Florida Realtor April 2014 : Page 8

Law & Ethics “Our greatest weakness lies in giving up. The most certain way to succeed is always to try just one more time.” — Thomas A. Edison, American inventor and businessman Otthon LegaL Q & HotLine A (407) 438-1409 COnTRACTS A buyer and seller have a Florida Realtors®/Florida bar ASIS-2 Contract. The buyer never delivered written notice to the seller that he received a loan commitment within the loan commitment period. nei-ther party chose to terminate the contract once the loan com-mitment period ended. Three days before closing, the buyer notified the seller that he was cancelling the contract, since he didn’t think he’d get the loan. The seller is demanding that he be allowed to retain the buyer’s escrow money. Shouldn’t the buyer get that money back since he didn’t get a loan? No. The updated florida Real-tors/florida Bar contracts contain new language that lays out specific time periods within which the buyer may terminate the contract and still be able to retain the deposit. Once the loan commitment period has passed and the buyer has failed to notify the seller in writing of receipt of a loan commitment, either party is able to termi-nate the contract. however, the contract is very specific that this cancellation must take place by the earlier of two dates. it must be sent either before the date on which the buyer actually notifies the seller that he or she received a loan commitment from his or her lender (or waives the financ-ing contingency) or seven days prior to closing. This must take place at the earlier of these Hungarian for home RULE ExCEpTIOn Paying Referral Fees aying referral fees to other real estate licensees can get tricky. The general rule is that it’s a violation of Florida law for a real estate licensee to pay a real estate brokerage commission or referral fee to anyone who is not a Florida-licensed real estate broker or associate. However, Florida law provides an exception to the general rule: A broker may pay a referral fee or share a real estate brokerage commis-sion with a broker licensed or registered under the laws of a foreign state as long as the foreign broker does not violate any Florida law. Where it gets tricky is when you want to pay a referral fee or commission to P is it ok to pay a referral fee to an international broker? NOW YOU KNOW 8 FLORIDA REALTOR April 2014 ! someone who lives in a foreign state that doesn’t require real estate licensing or reg-istration. If persons receiving a referral fee or real estate brokerage commission do not violate any Florida law and are permit-ted to perform real estate services in their foreign state without licensing or registra-tion and to receive compensation for those services, you may pay them. Although not required by Florida law, it’s a good busi-ness practice to have these foreign persons to whom you’re paying such a fee or com-mission sign an affidavit that essentially states that they are legally allowed, in their country, to perform services of real estate and to receive a referral fee or real estate brokerage commission for those services. Legal questions for the Legal Hotline may be entered online. Members will receive a live call back from a Legal Hotline attorney. As always, at no charge, members may speak with an attorney on a range of topics including licensing, contracts and landlord/tenant matters. Call (407) 438-1409 or log in to floridarealtors.org and click on “Legal Hotline” in the Legal Center.

Law & Ethics

RULE EXCEPTION

Paying Referral Fees

is it ok to pay a referral fee to an international broker?

Paying referral fees to other real estate licensees can get tricky. The general rule is that it’s a violation of Florida law for a real estate licensee to pay a real estate brokerage commission or referral fee to anyone who is not a Florida-licensed real estate broker or associate. However, Florida law provides an exception to the general rule: A broker may pay a referral fee or share a real estate brokerage commission with a broker licensed or registered under the laws of a foreign state as long as the foreign broker does not violate any Florida law.

Where it gets tricky is when you want to pay a referral fee or commission to Someone who lives in a foreign state that doesn’t require real estate licensing or registration. If persons receiving a referral fee or real estate brokerage commission do not violate any Florida law and are permitted to perform real estate services in their foreign state without licensing or registration and to receive compensation for those services, you may pay them. Although not required by Florida law, it’s a good business practice to have these foreign persons to whom you’re paying such a fee or commission sign an affidavit that essentially states that they are legally allowed, in their country, to perform services of real estate and to receive a referral fee or real estate brokerage commission for those services.

ETHICS

Stick to What You Know

Refer foreign buyers to an attorney for tax advice.

Realtor® Ralph has recently attained a high level of success with his international marketing efforts. He focused on Canada and has closed several deals for Canadian buyers. One of his recent buyers now wants to sell the home he purchased as an investment property and buy a bigger one that is closer to water.

During the first transaction, the Canadian buyer (who is not an American citizen) asked Ralph if there were any legal or tax issues he needed to be concerned about. Ralph replied, “No, none at all. Do not worry about it. I do dozens of these kinds of sales, and no one has ever had a problem.”

Now, Ralph presents a cash offer to the seller, and the seller immediately accepts it as it is: 10 percent over asking price. This deal is expected to allow the Canadian customer to buy an even bigger property immediately. As the closing documents are prepared, however, the seller receives a message from the title company informing him that his sale is subject to the Foreign Investment in Real Property Tax Act (FIRPTA). The seller remembers something about that in the original purchase contract but also remembers Ralph’s advice That this was not an issue. Now, the seller is informed that he will need to hold back a portion of the proceeds to comply with FIRPTA at closing. This enrages him as he had relied on Ralph’s advice in the original transaction.

The seller consummates the transaction, but is delayed in buying the next property and feels completely inconvenienced. He speaks to a friend, who suggests he file an ethics complaint against Ralph, citing Article 13 of the Realtor Code of Ethics. The complaint is sent in, and the Grievance Committee reviews the complaint and the content of Article 13:

“Realtors® shall not engage in activities that constitute the unauthorized practice of law and shall recommend that legal counsel be obtained when the interest of any party to the transaction requires it.”

Why it may be a violation: The Grievance Committee forwards the complaint for a hearing, and the hearing panel will most likely find Ralph in violation as he provided an opinion on the impact of the law in a transaction. He should have directed the Canadian buyer (now seller) to an attorney for this advice.

Q&A LEGAL HOTLINE

CONTRACTS

A buyer and seller have a Florida Realtors®/Florida bar ASIS-2 Contract. The buyer never delivered written notice to the seller that he received a loan commitment within the loan commitment period. Neither party chose to terminate the contract once the loan commitment period ended. Three days before closing, the buyer notified the seller that he was cancelling the contract, since he didn’t think he’d get the loan. The seller is demanding that he be allowed to retain the buyer’s escrow money. Shouldn’t the buyer get that money back since he didn’t get a loan?

No. The updated florida Realtors/ florida Bar contracts contain new language that lays out specific time periods within which the buyer may terminate the contract and still be able to retain the deposit. Once the loan commitment period has passed and the buyer has failed to notify the seller in writing of receipt of a loan commitment, either party is able to terminate the contract. However, the contract is very specific that this cancellation must take place by the earlier of two dates. It must be sent either before the date on which the buyer actually notifies the seller that he or she received a loan commitment from his or her lender (or waives the financing contingency) or seven days prior to closing. This must take place at the earlier of these Time periods—whichever event occurs first. Therefore, in this specific instance, since the buyer failed to cancel the contract at least seven days prior to closing, the attempted cancellation three days before closing will not be considered timely. The contract states that if neither party timely cancels the contract, the financing contingency is deemed waived by the buyer.

A buyer made an offer using the Florida Realtors/Florida bar ASIS-2 Contract. He said that a $5,000 escrow deposit would be made three days after the effective date, but he left the escrow agent information blank. The seller accepted this offer but never filled out the escrow information. The buyer failed to make the deposit within the timeframe in the contract, and the seller is furious. The seller wants to cancel the contract and move on with a different buyer. This buyer is upset and is willing to still make the deposit; he just didn’t know to whom and where to send it. Who is right?

It is recommended never to leave any blanks on a contract unless there is default or contingency language for that blank (e.g., “if left blank, then 15 days”). The buyer’s agent should have written, on the initial offer, the address and name of the escrow agent. The buyer’s agent could have checked with the listing agent to see if there was a preference. Leaving the escrow agent information blank could be a violation of Rule 61J2- 14. 008(2)(b), florida Administrative Code. This provision reads, “when a deposit is to Be placed with a title company or an attorney, the licensee who prepared or presented the sales contract, shall indicate on that contract the name, address and telephone number of such title company or attorney.” When the seller received the offer, if he preferred his own attorney to be the escrow agent, he could have countered the buyer’s offer and provided the preferred escrow agent’s information.

However, a buyer’s failure to make a deposit in accordance with the contract does not give the seller an automatic right of cancellation. Failure to comply with a term in the contract is likely a breach of the contract, for which damages may be sought. If the buyer wants to enforce the contract, he should immediately seek legal counsel. This is a good example of the importance of the agents’ taking the time to make sure the contracts are filled out correctly and completely.

LANDLORD/TENANT

A sales associate is putting together a lease for a landlord using the Florida Supreme Court– approved lease: Residential Lease for Single Family home or Duplex. Paragraph 13 of this lease deals with the Lead-based Paint Disclosure. The landlord’s home was built in 2007. How does the associate complete this section?

The Lead-based Paint disclosure must be given only if the dwelling was built prior to Jan. 1,

1978. A landlord whose property was built in 2007 does not need to give this disclosure to the tenant. The language in the lease instructs the user to “check and complete this section if the dwelling was built prior to January 1, 1978.” Therefore, in filling out this lease for their landlord, agents do not need to check this box, and the remaining section of this portion of the lease will not need to be completed.

Read the full article at http://browndigital.bpc.com/article/Law+%26+Ethics/1663181/201925/article.html.

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