With more than 600 attendees participating virtually, five prominent real estate attorneys discussed and debated actions and inactions by parties to various real estate scenarios. The popular “Battle of the Barristers,” presented annually by Seattle King County REALTORS®, is also a fundraiser for the Seattle First Citizen Scholarship Foundation. The seminar is approved for 3 clock hours.
The battling barristers included Annie Fitzsimmons, Hotline lawyer and instructor at Washington REALTORS®; Lars Neste, shareholder at Demco Law Firm, P.S.; Chris Osborn, general counsel for Northwest Multiple Listing Service and partner at Stoel Rives LLP; and Doug Tingvall, attorney specializing in residential real estate. Mike Spence, a partner at Helsell Fetterman LLP, served as moderator/instructor during the lively discussion on several significant real estate legal issues.
In the first of six scenarios, Spence described a transaction between buyers and sellers who are personal friends and whose brokers were in the same office. The case involved the use of Northwest Multiple Listing Service Form 65B Rental Agreement (Seller Occupancy After Closing) because the seller’s new house would not be ready when anticipated due to construction delays. One issue was the uncertain duration of the post-closing occupancy and whether the “short form” (65B) rental agreement, rather than Form 68 (Lease/Rental Agreement) should have been used.
“The longer the extension, the more likely a landlord-tenant situation exists,” suggested Neste. Osborn noted the short form was created upon pressure from the broker community. “The long form provides more comfort for both parties,” Osborn explained while acknowledging “there’s no bright line” regarding duration. As the attorneys bantered about the merits of the various forms, Fitzsimmons stated, “I worry about brokers walking away from this class thinking they shouldn’t use Form 65B.”
The second scenario was based on pandemic-related challenges affecting various phases of a transaction, including recording date(s) and a notice from the County Recorder’s office to the brokerage community stating they could not guarantee same-day recording numbers. This case study involved a broker with five transactions “in the hopper,” with two of them resulting in delivering the Notice of Termination on behalf of the sellers because of delays in appraisals. Buyers on the remaining three transactions were concerned about interest rate locks expiring. Spence posed questions about what the broker should do on behalf of the seller and buyer clients.
The barristers discussed the risks involved in deviating from the forms manual or not relying on experts in the industry, suggesting actions such as inserting an “on or before” or “TBD” clause could result in claims for malpractice or the unauthorized practice of law.
Tingvall also mentioned situations where closing is tied to another event, such as “within 10 days after the issuance of a Certificate of Occupancy.” He favors using a range of dates, but Osborn disagreed, saying the “vast majority of deals are date-specific.” He urged brokers to avoid ambiguity: “Steer away from language that is uncertain.” To underscore his point, he cited a recent transaction where parties used Form 21 to address defaults, but because the appropriate boxes were not checked, expensive litigation ensued. “With that kind of mistake on the document, both brokers are subject to malpractice claims,” he cautioned.
If a date needs to be changed, Neste suggested circulating an addendum in order to change a contract.
Fitzsimmons commented on the addition of “crazy, handwritten language” on an agreement. “If both parties sign, there could be a problem.” She also noted before COVID it was advisable to set a closing date not on the last day or a month, and not on a Friday.
Scenario #3 pertained to encroachments and the sellers’ failure to disclose a boundary agreement with their former neighbors 12 months before the sale so the neighbor could build an Accessory Dwelling Unit. The purchasers claimed the adjustment violated the Homeowner Association’s CC&Rs and meant the seller falsely answered question 1C on Form 17 regarding the existence of any “encroachments, boundary agreements, or boundary disputes.”
The case raised issues about disclosures, “actual and constructive knowledge,” context, and whether the HOA followed its own rules.
Osborn said absent any indication the broker knew (about the setback agreement), then the broker probably has no responsibility. Neste reminded brokers of their duty to exercise reasonable skill and care. While brokers tend to think they “can rest on what seller says” is generally true, brokers still have some responsibility to check on whether there is something obvious that is not disclosed. “I forgot” is not a defense, Fitzsimmons emphasized.
Scenario #4 raised issues pertaining to agency disclosure and Forms 42 (Agency Disclosure – for use when the transaction forms do not otherwise contain an agency disclosure provision) Form 34 (blank Addendum/Amendment to Purchase and Sale Agreement), Form 1S (appointment of subagent), disclosure of selling office commission, and timely communication and presentation of offers.
Neste said timing issues arise with teams, co-brokerage arrangements. “I don’t think we’re as careful as we could be.” Others agreed, emphasizing, “It’s critical that both parties understand who you represent.”
Neste also noted by statute, brokers have the option to represent neither party, but commented, “What are you really accomplishing? If you are providing limited services, I can see that, but otherwise, why run from your duties?”
Spence said brokers will sometime use Form 34 to state they are “only facilitating this transaction” and calls it bad practice. An agent who does so, as a “favor,” for example, can’t walk the middle. Tingvall said he’s okay with some situations when a broker acts as a facilitator. Neste stated he “despises” the term “facilitator” which was noted is not in the licensing law. Similarly, he has reservations about “dual agency.” While it is legal, are buyers and sellers informed of what that really means for them? he asked adding, “You can’t advocate when you’re a dual agent.”
The fifth scenario raised issues on backup offers, inspections (with and without contingencies), questionable relationships between brokers, post-closing promises, recission issues, and the unauthorized use of an image on a listing website.
During the discussion, the barristers commented on multiple offers and selling a property twice. “Some of the worst lawsuits you can be involved in are multiple offer situations and you move to the next before disposing of a previous buyer,” said one of the attorneys. Another remarked, “Selling a property twice is among the worst situation you could get in.”
The scenario also prompted comments about inspections. “Information only” inspections are a bad idea, stated Fitzsimmons, noting these and “pre-inspections” have been the source of countless hotline questions. One of the barristers attributed the use of such documents to the frenzy market, saying “Buyers are being stupid – and brokers are allowing it.”
With regard to post-closing promises, the panel of attorneys tended to agree, saying such promises can be risky and hard to enforce.
As for the unauthorized use of an image on the listing website, Osborn said copyright infringements are still a big issue with potential liability. However, he noted since Northwest MLS uses the Digital Millennium Copyright Act (DCMA), liability for the infringement is limited if the owner of the copyright provides notice and the image is taken down. “Make sure you have the license to use all images,” he emphasized. (See NWMLS Legal Bulletin 212.)
The final case (scenario #6) dealt with amenities at a townhome project, a purchaser who opted out of a club membership, and a recent law known as WUCOIA that requires public offering statements for “plat communities” of more than 12 units, and whether this property is subject to it. (The Washington Uniform Common Interest Ownership Act became effective 7/1/2018. It mostly pertains to new condominiums and other planned communities.) The barristers reminded brokers to be aware of this Act, which Fitzsimmons said “places an enormous burden on sellers in a plat community.”
First Citizen Scholarship Foundation
The popular “Battle of the Barristers” legal seminar raised a record-breaking $35,000 for the Scholarship Foundation, a 501(c)3 charitable corporation. Scholarships are presented to SKCR REALTOR® and Affiliate members, their children, grandchildren, nieces, and nephews who display a commitment to the growth, health, and betterment of or communities as exemplified by the Seattle-King County First Citizen Award recipients.
Since inception in 1999, more than $443,000 in scholarships have been awarded to a total of 254 students.
This year’s Foundation board established a named scholarship in honor of longtime member and past president Evangeline “Van” Anderson, marking only the third time a named scholarship has presented. Bellevue High School senior Rachel Park was the recipient of this year’s special $5,000 scholarship.