information. owner if liability results from the bro- By way of contrast, the new Wis. Stat. kers’ use of inaccurate information or § 704.07(2)(bm) (https://docs. With respect to the choice of a rental improper forms provided by the owner. legis.wisconsin.gov/statutes/stat- agreement form, the DSPS no longer utes/704.pdf), which would appear has approved lease forms that must be Condition/Habitability of to override the similar provision in used by Wisconsin real estate licensees. Rental Units Wis. Admin. Code § ATCP 134.04(2) Wis. Admin. Code § REEB16.04(2) Lines 204-217 are the owner’s rep- (a), indicates that a landlord has a allows licensees to use lease and rental resentations with regard to the liv- duty to disclose to a prospective ten- agreement forms available in the mar- ing conditions and habitability of ant, “before entering into a rental ketplace, as long as they are drafted Rental Units and the premises, agreement with or accepting any ear- by an attorney and approved by the reflecting the disclosures that must nest money or security deposit from owner. Therefore, owners of rental be made to a tenant under Wis. the prospective tenant, any building properties may direct the broker to Admin. Code § ATCP 134.04(2) code or housing code violation to use specific forms available in the mar- (https://docs.legis.wisconsin.gov/ which all of the following apply: ketplace. The broker may complete code/admin_code/atcp/134.pdf). 1. The landlord has actual knowledge the forms as directed by the owner. This rule lists code violations and of the violation. conditions affecting habitability that REALTOR® Practice Tip: Brokers may assist the owner a landlord is legally obligated to dis- 2. The violation affects the dwelling unit by providing forms for the close to a residential tenant before that is the subject of the prospective consideration of the owner (or entering into a rental agreement or rental agreement or a common area the owner’s counsel, if appro- accepting any earnest money or a of the premises. priate). Brokers providing such security deposit. These lines warrant 3. The violation presents a significant
Wisconsin REALTORS® Association 11 Legal Update, January 2013 threat to the prospective tenant’s owner has agreed to perform, pre- owner that misrepresentations or health or safety. sumably to enhance the desirability of half-truths may lead to the owner the Rental Units. A “build-out” often being liable for damages and costs. 4. The violation has not been refers to a situation where the prem- corrected.” REALTOR® Practice Tip: ises are being rented before construc- Brokers should encourage the Enacted in 2012, this statute imposes a tion is finished. A build-out refers to owner to be as thorough as landlord disclosure obligation regard- the completion of construction or the possible in disclosing informa- ing code violations that is somewhat addition of specified improvements tion about the condition of the more narrow and limited than the that will be finished before a tenant property so that no inaccurate or reference to “uncorrected building takes occupancy. A build-out also may misleading information is passed or housing code violations” in Wis. refer to a situation where a former along to prospective tenants. The Admin. Code § ATCP 134.04(2). tenant left improvements that need owner is also taking responsibility to be removed or where improve- for the choice of any forms pro- However, item (a) at line 207 of the ments need to be replaced or modi- vided for the broker’s use. 2013 rental listing refers to “uncor- fied to make the premises desirable rected code violations,” which is REALTOR® Practice Tip: for other tenants. Build-outs are most clearly much broader than what is Make sure to be clear about any common in commercial properties. required in the statute and the rules. code violations because the recent This would include fire code viola- These lines not only help to docu- legislation and expected additional modifications to the laws in this tions and other ordinance violations ment the owner’s agreement with the area make it an even greater focus as well as building and housing code broker regarding repairs and improve- of attention than it might other- violations. This information is given ments, but also help to ensure com- wise be. to the broker so that the broker can pliance with Wis. Admin. Code § make the disclosures required by law ATCP 134.07, which requires that Termination of Listing: on behalf of the owner if that duty any owner or landlord promises to has been undertaken, and so the tenants to clean, repair or improve Lines 230-238 broker has a broad range of informa- the premises be made in writing and The Termination of Listing is modeled tion about the condition of the prop- specify the date or time period when after the WB-1 Residential Listing erty to enhance the broker’s ability the work will be completed. The Contract. As with other listings, can- to do his or her job in marketing the owner is also obligated to give ten- celing the rental listing before its expi Rental Unit(s) and finding tenants. ants written notice of any reasons ration date will typically constitute a beyond the owner’s control that delay breach of the contract terms and thus Other Conditions and Rent completion. This section equips the violate the broker’s rights. The broker Concessions broker to, in turn, advise potential may demand compensation for any Lines 218-220 confirm that there are tenants of the owner’s plans and damages sustained and reimburse no other conditions that significantly make accurate representations regard- ment for out of pocket expenses as a diminish the value of the rental prop- ing this work if the broker is respon- result of the early listing termination. erty. The owner is specifically asked sible for making these disclosures. The broker cannot, however, sue to represent that the owner has not the owner for specific performance made any rent concessions or entered Updates to Representations because of the agency relationship. into other agreements affecting the Line 227 provides, “Owner agrees to The owner may cancel the listing with property. This is important in situ- promptly inform Broker, in writing, out risk of damages if the termination ations where the broker and others of any information that would modify is for cause or based upon a material are relying on a list of rents or copies the above representations during the breach of contract by the listing bro of leases to determine total monthly term of this Listing.” Thus, the owner ker. For example, if the listing broker rents or other material terms of the is obligated to update the broker fails to perform according to the tenancy. If the owner made a deal should conditions change or evolve terms of the listing contract or other with a tenant after the list of rents regarding the owner’s representations wise fails to act in good faith, then the or the lease was drawn up, these in the Owner’s Warranties, Covenants owner will have the legal right, not just lines will bring out that information. and Representations section. the power, to terminate the listing. Liability Warning Repairs and Build-Outs As in the other WB listing contracts, Lines 221-223 provide a place to The section concludes on lines the listing agent has no authority record any repairs or build-outs the 228-229 with a warning to the to terminate the listing, shorten the
Wisconsin REALTORS® Association 12 Legal Update, January 2013 listing term or change the commis- With respect to Rental Units subject Lines 240-242 allow the owner and sion amount without the written con- to the WB-37 that have been rented, the broker to agree on an amount sent of the agent’s supervising bro- the answer appears in the Term of that would fairly compensate the bro- ker. The revised WB-37 also requires Contract section at lines 256-258: ker for the owner’s premature termi- that any termination notice be in “In the event a commission is earned nation of the rental listing contract writing and be delivered in accor- for a Rental Unit, this Listing (shall) due to the owner’s sale, exchange dance with the delivery provisions (shall not) [STRIKE ONE] (‘shall’ or other transfer of the property. found on Page 1 of the rental listing. if neither is stricken) terminate for This amount may be stated as a dol- that Rental Unit.” In other words, lar amount, as a formula, etc., and Additional termination issues arise if a Rental Unit has been success- is on a per Rental Unit basis. For that are not present in sales trans- fully rented such that the broker example, if four condominium units actions when multiple Rental earned the commission, the ques- are listed for rent and two are sold, Units are subject to the WB-37. tion of whether that unit continues the termination fee stated on lines The following questions arise: to be subject to the WB-37 is up to 240-242 will apply to each unit sold. a. Should the sale of the entire prop- the parties. Some owners may sim- Although it is not expressly stated, the erty (all of the Rental Unit(s)) ter- ply want the Rental Unit(s) to be termination fee under the 2013 rental minate the listing? rented once, while others may want listing is in addition to any commis- continuity and therefore want the b. Should the sale of some but not all sion the broker might earn if the broker to find another tenant should of the Rental Unit(s) terminate the broker also had the property listed for any existing tenancies end or should listing as to the remaining Rental sale. This is in contrast to the 2001 the tenant unexpectedly leave, fail to Unit(s)? lease listing where the termination fee pay rent or otherwise default under was reduced by any commission paid c. Should the rental of some but not the rental agreement obligations. all of the Rental Unit(s) termi- to the broker for the sale or other nate the listing as to the remaining REALTOR® Practice Tip: conveyance of the listed property. Rental Unit(s)? If the owner were to decide to This can be quite unfair to a broker engage a property manager to who has agreed to receive a commis- d. Should the rental of all of the handle the Rental Units that sion as a percentage of future rents listed Rental Unit(s) terminate the had been subject to the WB-37, or who has spent significant time listing? that arguably would terminate and effort to lease a property only the rental listing per lines 237- to have the listing period cut short. When it comes to the first two ques- 238 and the broker may look for tions regarding sales, logic would damages. REALTOR® Practice Tip: dictate that if all Rental Units were Brokers should remember that REALTOR® Practice sold then the listing would no lon- the formula, percentage, dollar Tip: Agents should be vigilant ger be valid and the broker could amount or other expression of the and make sure that the provi- not rent the units that now belong termination fee is on a per Rental sion regarding the fate of rented to someone else. Also, if one of two Unit basis. Rental Units is completed. It may Rental Units subject to the WB-37 be easy to overlook, tucked away is sold, the remaining unit generally in the Term of Contract provi- Caution and Term of the could still be rented. The language sion. at the end of the caution on lines Contract: Lines 250-258 The boldface caution in capital letters 236-238 confirms this: “The Parties Termination Fee Per agree that this Listing shall terminate immediately preceding the Term of the upon an effective change in owner- Rental Unit: Lines 239-242 Contract section reminds the owner ship or control of the Rental Unit(s) The listing contract is terminated if and the broker that, once signed, the so affected, but in no event shall this there is an effective change in owner- listing creates a legally enforceable Listing terminate as to the remainder ship or control of the Rental Unit(s), contract. Although brokers may pro- of the Rental Unit(s).” Accordingly, as the parties agree on lines 237- vide a general explanation of the pro- if four condominium units were listed 238. Accordingly, there is a concern visions of the WB-37, they are pro- for rent and one is sold, then the that if the owner sells the property hibited by law from giving advice or sold unit is no longer subject to the during the listing, the broker may opinions concerning the owner’s legal WB-37 while the remaining three be shortchanged on future commis- rights under the listing or any other continue under the rental listing. sion income, particularly in long-term real estate contract. Consequently it rental listing contracts. Therefore, is suggested that the owner consult
Wisconsin REALTORS® Association 13 Legal Update, January 2013 with an attorney if legal advice is to pay the commission and will be on behalf of the entity should needed and with other experts such enforceable against those signatories. designate his or her capacity, as appraisers, tax advisors or inspec- Therefore, if only the husband signs for instance, as a corporate offi- tors if such services are required. a listing, then only the husband is cer or as an LLC member. The liable for the commission when the signature line for a corporation As noted before, the Term of Contract broker successfully finds a tenant, would indicate the entity’s name provision on lines 256-258 ends with even if the wife is also on title. as “XYZ Corporation,” and the a statement requiring the parties to person signing on behalf of the make a selection: “In the event a com- But make no mistake, a listing con- corporation would indicate his or mission is earned for a Rental Unit, this tract without the signature of all her name and capacity on the line Listing (shall) (shall not) [STRIKE owners is a disaster waiting to happen. where the person’s name is print- ONE] (‘shall’ if neither stricken) ed or typed (for instance, “Sam All of the owners on title should sign terminate for that Rental Unit.” Smith, Vice President,” or “Judy the rental agreement, the Addendum Johnson, Treasurer”). REALTOR® Practice Tip: It L for LBP and other necessary paper- is important for brokers and own- work. There may also be home- ers to remember to make a selec- stead (if there is a lease for more Hotline Questions tion regarding whether rented than one year) and marital property and Answers Rental Units are still subject to issues to deal with, often including the WB-37. However, there is a divorce proceedings for good mea- When helping a client with a default that provides that the rent- sure. If a broker proceeds without rental, can an agent list the prop- al listing does terminate as to any all owners’ signatures on the list- erty for both sale and rental? Rental Unit successfully rented. ing contract, then the owners who A listing contract is required before Owner Entity Signature sign are the clients and the owners the agent can negotiate for the owner. who do not sign become customers. Lines: Lines 261-267 The WB-1 Residential Listing Contract Whether the fact that not all owners – Exclusive Right to Sell provides The signature lines in the revised have signed the listing is something authority to market the property for WB-37 have been modified to pro- a listing broker needs to disclose as sale. The WB-37 Residential Listing vide for an owner that is an entity. a material adverse fact is a judgment Contract – Exclusive Right to Rent For example, if the owner is Jesse that only the broker can make after should also be used if agent is attempt- Jones Condo Builders, Inc., then considering all of the facts and circum- ing to rent the property for the owner. the entity name, “Jesse Jones Condo stances in the situation. If the broker, Builders, Inc.” goes on line 261. The broker currently has a condomin- as a competent licensee, knows that Jesse Jones would sign his name as ium project listed for sale. The seller the owner/client who signed the list- “Jesse Jones, President” and insert is interested in continuing to offer ing is not able or does not intend to the date on line 262, and on line it for sale, as well as offering a unit meet his or her obligations under the 263 he would print “Jesse Jones, for lease and/or lease with option to contract, then the issue constitutes an President.” This process would be buy. Regarding a lease with option adverse fact. If so, this fact is argu- repeated on lines 264-265 if there to buy, the broker believes a lease able material and would need to be was a second person signing on behalf agreement would need to be complet- disclosed to the parties in writing per of the entity. See Pages 5-9 of the ed along with the WB-24 Option to Wis. Admin. Code § REEB 24.07(2), May 2004 Legal Update, “Avoiding Purchase. Is this correct? Also, is there even if the client would direct the Liability When Signing and Making additional information pertaining broker not to disclose. If the owner/ Referrals,” online at www.wra.org/ to a lease with an option to buy of client is a spouse in the middle of a LU0405 for additional pointers. which the broker should be aware? divorce and is feuding with the other If there is an individual owner, that spouse who is on title but who has The broker is correct. With a lease person would sign his or her name, not signed the listing contract, dis- with option to purchase, the parties place the date on line 262 and print closure to the parties may be wise. will enter into two different agree- his or her name on line 263. The ments, each with their respective REALTOR® Practice Tip: process is repeated if there is a second terms. The lease/rental agreement will All contracts, including listing create a traditional landlord/tenant individual owner on lines 264-265. contracts, that are executed on relationship between the buyer and behalf of an entity should always The rental listing contract must seller. Under the option to purchase, be signed by whoever is agreeing be signed in the formal entity name, and the person signing the seller agrees that the prospective
Wisconsin REALTORS® Association 14 Legal Update, January 2013 buyer is entitled to buy the property and other aspects of the condomin- Listing Service or any other offer of at an agreed upon price and upon the ium (through experience since the cooperation may not be used to tar- stated terms at any time during the party will be living there) before get clients of other REALTORS® to specified term of the option. During proceeding to exercise the option. whom such offers to provide services this time period, the seller cannot may be made. (Amended 1/04).” See the September 2012 Legal revoke the option. Although the seller Update, “WB-24 Option to Purchase The broker may enter into a is bound for the period of the option – 2013 Revisions,” at www.wra.org/ WB-37 with the seller and negoti- to sell the real estate to the prospec- LU1209, and the July 2008 Legal ate leases for the seller. For dis- tive buyer, the prospective buyer is Update, “Using Land Contracts cussion of rental listing issues, see not bound to purchase the property. and Leases with Options,” at www. Legal Update 01.02, “Lease Listing & In exchange, the prospective buyer wra.org/LU0807 for a further dis- Property Management Agreement,” typically pays a non-refundable option cussion of this type of transaction. at www.wra.org/LU0102. fee. The option becomes a contract to sell only if the prospective buyer The broker is considering signing a The licensed broker works for a prop- exercises the option in the manner rental listing contract with the sellers erty management company that pri- specified in the agreement before wherein the broker would be paid a marily rents single-family homes. In the term of the agreement ends. commission for renting the property. the rental section of the MLS, there are The property is currently listed for currently many homes that are listed Wis. Stat. § 706.02 sets forth the for- sale with another broker. Does the first for rent by brokers. Most of these list- mal requirements for contracts relating broker have to go through the other list- ings have the owner’s name and phone to real estate conveyances and requires ing broker, or can he negotiate direct- number as the person to contact. They the contract to set forth terms relating ly with the seller to rent the property? also do not list a commission. Would to price, duration, description of the the broker be able to solicit these property, parties, the interest being When this situation arises, a WB-37 homeowners as potential clients for conveyed and signature of the parties. Residential Listing Contract – his company? If the homeowner was The WB-24 Option to Purchase ful- Exclusive Right to Rent is recom- interested in his services, he would fills all of these requirements. Often mended. Listing a residential property use the WB-37 Residential Listing the terms of the option will reference for sale and for rent simultaneously Contract – Exclusive Right to Rent. the lease agreement and provide ter- with both a WB-1 Residential Listing Would there be any type of conflict? mination of the option in the event Contract – Exclusive Right to Sell the lease is breached by the tenant. and a WB-37 clearly covers all the If the broker is trying to get a rental bases. This is true because the WB-1 listing with the homeowner, then that In addition to the WB-4 Residential does not give a licensee the author- would not be permissible. The homes Condominium Listing Contract, the ity to list the property for lease, and could not have been on the MLS with- broker will also need to enter into a the WB-37 does not give the broker out having rental listing agreements WB-37 Residential Listing Contract the right to list the property for sale. in place. The fact that the listing ser- – Exclusive Right to Rent. These two Each form contains specific provisions vice being provided may be limited in forms will provide the broker with the addressing the legal requirements for its representation does not mean that appropriate authorizations to offer the the particular transaction involved. the home is not currently listed. If property for sale and for lease as well. the broker wished to list the property Standard of Practice 16-3 pro- The condominium documents should for sale, that would be permissible vides, “Article 16 does not preclude be reviewed to make sure there are (using the WB-1) if it wasn’t already REALTORS® from contacting the cli- no prohibitions on unit rental. There listed for sale with another broker. ent of another broker for the purpose are no optional contingencies in the It is permissible for a property to be of offering to provide, or entering WB-24, but there are condominium listed as a rental with one broker and into a contract to provide, a different provisions that the broker should for purchase with a different broker. type of real estate service unrelated carefully review. The buyer typically to the type of service currently being The broker had a property listed for will conduct inspections and testing, provided (e.g., property management 18 months. The sellers feel they should determine the availability of financing, as opposed to brokerage) or from stop actively marketing for sale generally ascertain the suitability of offering the same type of service for and have the broker find a renter. the property for the buyer’s intended property not subject to other brokers' Then, if someone comes in the office purpose, and, in this case, review all of exclusive agreements. However, infor- who may be interested, the broker the condominium disclosure materials mation received through a Multiple could handle the sale for them. The
Wisconsin REALTORS® Association 15 Legal Update, January 2013 sellers will sign a contract to this effect. How would the broker do this? The broker may enter into a WB-37 Residential Listing Contract – Exclusive Right to Rent concurrent- ly with the WB-1 Listing Contract for the sale of the property.
Wisconsin REALTORS® Association 16 Legal Update, January 2013
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