1. Introduction
a. Real estate licensees are not attorneys unless they’ve passed the bar exam.
b. Do not mistake diligence for legal representation.
c. We enter into service agreements and sales contracts every day. In order to attempt to avoid confusion, trust, potential litigation, and loss of time, it’s best to verify available data when possible.
d. Establish that Sellers have legal representation and begin a dialogue with their attorney by way of introduction.
e. Objective of this course is to remind licensees to reduce risk as much as possible by ensuring accuracy of information, checking all data, and advising clients and customers to perform their own due diligence and seek legal counsel.
2. Review of the NAR Legal Pulse as a research tool in general, and, more specifically explore cases that provide a framework for discussion.
3. Comparison of Quinlan v Clasby and DeWolfe v Hingham Centre, LTD as it relates to the aspect of due diligence as defined by the courts of the Commonwealth.
a. Both cases related to zoning and usage as well as due diligence on the part of the agent
4. A discussion of the agent’s responsibilities to both their Principal (Seller) and their Broker/Owner to reduce the risk of liability for themselves, their company, and the consumers they represent relative to the following aspects of representation:
a. Verification of ownership
b. Deed review
i. Rights of way, easements
ii. Life estates
iii. Restrictions, covenants
c. Registry of Deeds overview
i. Liens
ii. Orders of Notice
iii. Registered v Recorded properties
iv. Hybrid properties in which parcels may fall within both categories (Recorded and Registered parcels within the same identified property)
d. Field card review
i. Accuracy
e. Permits filed and fully executed
i. Building, plumbing, electrical, etc.
ii. Completed and signed off
f. Special permits or variance, if any or applicable (Quinlan)
i. Check plans against variance/permit as well as sign off to ensure compliance
g. Assessors’ department v building departments research
h. Sellers’ Statements
i. Who should fill out the form
ii. Full disclosure of all known defects
i. Lead Paint Disclosure
i. Proper completion of the form
ii. Lead Paint and new construction potential liability
iii. Lead Paint and rehab liability (Piers v Wheeler)
iv. Certificates of Compliance, Letters of Interim Control, etc.
j. Home Inspections
i. Accompany, or not?
ii. Proprietary information
iii. Actual knowledge and subsequent disclosure
k. Condominiums and HUD approvals
i. HUD.gov
1. To check on whether a project is FHA approved
a. Choose Resources
b. HUD approved Condominium Projects
c. Choose State/City/Project Name, etc.
2. Check the approval is current/expired
3. Concentration/saturation
ii. Condominium documents
1. Declaration of Trust
2. Master Deed
3. Unit Deed
4. Bylaws, Rules and Regulations, Budget, Special Assessments, Pending litigation, Owner occupancy, Number of units owned by more than one owner, Reserve Study, Minutes, etc.
5. First right of refusal
6. 6d Certificate [MGL c. 183A s. 6(d)]
7. Rental/pet restrictions
iii. Condominium Questionnaires
iv. Management/Trustees
v. Certificate of Insurance
l. Multi-Unit Dwellings
i. Tenancy agreements/Leases
1. In writing v verbal
2. Notice required to accommodate sale, or transfer
3. Pending litigation or evictions
ii. Security deposits/Last month’s rent held in MA banks, if held
iii. Occupancy certificates iv. Verification of units permitted
* NOTE: Quinlan v Clasby ruling (although we are not considered zoning or usage experts, we should do our homework to avoid potential issues, when, or if, possible)
m. Interview/Walk-through triggers and data collection resources
i. Note items such as freshly painted basements, systems, water stains, knob and tube wiring, sheds on lot lines, etc.
ii. Visual inspection by the licensee to maximize disclosure and minimize risk
iii. Purpose of gathering information is to minimize surprises when possible
iv. Stigmatized properties
1. https://malegislature.gov/Laws/GeneralLaws/PartI/TitleXV/Chapte r93/Section114
2. MGL c. 93 sec. 114
3. Refer to RE91R14 Continuing Education course on Disclosure and encourage participants to take that class
v. Environmental Issues
1. Contamination, mold, etc.
2. Conservation Commission
3. DEP (Department of Environmental Protection)
a. Orders of Condition Open/Closed/Recorded
vi. Rivers Protection Act
vii. Underground tanks
viii. GIS mapping (Geographic Information System)
1. Overlay maps 5. In-laws and Accessory Units
a. Community zoning bylaws vary
b. Restrictions
c. Transferability 4
6. Contracts to Purchase, and PSA (Purchase& Sale) language
a. Note specific clauses and the bases/origins for the language
b. Be careful writing contingencies!!
c. Not an abdication, or waiver, of your common law duties
d. Verification of accuracy of information
1. Lana Schroeder, Esq., Claims Specialist for Rice Insurance Services Company, LLC
2. According to Lana, Breach of Duty was the second highest cause of suits reported by their company between 1/1/2001 and 7/31/2010
3. Example cited: Client reported the real estate agent breached her duty by failing to verify the lot she contracted to purchase was the same lot she showed her.
4. http://www.risceo.com/10%20Most%20Frequently%20Made%20 Claims.pdf
5. Names, addresses, Book/Page references
e. “AS IS” CLAUSES
i. If willful non-disclosure of known defect is found, clause may not survive in court
7. Pre-closing and Closing
a. Final utility readings (electric, gas, water/sewer, etc.)
b. Smokes and carbon monoxide
c. Excise Tax Stamps
d. Title V
e. HUD (NOTE: See CE course RE93R15: Consumer Financial Protection Bureau (CFPB) Effect on Real Estate Closings)
f. Walk-through
8. Walking the line between licensee and attorney
a. Know the laws of agency of the Commonwealth of MA i. MGL ch. 112, Section 87
b. Learn to recognize red flags and guide Sellers to the proper authoritative source
c. If you do not know the information, know where to find the information
d. Recognize the limits of your own knowledge
e. Do your homework and research
f. Be the source of the source
g. Remember, licensees are not attorneys unless they’ve passed the bar!