Working Inside the Box – Establishing the Box

Real Estate Sales People Need to Understand Their Broker Agreement

What is your agreement with your broker? A recurring question to the Hotline is “what is my broker’s obligation to pay me when I have pending transactions at the time I affiliate with a new broker?” There are many similar questions relating to fees after termination and whether a salesperson can take her clients and transactions to her new brokerage. 

The answer is always the same: what does your independent contractor agreement provide? If there are provisions regarding payment following termination, voluntary or otherwise, those provisions will prevail. Where the agreement is silent, there is little certainty. One might look to an invariable custom or practice of the broker in dealing with commissions post-termination but rarely is there an invariable practice that the court would accept as binding. It is more likely that the salesperson will lose out. The best practice is to endeavor to work out a resolution and if one cannot be achieved, consult counsel.

An even better practice is to establish terms for separation at the outset. When a salesperson affiliates with a broker, everyone should have high expectations. This is the best time to establish what happens at the end of the relationship. We know licenses are very portable and the odds are that the salesperson will not finish their career where they started. Neither the broker nor a salesperson benefit from uncertainty and suits that can follow termination.

Cyber Security

How Can an Organization Manage the Risk of a Cyberattack?

Cyber Security

The threat of a cyberattack is the sort of thing that keeps business owners up at night. Having an appropriate plan in place is critical to managing an organization’s response to a cyberattack. An organization will want to both manage risk before a security incident occurs, and mitigate risk afterward.

After a cyberattack, an organization aims to limit financial and reputational damage. But also, an organization should manage operational risk by having clear procedures for risk mitigation in place, before a cyberattack occurs. Organizations should be confident that their response plan will be useful and effective as a risk mitigation tool, and that their agreements with vendors provide helpful provisions to shift this risk when the vendor controls the outcome.

The experienced professionals at Mette, Evans & Woodside can assist your organization with this critical process.

For Sale By Owner

For Sale By Owner and the Statement of Estimated Costs

For Sale By Owner

What happens when a For Sale By Owner (FSBO) freaks out at settlement when she learns for the first time that she is paying seller assist and that the proceeds are less than she anticipated? She goes hunting, that’s what. Who is the likely target?

By definition, a FSBO is without an agent and we all know what a horrible idea that is! A listing agent would have reviewed the agreement and brought to the seller’s attention that seller assist would be deducted from the purchase price. A listing agent would have provided an estimate of closing costs and return.

While it is unlawful for a buyer agent to engage in conduct that confuses or deceives a seller, a buyer agent has no duty, in this author’s opinion, to review all the terms and provisions of the contract with the unrepresented seller. An unrepresented seller has a duty to assure that she reads the contract and understands what she is signing and to seek help if she does not (one the reasons the standard agreement suggests that the parties consult with an attorney).

Unfortunately, the seller may have a successful hunt because, in many cases, the buyer agent fails to provide the unrepresented seller with an estimate of closing costs detailing the costs and estimated proceeds. By regulation of the State Real Estate Commission, a buyer agent is required to present an estimate of reasonably foreseeable expenses associated with the sale that the FSBO may be expected to pay before she executes the agreement. The regulation (Section 334) states “Before an agreement of sale is executed, the brokers involved in the transaction shall provide each party with a written estimate of reasonably foreseeable expenses associated with a sale that a party may be expected to pay . . .” and it goes on to include the type of expenses for which there is to be an accounting. By my reckoning, the only broker involved in the transaction with a FSBO is the buyer broker whose agent is, therefore, duty bound to provide the estimate.

What is the consequence of not providing the estimate? It is likely that a disappointed seller will attribute the full amount of the seller concession to the selling broker and will demand that amount in suit. A common defense is based on causation: the buyer agent’s failure to estimate closing costs and proceeds did not cause the problem; rather, market conditions dictated a reduced sale price or seller concessions. While that may be true, it is difficult to assert this retroactively. Another consequence of not providing the estimate is that the seller may report the omission to the Real Estate Commission, which would likely seek to impose a fine.

The Importance Of Safety In Filling Heating Oil Tanks

By Paul J. Bruder, Esquire

As the weather turns colder and air conditioners give way to furnaces, homeowners call their heating oil providers and say “fill’er up.”

More than 100,000 homeowners in Pennsylvania heat their homes with oil, meaning that their basements are homes to large, typically 150 gallons or more, heating oil tanks.

Despite sometimes high costs, oil heat remains an efficient, clean and safe way to heat a home. However, the dangers and hazards associated with home heating oil often result from problems during the filling of those tanks. Having a grasp of the common risks can be helpful when working with clients selling or buying a home serviced by oil heat.

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Getting Creative

By James L. Goldsmith, Esquire

Agreement Photo

The most dangerous clause in the Standard Agreement for the Sale of Real Estate (ASR) is found in our current Paragraph 32(B), Additional Terms. Here’s where agents can let loose with the most creative use of the pen imaginable! A problem is, that when these works of art fail for any reason, they are likely to penalize the author (agent) and his or her client. Most of you are familiar with the legal maxim “ambiguities are construed against the drafter.”

We, the Hotline attorneys, hear from many of you who understand the potential risk of drafting special clauses and who want us to provide the language. Involvement in a specific transaction is beyond the scope of what the Hotline provides, but I understand why you ask. You really want to help your client even if it involves undertaking a job with which you are not completely comfortable. You think your client may think less of you if you say that this is something you don’t traditionally provide or that feel uncomfortable drafting the language.

Entering into an agreement of sale involves risk. The risk belongs to the buyer and seller. Drafting unique provisions that may be required in a particular transaction has tremendous impact on the buyer and seller. Out of concern for your client, it is best to refer them to a lawyer experienced in the type of transaction in which your client is involved.

Some modifications may be easily made without resorting to lawyers. Unless the modification is one commonly made, discuss the issue with your broker or office manager and have them review any language you propose. Better to have someone else draft it and have it be their problem.

To be sure, the Pennsylvania Supreme Court has ruled that real estate licensees may draft agreements that arise from the efforts of a licensee in a specific transaction without engaging in the unauthorized practice of law. That decision, however, dates back to 1934 and times have changed. Today, it is fairly easy to rely on the standard agreement and the many standard addenda available. It’s rare that a transaction calls for unique or specialized language and if that is the case then it’s likely to be a complicated provision. Rather than tackle a drafting challenge, refer the buyer or seller to their lawyer. Not only will you duck any potential bullet, you won’t have the angst of doing something you are uncomfortable with. Not only that, your pay remains the same and your client is getting the level of service he or she needs.

When a Hotline caller asks me to help draft special clauses I, of course, delve into the situation and the need for unique language. The explanations vary. One recent caller was trying to accommodate a 1031 exchange. I asked how many 1031 exchanges the agent had handled and the answer was “this is my first!” I advised that after 40 years of practicing law I did not feel comfortable handling 1031 exchanges as I’ve referred these transactions to my tax attorney partners in the practice who know what they are talking about. Tell the client that the task falls outside of the scope of what a licensee skilled in the marketing and sale of real property generally undertakes. Refer your client to an attorney. It is my belief, that undertaking such a task may very well fall under the unauthorized practice of law, in addition to subjecting you to license revocation or disciplinary measures.

Another caller was trying to draft a swimming pool inspection clause. This one was easy because it is already in the agreement in Paragraph 12, Home/Property Inspections. If you have any concern write that the swimming pool is one of the items to be inspected pursuant to the elected inspection provision.

Lawyers are criticized for taking a simple concept and turning it into a page-long provision. The reason, however, is that lawyers understand the importance that no ambiguities exist and that every “what if” is addressed so that there are no questions. And we don’t always get it right.

In this business the pen is indeed far mightier than the sword. Wield it carefully.

Copyright © James L. Goldsmith, Esquire, 2018
All Rights Reserved

Fessing Up

Recommendations On How Agents Should Handle Missed Agreement Deadlines

by James L. Goldsmith, Esquire

Of the common mistakes in residential sales, none occurs more frequently than the failure to abide by timelines, specifically those found in the inspection contingencies. If there is a time limit, someone will miss it.

In the Standard Agreement, the burden of observing the timeline is imposed on the buyer. If the seller does not agree to satisfy all terms of buyer’s corrective proposal, or if buyer and seller fail to negotiate a resolution, the buyer’s choice is to accept the property or terminate the agreement. If the buyer fails to make an election timely, subject to the goodwill of the seller, the buyer has lost the benefit of the contingency and is obligated to take the property in its present condition, even if the seller has agreed to satisfy most of the buyer’s demands. Buyer’s failure to meet the timeline means that buyer has purchased the property as is.

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Does An Employer Have To Pay Hourly Employees For Commuting To Work In A Company Vehicle?

By Kathryn Lease Simpson, Esq.

A: Not necessarily. Two provisions of the Fair Labor Standards Act (FLSA), that otherwise appear simple, create confusion. The first, employers do not have to pay their hourly employees for an ordinary commute to and from work. This is true even if an employee reports to different locations. However, the travel between work sites, after the first location, is normally compensable. For employees who regularly report to different job sites, at the beginning of the work day, factors such as the company’s usual business area and the frequency of changes to reporting locations may impact whether the drive is an ordinary commute.

Second, many employees believe if they are driving company vehicles to and from work, or to the initial job site, they are entitled to compensation. This is not necessarily the case. Courts will look to whether driving the vehicle and carrying tools impose more than a “minimal burden” on the employee.

Each situation is unique and the answer to the question turns on several factors. It is therefore important for companies that are considering entering into these types of commuting agreements to consult with counsel.

What’s the Biggest Mistake a Licensed Professional Can Make, When Faced with a State Board Investigation Notice?

By: James Goldsmith. Esq.

James Goldsmith. Esq.

Responding on your own to a licensing investigation or meeting with the board investigator, without legal representation, is one of the biggest mistakes a licensed professional can make when faced with an investigation notice from the state board.

If you receive an investigation notice from the state’s professional licensing board, immediately contact an attorney who is knowledgeable in professional license defense and familiar with state licensing boards and the disciplinary process. Not having an experienced attorney to provide a vigorous defense can adversely impact the outcome of the inquiry and put your professional license in peril.

The laws and regulations surrounding Pennsylvania’s professional licensure are complex and can widely vary from one profession to another. Our attorneys have an in-depth understanding of professional licensing and provide experienced representation. From a wide range of issues, from representation at administrative hearings to complaint investigations and disciplinary actions we guide clients through each step of the process to protect their professional licenses.

How Should an Employer Handle a Repetitive Motion Injury?

By: Victoria Edwards, Esq.

In manufacturing jobs many times employees are required to perform the same motion repeatedly or maintain certain body positions or grips, which can result in repetitive motion injuries. Under the Workers’ Compensation Act, an injury need not be pinpointed to a specific event or definable incident, so long as the injury arises in the course of employment. Pennsylvania Courts have held that an injury may have resulted from the cumulative effect from the work duties. Many cases come down to differentiating between repetitive motion injuries and degenerative conditions associated with aging. When an employee reports a repetitive motion injury, an employer should immediately document and file a report of injury and notify their insurance carrier. An independent medical examination is also essential to provide a potential basis to deny the claim. Additionally, have an employee be prepared to testify regarding steps taken to ensure that the work station was ergonomic and to address other mitigating factors.

Selling Real Estate in an Era of Modern Surveilling

By: James L. Goldsmith, Esq.

You either have firsthand experience or have heard stories of how modern surveillance techniques are entwined in the sale of real estate. Baby cameras, pet monitoring applications, security systems, and other surveillance equipment with varying degrees of technological and recording capabilities are now common features in homes. Some systems have no audio capabilities and are only available to view in real-time, while others may also record and store both audio and video data.

Real estate licensees and their clients must be aware of the nuances of video and audio surveillance laws to protect themselves from potential invasions of privacy, breaches of confidential information in violations of state and federal video and audio surveillance laws.

Video Surveillance

Under Pennsylvania law, a person may not videotape, photograph, or otherwise record a fully or partially nude person in a place where the person would have a reasonable expectation of privacy (hereinafter “REOP”) without the person’s knowledge and consent. This means that one cannot have surveillance equipment in a place where a reasonable person would believe they can get undressed (e.g., a bathroom) without first notifying the person and obtaining their consent. Where a property is being shown to prospective buyers, the seller should disable and/or remove any surveillance equipment in bathrooms or other locations that are subject to this heightened standard of privacy.

The REOP standard does not, however, have clear boundaries. Likely, a prospective buyer would not be able to successfully argue that they have a REOP everywhere in a seller’s home. Could a buyer successfully argue that he or she had a REOP in a bedroom of a home they were touring? Likely not, but life presents situations that can pose difficult questions. Does a nursing mother have a reasonable expectation of privacy as she nurses her child in a chair in the seller’s bedroom? To avoid any question of liability, a seller would be well advised to notify prospective purchasers that video equipment is located throughout the property and that special arrangements can be made to accommodate changing clothes, nursing, etc. Certainly avoid the placement of video equipment in bathrooms.

Regardless of the purpose of the video technology – nanny cam, baby monitor, live-feed-pet-recorder – sellers, buyers, and their real estate agents should keep a few points in mind: 1) use of video surveillance equipment is not per se illegal, so long as it is located in a place without a heightened standard of privacy, like a bathroom; 2) a place with a REOP is analyzed on a case-by-case basis and is subject to interpretation by a court; and 3) if there is any question of whether a person would have a REOP in a certain location where video surveillance equipment is operating, always notify the buyer and buyer’s agent and obtain consent before the showing takes place.

Even where video surveillance technology is restricted to places where no REOP is likely, notification to buyers and their agents may still be advisable. A buyer who discovers the presence of video surveillance in non-REOP areas may be offended regardless of the whether the owner has followed a protocol that is legal. Notice to the effect that the home is equipped (and perhaps being sold with) a video security system for the protection of visitors as well as owners may put prospective buyers at ease.

Another choice is to remove or disable such equipment or obtain written consent from buyers and their agents in scenarios where the equipment is visually recording them in various locations throughout the home. While these suggestions would not seemingly be required in living rooms, hallways, dens and other locations where there is not a REOP, the practice prevents any potential argument that an invasion of privacy took place.

Audio Surveillance

Unlike video surveillance, the laws on audio surveillance are more strict and clearly defined. Under the Pennsylvania Wiretapping and Electronic Surveillance Control Act, which is more stringent than federal law, if a person has an expectation that his or her oral communication is not being recorded, no other person may intercept that communication without consent from all parties involved (subject to some caveats for law enforcement, court order, etc.). This law is definite and not subject to the interpretation of a REOP standard like discussed above for video recordings.

As applied to real estate transactions, buyers and their agents likely have an expectation that their oral communication during a showing is not subject to recording. Therefore, a seller should not be audio recording or otherwise intercepting audio from the buyer or buyer’s agent, or any other parties, during a showing of their property. If a seller has audio devices, a video surveillance system with audio capabilities, or other recording devices in place, he or she may keep the devices in operation, only if he or she first obtains consent from all parties involved in the communication, which should be documented in writing. You can decide for yourself whether maintaining audio surveillance will enhance the prospect of selling the home!

While the laws discussed above must be followed by all parties involved in a real estate transaction, real estate licensees face additional penalties under the Real Estate Licensing and Registration Act, the Rules and Regulations of the State Real Estate Commission and perhaps also for violating the Code of Ethics.

As this is an emerging field, stay alert for new and changing rules and legislation, and don’t forget to smile. You may be on candid camera.

Copyright © James L. Goldsmith, Esquire, 2018
All Rights Reserved