Lawyer Typing with Justice Scales in Front

When Real Estate Brokers are Forced to Sue for Their Fees

Lawyer Typing with Justice Scales in Front

By: James L. Goldsmith, Esquire

My mentor and former PAR legal counsel, the late Tom Caldwell, used to caution brokers intent on suing clients for fees by asking that. The clear message is that when you sue for a fee, the client is going to bite by claiming that no fee was owed because of the malpractice committed by the broker or salesperson.

I represent brokers who sue for their fees and the defenses always include claims of malpractice.  It is true that my clients win most of these cases, though the only credit I lay claim to is that I am selective about the cases I take. The reasons for success, however, I attribute to my clients. In this article, I’ll present several tips for success. I could drag the list out to 15 or 20 tips beginning with don’t accept a jerk for a client, but I’d rather provide you with the core. While these tips work regardless of your representing a buyer, seller, landlord or tenant, I’ll provide a context from a case I most recently resolved.

In that case, the broker was the buyer’s agent for a married couple seeking a new home. The wife was an in-house lawyer for a retail chain and the husband an engineer. They signed a standard buyer agency agreement. During the course of his efforts, the broker wrote an offer that did not result in a signed agreement of sale. He continued to identify properties, but ultimately, the buyers went dark and ceased communicating with him. He doubled his effort to solicit a response. Eventually, he reached the wife by telephone. She reluctantly revealed that she and her husband had purchased a home, but that she would consider hiring the broker to list her former home for sale.

My client was far from delighted by her “generous” offer and told her that he expected her to pay his commission. While that call ended abruptly, the wife replied with an email several days later. She said she and her husband owed no fee because the broker was “not the procuring cause of the sale.”  At this point I was engaged, and suit was filed. The complaint was less than three full pages and consisted of about 15 enumerated paragraphs and an exhibit, the executed buyer agency contract. The amount sought was the percentage fee recited in the buyer agency contract multiplied by the purchase price of the home the buyers bought during the term of that buyer agency contract. In our case, the fee came to $19,500.

The answer to the complaint included the affirmative defense of malpractice: The buyers alleged that the broker failed to make a continuous and good faith effort to find a property for the buyers as required by the Real Estate Licensing and Registration Act. To allay what little suspense there may be, my client prevailed. We moved quickly to get this matter on a trial list (believe it or not it happened within months) and on the eve of trial, the defendants agreed to pay $15,000 and it was accepted. Why did my client prevail? Consider the following.

First, my client had a nearly perfect file. He had a fully executed buyer agency agreement. If your client bails on you and you don’t have an executed agency agreement, forget it. Further, he had every email and text from his first meeting with the buyers to the last exchange. No impartial judge or jury could reasonably conclude from the string of email that the broker abandoned his clients. Every step taken by the broker was memorialized by email to his buyers reciting their most recent telephone conversation or what his recent research had revealed. It easily demonstrated that it was they who had abandoned him.

Take any risk reduction seminar and something will be said of the importance of maintaining a file and corroborating and confirming all actions and discussions by mail or email. Usually, it’s suggested that this will assist in the defense of any malpractice claim should it be asserted. A good, comprehensive file also will enable you to recover a fee when your client breaches his or her contract with you.

Second, pursue the claim and march steadily to trial. Engage counsel who know license law and the standards of practice of real estate brokers and salespersons. Don’t assume that every real estate lawyer knows anything about how brokers work, their duty or how they get paid.

These files don’t have to be over litigated. When the amount in controversy is less than $50,000, the case will first be heard by arbitrators in the court of common pleas of the county where suit is filed. I take limited discovery to assure I have every document that might be asserted as a defense, I don’t take depositions because I’ll get the testimony at the arbitration and can have it recorded there by a stenographer for use if the case is appealed to a trial before a judge and jury.  Discuss these matters with your counsel and keep in mind that your claim is for a liquidated amount (an amount certain). A realistic projection of costs and taking measures by which they are reasonably limited will assure that your net recovery is good. Unfortunately, no matter how efficient your attorney is, the other side can delay, obfuscate and over-litigate.

Third, the broker was first to demand payment, not me, his attorney. To be clear, I am not suggesting that you don’t engage counsel before demanding payment. I have found, however, that when the broker makes his or her demand directly to the client, the client will respond. If I write a letter of demand, the response will be from an attorney whose words I can’t use as evidence in court.

In our example, the buyers’ first response was that the broker was not the procuring cause of the sale. Of course not, the buyers had abandoned their broker and did not give him the chance to put them in a property. This defense was dropped and in the answer to the complaint it was replaced by the defense that the broker committed malpractice by abandoning his buyer clients thereby justifying their non-payment.

This change in the defense would make good fodder for cross-examination. Don’t most people who have a legitimate reason for non-payment know that reason? Here it was evident that the buyers were searching for a pretext and the original procuring cause defense was put together before they engaged counsel who realized it was a losing argument. Again, if I had been the first to demand payment, the matter would have gone straight to counsel and we wouldn’t have had this switch in defenses that made buyers look particularly weak. I don’t encourage self-representation but a simple request for payment might be reasonable coming from you, the broker. This too is a matter for discussion with your counsel.

My experience suggests that brokers are generally successful in recovering fees that have been earned. That judges and juries favor clients over their real estate brokers is not true in my experience, especially for those brokers who maintain good files and can establish that they provided the services that a reasonable prudent licensee is to provide.

Copyright © James L. Goldsmith, Esquire, 2019
All Rights Reserved

Super Lawyers

Four Mette, Evans & Woodside Attorneys Named “Super Lawyers”

Super Lawyers

Attorneys pictured (left to right): Kathryn Simpson, James Goldsmith, Michael Farrell & Victoria Edwards

Mette, Evans & Woodside attorneys Kathryn L. Simpson, James L. Goldsmith and Michael A. Farrell were named as top attorneys in Pennsylvania by Super Lawyers. Attorney Victoria P. Edwards was also recognized by Super Lawyer as a Rising Star. The Super Lawyers honor is reserved for attorneys who exhibit excellence in their legal practice with just five percent achieving the recognition in the state.

Ms. Simpson’s practice is in commercial litigation, professional liability defense, labor and employment, and health law. Since 2004, Ms. Simpson has been recognized as a Super Lawyer for her litigation work. She is a frequent speaker and author of continuing legal education course materials for the Pennsylvania Bar Institute.

Mr. Goldsmith focuses his practice on professional liability defense, professional licensure defense and real estate litigation. Since 2006, he has been recognized in the professional liability defense category. Mr. Goldsmith also provides legal expertise to professional trade associations such as the Pennsylvania State Association of Boroughs, and several Associations of REALTORS® across Pennsylvania.

Mr. Farrell, who has been recognized for seven years, has been practicing in the field of insurance defense litigation for 32 years. He is a certified specialist in the practice of workers’ compensation law by the Pennsylvania Bar Association’s Section on Workers’ Compensation Law as authorized by the Pennsylvania Supreme Court. He has published articles and has taught seminars relating to Pennsylvania Workers’ Compensation Law.

Ms. Edwards dedicates her practice to workers’ compensation and social security disability. Since 2016, she has been recognized as a Rising Star by Super Lawyers. Ms. Edwards also is a certified specialist in the practice of workers’ compensation law by the Pennsylvania Bar Association’s Section on Workers’ Compensation Law as authorized by the Pennsylvania Supreme Court.

“Having so many of our attorneys recognized as “Super Lawyers” over the last decade is a testament to Mette, Evans & Woodside’s dedication to providing top-notch legal counsel,” said the firm’s President Tim Hoy. “We’re proud to have these outstanding attorneys as a part of our legal team.”

Mette, Evans & Woodside has a long-standing tradition of providing comprehensive legal representation in Litigation, Estates and Trusts, Business and Real Estate. Founded in 1969, the firm provides clients throughout Pennsylvania with sound legal counsel for all facets of their professional and personal life.

Understanding Pennsylvania’s Real Estate Commercial Broker Lien Law

Realtor Property Lien

By: James L. Goldsmith, Esquire

A majority of states, including Pennsylvania, have enacted broker lien laws that enable real estate brokers to file liens on commercial property in the full amount of their commission.  There are prerequisites to be satisfied before a lien can be asserted.  The terms of engagement of the broker and the conditions to be satisfied in exchange for the commission must be specified in writing between the broker and client. When the client is a seller or lessor, this agreement is generally referred to as a listing for sale or rent agreement.  The terms should be clear so that there is no ambiguity as to when a fee is earned.  It is also imperative that the broker asserting the lien establish that the broker and/or agents affiliated with the broker “have provided licensed services that result during term of the written agreement in the procurement of a person or entity that is ready, willing and able to purchase, lease  . . . as evidenced by a written agreement signed by the owner or owner’s agent.”  Generally, the mere marketing of the property’s availability has been deemed to satisfy the requirement that the broker provided licensed services.

Notice of a broker’s intent to file a lien must be served on the owner and purchaser at least three days prior to the filing of the lien with the prothonotary in the county in which the property exists.  This requires the broker to anticipate that the seller won’t pay a commission since the lien has to be filed before settlement when the commission is ordinarily paid

If a lien is asserted but the transaction does not settle through no fault of the owner, the lien must be removed voluntarily and promptly.  Failure to do so on the part of the broker can result in additional assessments including expenses and attorneys’ fees.

When a lien is asserted before settlement sums sufficient to satisfy the lien can be taken from the proceeds of the transaction and held in escrow in order to allow the transaction to proceed.  If such an account is established, the parties may not refuse to close.  Ultimately the sums held in escrow will be paid to the broker as a commission or returned to the seller if a commission has not been earned.  This may be determined by trial.

Broker liens can be asserted against a buyer who has agreed to pay a commission, but has failed to do so.  A lien against a buyer or tenant can be filed up to 90 days following the date of the purchase or lease.  There would also have to be clear agreement between the buyer/tenant and the broker and broker’s services would have to been provided pursuant to the agreement.

Waivers of a broker’s right to file a lien are ineffective by the terms of the lien law.  For this and other reasons it is imperative that a clear consumer/broker agreement is established at the outset of the relationship.  There should be no uncertainty as to when and how a fee is earned.

Copyright © James L. Goldsmith, Esquire, 2019
All Rights Reserved

Real Estate Claims

Taking Real Estate Cases To Magisterial District Courts

Real Estate Claims

By: James L. Goldsmith, Esquire

The magisterial district courts are the small claims courts of Pennsylvania. The magisterial district justices (MDJs) are the small claims judges. It is within their jurisdiction to conduct preliminary hearings in criminal matters where the only issue is whether there is sufficient evidence to send the matter to the common pleas court for trial. Hopefully your interest in this article has nothing to do with the criminal functions of the court!

Among the other responsibilities of the magisterial district courts is the resolution of cases involving evictions and civil cases where the amount in controversy is $12,000 or less. MDJs may hear cases involving larger sums, but can only award the maximum amount of $12,000. The attractiveness of the magisterial district courts is the low cost and that the proceedings can be navigated without legal counsel. Legal counsel is not required in the court of common pleas or the appellate courts, but try navigating your way without one!

For obvious reasons, many cases rooted in real estate find their way to the MDJs. Though more and more MDJs are lawyers, it is not a requirement of the job. Before being sworn into the position, all MDJs must pass a test that includes civil law including real estate and landlord/tenant law. One would hope that the MDJ before whom you appear would be expert in the law, and most fit the bill. A Hotline caller, however, recently relayed how the MDJ refused to enforce his lease because it was a lease in writing for more than one year, and, according to the MDJ such leases were not enforceable!! Most MDJs are willing to be persuaded that the law is other than what they had thought, but a gentle and non-condescending approach is suggested. Providing a legal opinion or treatise on the matter is also suggested.

A limitation on taking a matter before an MDJ is the ease in which it is appealed. This can also be a benefit, but it certainly means that complete resolution before the MDJ is not a certainty. Appeals can be taken for any reason, or no reason. An appeal from the court of common pleas is a different matter; the appeal must be based on an error of law and not merely because the appellant is unhappy with the decision.

Despite the ease with which an appeal is taken from an MDJ decision, there are benefits. First, many cases are resolved without appeal. Second, a hearing before an MDJ gives one a relatively inexpensive rehearsal. On appeal, the shortcomings in one’s presentation can be rectified. Third, a hearing before an MDJ is inexpensive discovery. Practice in the court of common pleas enables one to take depositions and serve written discovery seeking information well in advance of trial. You can get much of the same by trying a case before the district justice. In fact, you can request that the testimony of a witness or the entire hearing for that matter, be transcribed for later use. The person seeking the transcription is the person who pays for the cost.

Landlord and tenant practice is primarily relegated to the magisterial district courts. If you manage property you should get to know the MDJ(s) that will entertain your cases. Judges are nuanced and some have requirements that others may not observe. Most would welcome an introductory visit. State that your objective is to simply become aware of the procedures to be applied by the MDJ. Don’t expect all MDJs to be open to this kind of introduction and don’t ask for favors. Do your homework and be conversant with Pennsylvania’s Landlord and Tenant Law. Don’t expect the MDJ to teach you the law; rather, you are there to determine if there are any special procedures or practices that the MDJ prefers so that you can comply. Hopefully the introduction will enure to the benefit of you and your client.

Copyright © James L. Goldsmith, Esquire, 2019
All Rights Reserved

How long to return deposits?

How Long to Return Deposits?

How long to return deposits?
By: James L. Goldsmith, Esq.

As a broker holding a deposit, how long should it take you to return it pursuant to the terms of a release signed by both parties or when sufficient time has passed (the 180 days or whatever it has been reduced to) and not litigation/mediation has been initated? I am hearing complaints that listing brokers are taking “too long” to return deposits when buyers are the recipients. I’ve not verified any of these complaints, but they are the focus of a good number of Hotline calls so I thought it merited discussion.

There are times when a deposit cannot be returned despite how evident one party’s entitlement to that deposit may be. We need an agreement between the parties which usually is in the form of a release; or we wait the passage of time and follow the formula for the deposit’s return that is set forth the agreement of sale. Rarely do we await a court order. These issues, however, are not the subject of the more recent complaints.

What I am hearing is that the escrow holding broker has received a release or has received the buyer’s letter demanding return of the deposit given the passage of time without resolution. In those circumstances, the broker has no skin the game and the parties have agreed (in the release or have pre-agreed in the agreement of sale) where that deposit is to go.

In most cases, deposits are returned to buyers because of a termination resulting from an inspection contingency, or, because the buyer did not get the necessary mortgage. Sellers, and in many cases listing brokers who hold the deposit, may be suspect that the buyer’s stated reasons for terminating are bogus, or that the buyer did not make a good-faith effort to get that mortgage. To punish the buyer for their pretextual termination sellers may encourage the broker to hold that deposit as long as possible.

So the question frequently is asked: how long does the broker have to return a deposit once entitlement is established? The agreement provides no answer. So we look to what a court would do.

I think just about any lawyer would give you the same answer. The broker has a “reasonable period of time to return the deposit.” What is “reasonable” depends on the circumstances, but it is hard to fathom that it would take a broker more than several days to issue a check. Perhaps if termination happens so early in the transaction, the broker might be justified in waiting until the buyer’s deposit check clears before making the return. A seller who wants a listing broker to drag his or her feet when returning the deposit should be ignored. If a complaint is made to the Real Estate Commission, it’s not the seller who is under the gun.

I understand that there are pockets in Pennsylvania where buyer brokers hold deposits. It is a practice I think that should be considered by those who don’t. Holding a deposit does not give the broker an advantage over the other. The situations when it should be released and the time of release are not dependent on which broker is holding the deposit. The ability to fund a transaction with a deposit, however, is shorter when the buyer broker holds the deposit simply because there is one less step in the process. A buyer makes their check payable to the selling broker and hands it to their agent when close to a decision. Then, even if the contract is executed via software, the buyer agent merely needs to hear that the offer has been accepted and then place it in his broker’s escrow account. Voila! The transaction is funded rather than having to await the additional step of transfer from the buyer broker to the listing broker.

Lastly, and while we are on the subject, why am I still taking Hotline calls involving convoluted facts of the transaction and questions of breach and entitlement to a deposit when the it is only $1,000? The fight is so greater than the reward and the cost to litigate so much greater than the amount in controversy that nobodies’ interests are served!

Home Inspectors

Attend Inspections

PART TWO

By: James L. Goldsmith, Esq.

Home Inspectors

 

Who, if anyone, should attend home inspections has been a topic of debate for as long as home inspections have been a standard element in a residential transaction.  Year ago when the topic came up at an NAR meeting of attorneys who represented state associations of Realtors, the room was divided, with roughly 50% saying that buyers should attend, but not their agents.  I remember one outspoken attorney claiming that if an agent was not present to hear the spoken word of the inspector, he/she could not be charged with failing to pass the inspection comments on.  As for me, I am not a supporter of “see no evil” or “head in the sand” approach.

Most of the lawyers at that NAR meeting, however, agreed that buyers should attend inspections.  The reason should be obvious, but consider a recent transaction where the buyer sought an inspection of the sewer lateral from the home to the municipal system located in the street.  The inspection primarily consisted of snaking a video camera through the lateral and visually assessing its condition.

The seller agreed to be present for the inspection so he could open the door to the inspector and direct him to the location of the line in the basement.  Neither the buyer nor the salespersons involved in the transaction chose to attend.  The seller, who was curious, watched the process and conversed with the inspector during the inspection.  As they watched the monitor, the inspector pointed out dips in the lateral and explained they were probably caused by substandard work when the house was constructed.  The inspector felt that the stone bed in which the lateral was placed was not sufficiently compacted and offered other criticisms that were either an educated opinion or complete conjecture.  He also expressed that the dips would get worse over time.  When the seller read the report he was surprised to see that, while the dips were mentioned, there was no reference to the hypotheses that were verbally expressed by the inspector.  The seller was so concerned that he contacted his lawyer questioning whether he had a disclosure obligation that went beyond the written report.

It happens all the time.  The inspector is generally all too happy to discuss his findings and the possible implications of those findings as he pokes about shining a flashlight in dark corners, behind water heaters and above drop ceilings.  Yet, it’s very likely that what will appear in the written inspection report will be an abbreviation of those comments, if they are mentioned at all.  Wouldn’t it be beneficial to the buyer to have the opportunity to ask the sewer inspector what causes dips, whether they remain stable and what is likely to happen over how many years?  More information is better.  When buyers are told to focus not only on written conclusions, but also the inspector’s musings and mutterings they will get more out of the inspection.

Home Inspectors

Untimely Repairs

PART ONE

By: James L. Goldsmith, Esq.

Home Inspectors

 

It happens.  Sellers agree to make repairs suggested by a home inspection, but fail to complete the job timely.  When this happens a buyer is faced, unfairly, with proceeding under a contingent plan (e.g., having repairs made post-settlement or taking cash in lieu of repair) or of delaying settlement.  Usually there is little choice.  The buyer is packed and ready to move or the mortgage commitment can’t be extended, etc.

What prompted this article was a recent call to the Hotline involving a transaction where seller was to have conditions repaired before settlement.  For any number of reasons the repairs were not made.  Buyers only learned of sellers’ failure at the pre-settlement walk-through.  The seller acknowledged the failure but offered to issue a check payable to the repairperson that would be given to buyers at settlement.  When the buyers expressed their dissatisfaction, sellers became indignant.  How unreasonable of the buyers not to accept a check in the full amount the repairperson had estimated!   Likewise, the listing agent was incredulous that the buyer agent didn’t find this to be an acceptable alternative to what had been agreed to: repairs made before settlement.

An agreement is an agreement is an agreement.  If it was agreed that repairs were to be made before settlement!  It really doesn’t matter that the sellers and listing agent feel that providing a check in the amount of the repairs is an equivalent.  It is not.  Repairs frequently lead to the revelation of other issues requiring repair.  The cost of materials can rise.  Estimates are not always guaranteed.  Repairpersons go out of business or get sick or worse.  Further, the parties agreed that the burden of resolving the matter would be borne by sellers.  When the sellers deliver a check at settlement, the burden of repair falls on the buyer.  This was not the bargain the parties struck.

Certainly a buyer can hold firm and demand that the terms of the agreement are honored.  But, at the price of delaying settlement and the well-made plans of buyer, this is usually not a satisfactory alternative.  Further, listing agents and sellers quickly understand that buyers may have little choice.  What do you, as a listing agent, consider appropriate?   Beyond the legal obligation, is there a moral obligation that your sellers complete the tasks that they agreed to undertake?  RELRA requires licensees to advise their clients of the status of the transaction and an argument can be made that as a listing agent you have an obligation to poke in every now and then to determine that your seller is complying with their agreement.  Should a buyer agent be inquiring as to the status of repairs at the risk of being labeled a pest?

The fact is, buyers have a right to enforce the agreement, including seller-promised repairs.  While it is rare that a buyer will refuse to attend settlement until the terms of the agreement are satisfied, it happens.  Further, if I were negotiating on buyer’s behalf, I might anticipate delays in repair and, as part of the change in terms agreement, require that repairs not made by settlement will exact a payment into escrow at settlement of 1 ½ to 2 times the projected cost of repair.  It’s not customary, but I do know agents who make this a routine point of negotiation when repairs have to be undertaken.

The best transactions occur when a seller receives all of the purchase money at settlement and where the buyer receives all of the property promised, at settlement.

Real Estate What If Question

What if?

Real Estate What If Question

By: James L. Goldsmith, Esq.

These two words are the start of many questions by those who draft contracts, including agreements for the sale of real estate.   Consider Paragraph 18 of the PAR standard agreement entitled Maintenance and Risk of Loss.  This paragraph was borne of the following “what ifs?”  What if the HVAC system or other systems fail after signing but before settlement?  What if the seller is unwilling to repair within the sale price agreed upon?  What if the seller, instead of repair, promises to credit the buyer with the fair market value of the system at the time the agreement was reached?  What if the seller refuses to do anything?  What if the buyer is willing to make the repair and what if the buyer is not?  And you could go on and on and on.

Well drafted agreements are more likely to go beyond basic terms in order to deal with the possibility of intervening events.  Having an agreement that charts a path through all of the possibilities means that the parties don’t have to pause when one of these events occurs in order to negotiate a resolution.  The problem is anticipated and the fix covered.

When teaching, I frequently reference the fact that the agreement of sale is 14 pages long because it covers all of the possibilities and eventualities.  We could strip the agreement down to a 3-4 page agreement, but then when issues arise we would be stuck negotiating a new set of terms and conditions.

The problem addressed by this article is that when agents encounter a situation not covered by the agreement or a standard addendum, they may draft an addendum that doesn’t ask all of the “what ifs.”  This usually happens when the parties are drafting a change in terms addendum following an inspection report that reveals a problem.  When a buyer agent proposes that the seller make a repair, has the agent asked what will assure that the seller selects a qualified, experienced repairperson who will use A-grade materials versus a semi-qualified handyman who uses salvaged parts?

A recent call to the Hotline underscores the problem when the “what ifs” are not asked.  The property in question was serviced by a septic system that failed the buyer’s inspection because of a saturated drain field.  The drain field was wet, perhaps because of a malfunction, but certainly because of the heavy rains and snow that preceded the inspection.  The buyers were gung-ho on going forward with the purchase, but they certainly wanted recourse if a subsequent inspection found a problem.  With the “help” of their agents, the parties agreed that seller would get approval of the drain field by July.  Settlement was March 1.  In late March there was a major sewage back-up that may be related to the drain field.  Seller refused to take any responsibility saying that the agent-drafted agreement merely said that the seller would obtain a passing inspection by July.  July was months away; regardless, the agreement didn’t say that the seller had responsibility if seller couldn’t obtain a passing drain field inspection.

It’s clear that the buyers’ agent hadn’t asked “what if the seller is unable to obtain a report that the drain field was in satisfactory condition?”  In fact, the agent missed asking a whole lot of “what ifs” and the result was an abysmal set of words that covered little.  The aftermath will include litigation.

Effective draftsmanship is a skill and my belief is that licensees are not well trained in it and should probably defer to published standard forms and lawyers.  There is a legal doctrine that holds that ambiguities in draftsmanship are construed against the draftor.  This means that whoever penned the ambiguous language will find that the interpretation accepted by the court is the one most favorable to the other side.  If you wheeled the pen you better draft well and in a manner that can lead to no confusion.  There is nothing wrong with asking your clients to obtain the advice of their counsel.  There is nothing wrong with using tried and true standard forms that go through rigorous scrutiny.  Best of all, however, is having a transaction close only when all lingering doubt, problems and contingencies are resolved.  When the buyer gets everything bargained for in exchange for the full consideration, there are few “what ifs” that have gone unanswered.  Put money in escrow to cover a roof repair and we begin to think what if the repairperson finds more damage than was anticipated; what if a contractor can’t be engaged to complete the work before the balance is to be returned to the seller; what if  . . . what if . . . what if.

Copyright © James L. Goldsmith, Esquire, 2019  |  All Rights Reserved

Mr. Goldsmith is an attorney with Mette, Evans & Woodside and serves as general counsel to PAR.  A substantial portion of his practice is dedicated to providing advice and counsel to real estate licensees. He and his firm represent and defend real estate salespersons and brokers in civil lawsuits and licensing claims across the Commonwealth. Jim also defends Realtors® in disciplinary hearings conducted by the Real Estate Commission. He routinely counsels employers on employee relations issues and is one of the voices of the PAR Legal Hotline. 

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

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.