Mette, Evans & Woodside

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

Mette, Evans & Woodside

What is CASPA and What do Contractors and Subcontractors Need to Know About Recent Legal Changes?

By: Veronica L. Boyer, Esq.

CASPA is Pennsylvania’s Contractor and Subcontractor Payment Act. It is the private industry version of the Prompt Payment Act, which applies to public projects. CASPA helps ensure that contractors and subcontractors working on commercial construction projects (or projects involving more than 6 residential units) get paid in a timely manner. The Act imposes penalties on owners or contractors who fail to pay their contractors or subcontractors. CASPA requires payment within a specified time period and provides for 1% per month interest (plus contractual interest) and a 1% per month penalty for amounts wrongfully withheld. It also provides for an award of attorneys’ fees and costs to the substantially prevailing party. CASPA was recently amended to prohibit contractual waivers of CASPA claims. This is important because it means that parties with greater bargaining power cannot force others to waive their rights under the Act. CASPA was also amended to permit suspension of work for non-payment as outlined in the Act. The Act can be a powerful tool for contractors and subcontractors to get paid for their work.

Mette, Evans & Woodside

A Tip from the West?

by James L. Goldsmith, Esq.

Timely tender of deposit checks is a growing problem that did not exist when offers and deposit checks were hand delivered. Now, deposit checks follow an offer’s acceptance by a handful of days. Further, a typical agreement includes a checkmark in Paragraph 26(G) limiting the seller to retaining paid deposits as the sole remedy in the event of buyer default. Thus, if a buyer backs out of the agreement and no deposit has been paid, the seller is without recourse. Shrewd buyers can use this tactic to hold a property in reserve while they continue shopping, but you don’t have to cite the extreme, however, to know that agreements not supported by healthy deposits make for weaker agreements.

In a competitive market the strongest offer should prevail. A strong offer has a substantial deposit tendered with it. An even better offer is one that comes with a substantial deposit and no checkmark in Paragraph 26(G).

So, why not borrow a practice from the west? By west, I mean Pittsburgh and western Pennsylvania where deposit checks are held in escrow by the buyer’s broker. Let’s explore how this practice can prevent the “unfunded offer.”

A deposit can go into escrow more quickly when it is tendered by the buyer to the buyer agent. Usually, the buyers and their agents will have a face-to-face meeting at the time an offer is drafted, or shortly before. The buyers and their agents know that the offer needs to be supported by a “good” deposit, especially in this sellers’ market. A strong buyer should be prepared to pay a deposit as soon as she is ready to extend the offer and there should be no greater problem getting a deposit check days before the offer is drafted and tendered rather and 1-5 days after the offer is accepted.

There are several slight adjustments to make in your paperwork. First, the agreement of sale will need to be modified at Paragraph 2(C) to show that the deposit is being paid to the broker for buyer rather than the broker for seller. There is a line to accommodate this changed.

Second, it may be necessary to have your buyer sign a one-sentence note for placement in your file. Ordinarily, when any agent receives a deposit, it is to be placed in an escrow account within the next business day unless the seller and buyer have agreed to the agent’s holding it (uncashed) until the agreement is executed. When buyers sign agreements of sale they agree to this (Paragraph 2(C)) and sellers agree that deposit checks can be held until an agreement is accepted when they sign their listing agreement. If a buyer agent collects a check from a buyer more than a day before the buyer signs the agreement of sale, the agent should obtain permission to hold the check from the buyer in writing. This is as simple as borrowing language from Paragraph 2(C) of the agreement of sale where it says “checks tendered as deposits may be held uncashed pending the execution of [this] an agreement of sale.” This will be unnecessary if the buyer is giving the buyer agent a deposit check no more than a day before signing the agreement of sale. To repeat, you only need this simple waiver agreement if the buyer is going to tender a deposit check to you more than a day before the buyer signs a standard agreement of sale.

Lastly, be prepared to prove to the listing agent that you’ve deposited the buyer’s purchase deposit in your broker’s escrow account. A copy of the deposit slip should suffice as should any other reasonable verification that the funds are received, accounted for and in an escrow account.

To those of you accustomed to having listing brokers hold the deposit, don’t fret. What is the advantage of holding a deposit when, by law, it can’t be released until there is settlement, an agreement by the parties or a final order of court? As a practical matter, it doesn’t matter which brokerage holds the deposit. It is more important that the agreement is supported by a deposit that is in an escrow account.

The advantage to having the buyer broker hold the deposit is that the delay from transferring a check from agent to agent is avoidable. While the deposit may not be the most important term of an offer it is a factor that a seller will consider. A competitive offer with a better deposit funded immediately just might win the day.

Mette, Evans & Woodside

A Question of Coverage

by James L. Goldsmith, Esq.

Mistakes happen. Consider the case of listing agent Robert. Robert happened to be on vacation when he received an offer at list price. He reviewed the standard form on his cell phone and reported to the sellers that it looked great. The agreement was executed electronically as was the sellers’ estimate of closing costs.

At settlement the sellers and listing agent were surprised that the net proceeds were $9,000 less than estimated. The reason: the agreement of sale called for seller assist that accounted for the $9,000 discrepancy. Robert has filed to take note when reviewing the offer on his cell phone. Nearly two years later when a claim was asserted and I was engaged to defend Robert, he readily admitted his error.

The claim asserted against Robert was a disciplinary complaint (order to show cause) filed by prosecutors with the Commonwealth of Pennsylvania, Bureau of Professional and Occupational Affairs. Robert was ready to sign my engagement letter, though I first suggested that he determine whether his errors and omissions (“E&O”) insurer would cover this. Many E&O carriers will pay defense costs for their insured’s involved in disciplinary matters, though they will not pay any fines levied. In most cases, a deductible will not apply.

Determining whether coverage existed was difficult. Robert was employed by Broker A on the date of his error. Though Robert then discussed the matter with his broker, his broker decided not to report it to the E&O carrier. Robert’s broker reasoned that the sellers were equally culpable for their loss because they failed to read the agreement of sale and because no threat of a suit had been communicated to her or Robert. Why risk having E&O rates increase over a report that does not come to fruition, the broker reasoned.

At the time of his receipt of the order to show cause, Robert was practicing with Broker B. At issue is whether Robert is insured for his defense costs and, if so, whether through the insurer for Broker A or Broker B.

My advice to Robert was to have both Broker A and B report the claim to their E&O insurers. Broker B did so and the quick response from the insurer was that there was no coverage. Robert was not affiliated with Broker B at the time of the occurrence.

Broker A was less compliant. Why report a claim for a past sales agent when it may lead to increased premiums? My advice to Robert was to insist that Broker A submit the claim. Robert’s contract with Broker A stated that Broker A would provide E&O coverage. Robert had kept his end of the deal as a sales affiliate, the broker who benefitted from Robert’s service should likewise fulfill her obligations. Broker A eventually relented and submitted the claim. Because the occurrence at issue happened while Robert was with Broker A, her coverage was the applicable policy and the claim should be covered.

Robert’s identifying the right E&O carrier was not the solution to Robert’s dilemma, unfortunately. All policies require claims and potential claims to be reported promptly and you will recall that Broker A upon learning of the matter had decided not to report it to her insurer! Years later when a case was initiated and after relenting to Robert’s demand that she report it, the E&O insurer wanted to know why the broker had not notified it of the problem. Whether Robert or his broker had knowledge of a potential claim. While the sellers did not threaten to file suit nor advise Robert that they would be filing a disciplinary matter, Robert certainly knew that his error might subject him to liability. And no, he didn’t make the report because as you read above, his broker did not want to do so.

Whether Robert will have coverage under Broker’s A insurance is, as of this writing, not determined. If Robert is denied coverage, does he have a claim against his broker for failing to report it to the E&O insurer at or near the time of the occurrence? There are too many issues to state with certainty, including Robert’s failure to insist that his broker report the occurrence. Regardless, it is a situation that pits an agent against his former broker.

The lessons to draw from this situation are several. When a mistake is detected, report it. Your premium is not increased because you have reported a potential claim. When a claim is subsequently filed, you can then determine whether you will have it covered through your E&O policy. [Note: I always suggest that an insured broker/agent submit a claim to their E&O insurer! It is risky not to do so because even the smallest claims can cost more to defend than imaginable and damages have a way of aggregating as time passes.]

Another important issue is determining what your coverage includes. Ask questions of your insurance agent. If a claim is asserted against a former sales agent, but does not include the broker as a defendant or respondent, does the former sales agent have coverage through the broker’s policy? Agents, ask questions of your brokers. When transferring to a new broker, find out who the E&O carrier is and ask questions about coverage for incidents that occurred previous to your employment. Learn the differences between a claims-based and an occurrence-based policy.

Lastly, and this is especially so if you determine that coverage exists, don’t fret. As I told Robert, his mistake was hardly a condemnation of his skills and competency. It happened. He has undoubtedly made worse mistakes that could have far graver consequences (e.g., looking at a text message while driving). It happened, it is not a “deathbed issue” (one that will be Robert’s last thought on that fateful day) or anything more than a financial burden. Make the right decisions with regard to E&O coverage and sleep peacefully.

Mette, Evans & Woodside

The Superior Court Recently Ruled on Two Issues Under the Real Estate Seller Disclosure Law that Realtors® Should be Aware of

The first question decided by the court was whether the seller was liable for failing to deliver a Property Disclosure Statement, where the agreement included an “as is” clause. The second question was what constitutes “actual damages” as the term is used in the Real Estate Seller Disclosure Law (RESDL) to define a buyer’s remedy for breach of the statute.

The case involved the sale of a 165-year-old two-story, single-family home with barn, garage and greenhouse structures that had been used as a residence and as the site of the seller’s commercial plant nursery. Upon the advice of counsel, the seller did not provide a Seller’s Property Disclosure Statement, because the property was a commercial property, because the agreement was an “as is” sale and because seller claimed to be unaware of any property defects. The parties to the transaction were not represented by real estate brokers and the Agreement of Sale was not a Pennsylvania Association of Realtors® standard form.

That the property was partially used for a commercial purpose is of no consequence, given RESDL’s applicability to the sale of residential dwellings, which this sale included. The seller’s next position was that the “as is” clause was sufficient to put the buyer on notice that there may be liabilities attendant to the purchase and relieved the seller of the obligation to provide a Seller’s Property Disclosure Statement. This position was as easily disposed of as the first. RESDL states that “a signed and dated copy of the Property Disclosure Statement shall be delivered to buyer….” The court noted that “shall” generally imposes as a non-discretionary duty; hence, whatever the parties may have intended or agreed to, RESDL imposed a duty upon the seller to deliver a completed and signed disclosure statement and seller’s failure was a breach of that duty.

Lastly, with respect to seller’s liability, seller asserted that his good faith reliance on the advice of counsel established a defense. Counsel had apparently advised that no disclosure was required in a transaction with an “as is” agreement. Further, though the sale included a dwelling, counsel considered it to be a commercial property that did not require seller’s delivery of the disclosure form. This argument was also denied as the court again took note of the mandatory language of RESDL, and noted that the seller was unable to cite to a case holding that a mandatory disclosure can be negated by the advice of counsel.

The next major issue considered by the court was what was meant by “actual damages” as that term is used in RESDL. At trial, evidence was submitted that the expected cost to repair the property was about $60,000. But an appraiser also testified that the value of the property at the time of purchase was about $125,000 less than what it would have been had it been in average condition.

The buyer argued that the proper calculation of “actual damages” should include the reduction in property value as well as other consequential damages, but the trial court awarded based solely on the anticipated cost of repairs.

The Superior Court undertook lengthy analysis of the term “actual damages” as used in, but not defined by, RESDL. In doing so, the court noted that no Pennsylvania case has defined “actual damages.” Without clear precedent, the Superior Court dug into the legislative history of RESDL to determine its intent. Deferring to its recognition of RESDLs “protective purpose” and considering the measure of property damages in other types of cases, the Superior Court concluded that “actual damages” as used in RESDL “may be determined by the repair costs, capped by the market value of the property.” It thus upheld the trial court’s approach to damages, though the case was remanded because of some technical questions as to exactly how that number was determined.

In this case, there was no evidence to suggest the property was not repairable. Other cases have suggested that when property is not repairable then the difference-in-value damages are appropriate.

For more information about this case, see Phelps v. Caperoon found at 2018WL3016477, or at 2018 PA Super 171 (2018).

Mette, Evans & Woodside

Vituperativeness: Is There Ever a Reason?

Vituperativeness-Is-There-Ever-A-ReasonBy: James L. Goldsmith, Esq.

My wife and I were recently sharing a farewell dinner with a couple moving from the mid-state. Their home was sold and packed. They were letting down their hair after a week that was particularly demanding, both physically and mentally.

The wife of this couple, Betsy (not her real name) had called me a month earlier about their buyers’ demand to visit the house with a contractor to take measurements and make observations. The buyers’ agent claimed that this was one of two pre-settlement walk-through inspections to which the buyers were entitled. “Pre-settlement walk-through” is not defined in the agreement, but we know its purpose is to enable the buyer to assure that all conditions prerequisite to closing have been satisfied. Whether this was such a walk-through is not so important to this article and, in fact, Betsy would ordinarily have permitted it without a blink. The problem was that her parents were visiting from out of town on the day the buyers were demanding access for their entourage, and Betsy’s mother was recently found to be in the early stages of Alzheimer’s. Betsy’s adult children were in town and it just wasn’t a good time to have strangers bumping about the property. So, Betsy tried to put her foot down.

Ultimately the standoff was resolved and the buyers came through the property as they desired and Betsy’s angst was short-lived. The problem, and the point of this article, involves the communication between the buyers’ agent, demanding the visit, and the listing agent who was trying to guard her clients. Because the property is located in my neck of the woods, I knew both salespersons. I believed both to have sterling reputations and the buyers’ agent is on my short list of agents to whom I would gladly refer business and about whom I have given glowing reports.

Though the standoff between the buyers and sellers was brief, a few emails were lobbed from buyers’ agent to listing agent and back. Betsy was particularly distressed to read an email from the buyers’ agent that her agent forwarded it to Betsy. It referred to Betsy in rather unflattering terms. Had I been the listing agent I would not have forwarded it to my client, but would have passed along the relevant part of the message. No transaction benefits from high emotion and Betsy went off the rails upon reading the email.

By the time Betsy and her husband were sharing this story over our farewell dinner, she probably had repeated the same complaint to countless others; and I am sure she referenced the buyers’ agent by name. In a business, largely based on word-of-mouth, I can’t imagine how deleterious it is to have stories like this repeated.

By contrast, I recently defended a broker in an ethics proceeding brought by a consumer. The broker was not specifically involved in the transaction, but had provided advice to one of his agents who was representing the buyer. This broker, too, has a sterling reputation. I have never known him to be other than a gentleman in his comportment, dress and communication.

To properly defend him I asked and received all of his email exchanges with his agent. By contrast to the bomb Betsy received, this broker’s emails were thoughtful and considerate to the point where the introduction of his file would cast him in a good light, regardless of the relevance of the email to the issues at hand.

My immediate thought when reading his email was to contrast his approach to that involving Betsy’s situation. In fact, I talked to this broker about the contrast and how impressed I was that he was thoughtful and articulate in his email. He told me that he always made a point of doing so and always avoided invectives, vituperatives, and other euphemisms for insulting and abusive language. Fittingly, this is a man who always wears a suit and who at all times comports himself as a businessman, respectful of his colleagues, clients and adversaries.

There are other reasons for maintaining decorum in your communications. When defending brokers and agents, my first request is for a complete copy of all files including notes and email. I require the production of the same from adversaries through rules of court that require production of documents. Cases are won and lost on a judge’s and/or jury’s assessment of a plaintiff’s and defendant’s written communication. When a jury dislikes a party it is hard to overcome the prejudice. But even a party who’s made a critical error will garner sympathy from gentlemanly and gentlewomanly behavior. Save your invectives for private moments. Draft your written communications as though you will be judged by it.

Mette, Evans & Woodside

Expletive Deleted

Expletive-DeletedBy James L. Goldsmith, Esq.

In news and other articles, another’s profanity is frequently replaced with “expletive deleted.” Some use the term in self-censorship. More often, we just let the expletives fly. At that moment it might feel quite good to do so; upon reflection, not so good. Realtors® hold no ownership on profanity or expletives deleted, the inspiration for this article did, however, arise in the context of a Realtor®-related dispute.

The matter involved the termination of a broker- salesperson relationship. The salesperson was moving on and the broker was quite unhappy. A dispute arose over payment for transactions that were pending at the time the salesperson gave notice, and about other money matters and file possession. The details matter to the disputants, but not so much to us.

The aggrieved salesperson enlisted the aid of an attorney who, like many of us, believe that every effort should be made to spare a brawl. He wrote to the broker and explained the issue from his client’s perspective and made a financial demand to be exchanged for a release from further liability.

Replies to a demand are best fashioned once one has cooled off. The broker, however, was not of this mind and before reading the entire letter called the attorney and let him have it. Expletive deleted. Expletive deleted. Expletive deleted.

Not unpredictably the broker’s call did not bring the lawyer to his knees or send him packing. Instead, the lawyer hastened to sue the broker and brokerage. The broker assumed his errors and omissions insurance policy would cover the costs of defense and losses, if any. It did not. The matter was not asserted by a consumer claiming to have been harmed by the Realtor®’s malpractice. By the time the insurer declined coverage, the broker was beyond the 20 days provided to respond to the complaint. The lawyer sent a 10-day notice of intent to take a default judgment and assured the broker, in writing, that there would be no extension of time for any reason (most lawyers will grant an extension). It seems that the broker’s initial telephone call had left its mark!

It was I who was ultimately engaged by the broker to defend the suit. Noting the notice of intent to take a default, I immediately called the Plaintiff’s lawyer and after introducing myself and the matter in which I had been engaged, I was cut off. There followed a well-articulated harangue about what an EXPLETIVE DELETED my client was! I would receive no courtesy (no personal animosity intended) and that the lawyer and his clients would not capitulate, mediate or take any action that might resolve the matter without my client having to pay the maximum penalty. Further, as a result of my client not deleting his expletives, but instead letting it all hang out there in that call, the agent was going to the Real Estate Commission to file a complaint.

In my 40 years of practice I have had exchanges with opposing counsel that had been, expletive deleted, miserable. But I know I will not make another attorney unball his fist because of what I say. While their credibility may be markedly diminished in my eyes due to their rants, I do not reply in kind. “We will agree to disagree” conveys enough.

I know my broker client will spend much more in attorneys’ fees because of that call. My broker client has lost the ability to compromise a claim because of that call. My broker will suffer a slight loss of credibility in the eyes of one or a few folks because of that call.

Animus is not our friend. A heightened emotional state can bring out the worst. We reveal information we might otherwise hold back. We arouse anger in others and jeopardize compromise that might be in our client’s best interest.

So what to do when the position taken by another player in our transactional setting is annoying if not angering? First, take a chill pill. Feign another call or a situation that calls for you to remove yourself from the conversation. Cool down and call back later.

Second, orient yourself. The transaction is not about you, but rather your client. The client bears the fallout though you may lose a fee. Divest yourself of some baggage by understanding who it is that benefits or loses from the situation. Client disappointment comes with the territory. While your client deserves your best effort, this is not a situation where a ship is sinking or you are losing a loved one. Stay oriented.

Third, take advantage of your adversary’s emotional state. Let him or her talk. You might get something. Ask for the basis of their position: “I’d like to understand your position and will give you the floor and listen to the reasons by which you conclude . . .” Ask for supporting articles or citations that support their position. I’d prefer to see the cards my adversary is holding so that I can best prepare a course that will most benefit my client.

There must be dozens of other helpful tips, and I’d love you to share yours with me. I’ll leave you with this broad principle. Consider your own reputation and comport yourself in a way that does nothing but enhance it. Be the voice of reason, particularly when in an adversarial situation. How can it be any better than to be well regarded by the person with whom you are having a dispute? Be firm, but be willing to be wrong if indeed you are. My standard line when defending a Realtor® in litigation is to say something to the affect that if you are right I will be more than happy to help you reach a fair resolution and get the funds to which you are deserving; on the other hand, I need a factual basis by which you conclude my client’s liability.” If my client has committed a wrong, I’d rather have a dispassionate opposing counsel who is willing to discount the loss in exchange for a prompt resolution. When my Realtor® client has beat me to the punch and has ranted and raved at the attorney . . . well my chances are way less than otherwise.

Mette, Evans & Woodside

A Listing Agent’s Right to See your Buyer Agency Contract

Buyer-agency-contractBy James L. Goldsmith, Esq.

Does a listing agent have a right to see your buyer agency contract? At the moment, I can’t think of a good reason! It is not prerequisite to your being paid a cooperating commission. Your entitlement to that is wholly dependent upon whether you are the procuring cause of the sale. The terms of cooperation, established by your local MLS, make that clear. It is NAR’s policy, applicable to Realtor owned multi-list systems, that the only prerequisite to a fee is procuring cause.

The Real Estate Licensing and Registration Act (RELRA) provides that a licensee may not perform a service for a consumer for a . . . commission . . . paid buyer on behalf of the consumer unless the nature of the service and the fee to be charged are set forth in a written agreement between the broker and the consumer that is signed by the consumer. See my article entitled “Buyer agency contracts: When?” recently published by your local association.

As noted in the above-referenced article, services may be performed before the employment contract is signed ” . . . but the licensee is not entitled to recover a fee, commission or other valuable consideration in the absence of such a signed contract.” So, can a listing broker demand to see a buyer agency contract of the broker whose office procured a buyer as prerequisite to payment? I suggest that the answer is no, and I am not aware of any case that has held to the contrary. That a buyer agent is to have a written contract with a consumer in order to be paid is clear from the language quoted from RELRA. But is also flies in the face of the contract establishing payment terms between listing broker and selling broker that are established by the multi-list. It’s only predicate is that the buyer agent procured the buyer.

I have no doubt that a buyer agent would not succeed in recovering a commission to be paid directly by the buyer in the absence of a written contract signed by the buyer. So why is a listing broker obligated to pay the fee offered in the MLS to a buyer agent without a contract? Because the relationship between the listing and selling agents are established by the terms of the MLS where there is but one prerequisite to payment: procuring cause.

It is possible then for a selling agent to succeed in Realtor® arbitration against the listing broker who promised to pay a fee, but also face disciplinary charges for not having a written buyer agency contract. Disciplinary charges are handled by the Bureau of Professional and Occupational Affairs which is concerned primarily with the enforcement of RELRA and the Rules and Regulations of the Commission and not interested in terms of cooperation as provided by the multi-list service. Further, in a direct suit filed by a selling broker against a buyer, the broker’s efforts would fail because of lack of a signed contract.

The question of whether a listing broker can demand to see a buyer agent’s contract should be irrelevant in a world where agency contracts are executed at the beginning of the relationship. No buyer agent should find himself or herself without a contract when an agreement of sale is executed much less when settlement occurs. Yet, it happens.

So, can a listing broker ever demand to see the buyer agency contract? Perhaps there is a situation that would justify it, but none come to mind at this writing. Can buyer agents demand to see a listing broker’s contract? It never happens, but then again it’s a rarity for someone to take a listing without also having a signed listing contract. By the way, if the norm is to get a listing contract at the beginning of the relationship, why doesn’t that hold true for buyer agency contracts?

Mette, Evans & Woodside

Communicating Acceptance: When is a Binding Agreement of Sale Officially Formed?

By: James L. Goldsmith, Esquire

Many believe that an Agreement of Sale is effective the moment both parties sign it. It can be, when the parties are in the same room to witness the others’ signing. More often, however, the parties review agreements at separate locations and without knowing what the other side will do. Imagine that a buyer signs an agreement before bed and sets it on her nightstand, only to awaken at 3 a.m. so fearful of homeownership that she tears up the document. Was there ever an agreement? The answer is, like most legal answers, it depends.

The general rule is that a contract is effective when both parties agree (i.e., sign the Agreement of Sale) AND acceptance is communicated to the offering party. If both parties sign the contract in the same room and at the same time, then acceptance would be communicated simultaneously with the signing of the document. In other cases, where acceptance is not as clear, an additional step to communicate the acceptance may be required.

For a real estate Agreement of Sale, the best method of acceptance is by returning the signed Agreement of Sale to the offeror. The PAR Agreement of Sale states that “return of this agreement…bearing the signatures of all parties, constitutes acceptance by the parties.” The PAR agreement does not, however, rule out other methods of acceptance. Therefore, there are other means of acceptance that could be used and deemed appropriate by a court, such as acceptance by a writing, verbal acknowledgement or conduct.

Acceptance by some other writing.

Acceptance can be made in writing without returning the actual agreement of sale to the offeror. For example, if after signing the agreement, a seller texts a buyer that he signed and accepted the agreement, the buyer would have the better argument that acceptance was communicated. Though, if there were a dispute, she could face other issues, such as assuring that the text messages get admitted into evidence, based on authentication and other evidentiary rules.

Long story short: It’s possible, but it’s unreliable and a bad idea to rely on any writing other than the Agreement of Sale itself as means of communicating acceptance of an agreement.

Oral acceptance.

Communicating acceptance orally is less reliable than by writing. To guard against the uncertainties of oral agreements, Pennsylvania has a statute of frauds that requires agreements for the sale of real estate to be evidenced by a writing. The writing does not necessarily need to be a contract, but it must include material provisions and be signed by the party to be bound. A verbal acceptance can establish a valid contract, but there would have to also be some other writing signed by the party now refusing to abide by the contract before a court will enforce it.

Acceptance by conduct.

Other than accepting an agreement in the presence of both parties, acceptance could also be accomplished in very limited circumstances through other types of conduct. For example, what if Brooke Buyer delivered her signed offer with a $5,000 deposit check? If the seller endorses and deposits the check into his bank account, but never produces a signed Agreement of Sale, the buyer would have a strong argument that the seller accepted the agreement just via the check endorsement. Depending on the clarity of the buyer’s offer, just this signature and deposit could be sufficient for a court to find that all material terms of the sale were in writing.

Although this is a stronger argument for the buyer, this scenario still leaves uncertainty, which could result in added expense, litigation and a potentially losing result.

So, what should you do? Ultimately, the above examples are outliers, and the ordinary and recommended method of acceptance is in writing through delivery of a signed Agreement of Sale. If a seller signs the agreement and delivers it back to a buyer, the moment that the buyer receives the signed agreement is the moment the effective contract is created. This is the moment when the seller communicates his acceptance. The Pennsylvania Supreme Court confirmed this rule in Groskin v. Bookmeyer when it held that the “[offeree’s] mere signing of his own copy of the agreement, without any attempt to notify [the offeror] that he had done so, did not constitute an acceptance of [the] offer.”

Add in agents.

As a general rule, we can treat an agent as the actual person being represented. This means that communicating acceptance to the other party’s agent is communicating acceptance to the other party. Likewise, communicating acceptance to an individual’s own agent, is communicating acceptance to themselves (i.e., nobody). In sum, until the agent communicates the acceptance to the other party -— assuming the agent has authority to do so -— no agreement is created.

There are three major takeaways from this discussion. First, agents should advise, and be advised, that until a signed Agreement of Sale by both parties is in their physical possession, there may not be a binding agreement and the transaction should be treated accordingly. Second, oral communication of acceptance (“We have a deal”) creates uncertainty and has been the subject of repeated litigation. It is far better to indicate that the terms look good, but state that there is no deal until the agreement is signed and returned. Finally, if there is a question as to whether an agreement was formed without having the physical agreement of the sale in hand, the answer is likely fact intensive, and parties should be advised to seek counsel.

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

Condemnation of Property…What are My Rights?

By: Mark S. Silver, Esq.

Condemnation Of Property

The Department of Transportation, school districts, sewer and water authorities, certain pipeline companies, some electric companies, and various other government agencies have the power to acquire private property for public purpose. Without such power, many important public works projects that provide benefits to us all could not be undertaken. Pursuant to the Constitution, a property owner is entitled to just compensation for the taking of his private property.

Attorneys with experience in eminent domain (condemnation for public purpose) and qualified real estate appraisers can provide valuable assistance to a property owner facing condemnation. Sometimes the offer made to the property owner by the acquiring entity is fair; sometimes it is not. In determining what is just compensation, the attorney and appraiser will evaluate whether the taking has resulted in a restriction on the use of the property following construction, as well as whether the taking has reduced or eliminated more profitable uses of the property.

Early involvement by professionals on behalf of the property owner is critical to establish and to document a claim for compensation, as well as to negotiate the most favorable terms of the taking for the property owner. For example, it is possible to negotiate a 60″ depth, rather than the standard 48″ depth, for a pipeline easement that crosses cultivated fields. It is also possible to relocate easements, as well as access routes to them, to areas that create the least functional disturbance to the land owner. Further, additional protections to the property owner that can be negotiated include: tree removal or storage of usable timber, separation of topsoil cover from sub-grade material, and separation of rock in excess of a specific diameter from the backfill material so as to enhance crop development after the installation is complete.

Property owners can contest the condemnation of their property on several bases, such as the lack of a legitimate public purpose, the lack of authority to condemn and failure of the condemning authority to follow required legal procedures. Yet, in most instances, a property owner’s money and efforts are better spent on maximizing the just compensation that is paid for the condemned property.

Owners of agricultural property have unique protections in certain circumstances, especially if the property is enrolled in an agricultural security area that has been approved by the local municipality. If applicable, the condemnor, before filing a condemnation action, must obtain a determination from the Agricultural Land Condemnation Approval Board (ALCAB) that there is no alternative to the taking of this particular agricultural property. The condemnor can have a difficult time satisfying that standard.

The law in Pennsylvania includes a provision that the condemning authority, in most instances, is obligated to reimburse the property owner up to a maximum of $4,000 toward professional fees. This can assist to offset initial expenses incurred to obtain an initial review of the matter on behalf of the property owner.