DR Legal News: Commercial brokerage loses ‘slander of title’ countersuit

In the July edition of D.R. Legal News, a commercial real estate brokerage firm lost a case in Michigan and more than $20,000 in litigation costs after refusing to release a broker’s lien.

It’s just one of six case studies summarized by Lisa Harms Harzler of Sorling Northrup Attorneys, in this issue of D.R. Legal News. Get the details now.

This situation began with Anton, Sowerby & Associates getting an exclusive listing agreement to sell or lease a commercial property owned by GAM Properties. The brokerage introduced a potential buyer (Mr. C’s Lake Orion, L.L.C.) to GAM. But after GAM defaulted on its mortgage, an appointed receiver negotiated a sale to Mr. C’s for $1.2 million and offered to settle the brokerage firm’s claim for a commission.

The parties could not reach an agreement on the commission, so the brokerage firm recorded a broker’s lien for $60,000. In order to close the sale, the receiver and Mr. C’s funded an escrow account for $75,000 to cover the brokerage firm’s claim and asked for a release of the lien.

Anton, Sowerby & Associates refused to release the lien, and Mr. C’s filed a counterclaim accusing the brokerage firm of “slandering its title.”

Slander of title, writes Hartzler, is a remedy for malicious publication of false statements that disparage an owner’s right in property. The Michigan Appelate Court decided that the brokerage firm properly recorded its broker’s lien prior to the sale of the property, but was obligated under Michigan’s state law to release the lien when the escrow was created. The persistent failure to release what was then a false lien demonstrated sufficient malice to constitute slander of title. The court affirmed an award to Mr. C’s for all of its litigation costs, which totaled more than $20,000.

D.R. Legal News: 6 things you need to know about TRID

IAR members who are designated realtors® for their real estate office can check their email for the July issue of D.R. Legal News and the story about TRID, otherwise known as the new integrated disclosure rule.

The latest proposal by the Consumer Financial Protection Bureau includes an effective date of Oct. 3, although that date hasn’t formally been approved, writes Jeffrey T. Baker, Sorling Northrup Attorneys, IAR Transaction Helpline. It’s just one of six important pieces of information he mentions in the July D.R. Legal News.

The second item on Baker’s list is that the new loan estimate form will replace the initial truth-in-lending and Good Faith Estimate forms. The new loan estimate form is intended to provide consumers with a more accurate estimation of the true financing and closing costs. He says each estimate must fall within a prescribed tolerance or a refund to the consumer from the lender may be necessary.

Third item on Baker’s list is that the loan estimate must be delivered to the consumer within three business days of a loan application. Whenever applicants provide their names, Social Security Numbers, incomes, addresses of properties to be purchased, the estimated values of the properties and the loan amounts to the lenders, applications have been made.

Get the other three pieces of TRID information from Baker by reading the July D.R. Legal News.

Supreme Court ruling on Fair Housing highlights July D.R. Legal News

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Illinois REALTORS® could be affected by a U.S. Supreme Court case regarding Fair Housing, according to the July edition of D.R. Legal News for managing brokers.

The IAR publication also includes:

  • Explanations of six case studies, including one where a brokerage firm could not recover a commission for a service performed by an unlicensed practitioner;
  • Summaries of real estate disciplines;
  • An analysis of the TILA-RESPA Integrated Disclosure (TRID) rule and how it will affect closings;
  • ideas to help REALTORS® complete transactions without errors; and
  • a recap of our June publication for local municipalities, On Common Ground.

Read D.R. Legal News.

U.S. Supreme Court Rules on Texas ‘Disparate Impact’ Case

On June 25, 2015, the U.S. Supreme Court issued its opinion in the case entitled, Texas Department of Housing and Community Affairs et al. v. Inclusive Community Project, Inc., et al., examining the question of whether “disparate impact claims are cognizable under the Fair Housing Act….”(576 U.S.____(2015)). In other words, is it appropriate for the Court to consider claims alleging discrimination where a particular statute or regulation appears neutral on its face; but application appears to create an “after-the-fact” discriminatory effect or disparate impact on members of a protected class?

The Supreme Court held, in a 5-4 decision, with Justice Anthony Kennedy writing for the majority, that disparate impact claims are appropriate for consideration by the courts, but that care should be taken when considering these types of cases so as not to impose “racial targets or quotas.” Click here to read the opinion.

Secrets of ‘No Error Transactions’

IAR Legal Transactions Attorney Jeffrey T. Baker answered questions and coached REALTORS® on having “No Error Transactions” during his presentation at MREDPalooza on June 23, 2015 in Rosemont, Illinois. Here are some of the top take-aways and best practices from that session.

Sellers’ Brokers:

  • Know your client. Who actually owns the property and has the authority to sign the deed? Does your client have power of attorney for the owners? Is a trust involved?
  • Explain exactly how and where you will market the property. Pocket listings are acceptable, but are they in the client’s best interest?
  • Educate the seller about disclosure duties. These include common law duties as well as those mandated by the Sellers Disclosure Act. It’s your duty to inform the seller, not to provide legal advice.
  • Provide all disclosures well in advance of the contract being signed.
  • Don’t hold onto earnest money checks. Cash them immediately – the law requires it.
  • Changes to the listing agreement do not involve the buyer or the buyer’s broker. Listing agreements are strictly between the seller and the seller’s broker. Do not amend the contract.

Buyers’ Brokers:

  • Avoid misunderstandings and protect your right to get paid by obtaining a buyer representation agreement. At minimum, provide a designated agent form up front to establish your duties to your client – this is required.
  • Make sure inspection and attorney review language is in the contract.
  • “If it’s not in the contract, it’s not in the sale.” If the buyer wants a particular piece of personal property included in the sale, include that property in the contract.

All Brokers:

  • Be clear about acceptance dates. Acceptance needs to be communicated promptly.
  • Pay attention to deadlines and stick to them! Insist that both parties adhere to deadlines.
  • Do not leave blanks in contracts. If using a form, write N/A or cross out parts that don’t apply and have both parties initial the change.
  • TRID will change closings and how broker’s payments are reported. Get clients ready for closing 7-10 days before the proposed closing date in the contract.
  • Respect personal privacy rights. Buyers should not take photos without the seller’s consent. Sellers should not record video without the buyer’s consent, although it is legal to do so. Recording audio without consent is illegal

Members of the Illinois Association of REALTORS® may consult the IAR Transaction Helpline at any time for answers to questions about contract formation, due diligence and closings. The IAR Legal Center is a resource for members of the Illinois Association of REALTORS® related to the laws, regulations and policies that govern the real estate industry in Illinois. Visit http://illinoisrealtor.org/legal for more information.