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Radon disclosure effective January 1, 2014

3 Jan

Making Sense of the Radon Awareness Act

Buyers and sellers of residential real estate in Minnesota should be aware, if they are not already, of a law passed in the last legislative session that became effective January 1, 2014.  The new law requires sellers to disclose to buyers, in writing, any knowledge the seller has concerning radon concentrations in the dwelling.  It also requires very specific disclosure in the form of a statutory notice and accompanying publication, as detailed below.

Clearing the confusion.  While this law has only been in effect two days as of the time of this writing, it is clear that there is already some confusion and misinformation concerning what the law requires. Perhaps it is worth clarifying what the law does not require, first.  The law DOES NOT require a seller or buyer to perform a radon test before the property is sold.  The law DOES NOT require a seller to provide, or a buyer to obtain, a radon inspection.

  • What transactions are impacted? While the law became effective January 1, 2014, it applies very specifically to “[…]agreements to sell or transfer residential real property executed on or after that date.”  Minn. Stat. Sec. 144.496, subd. 6.
  • What does the Minnesota Radon Awareness Act require?  You can find the full text of the law here: https://www.revisor.mn.gov/statutes/?id=144.496. The new radon disclosure law is somewhat similar in approach to other Minnesota seller disclosure obligations, and also to federal lead-based paint disclosure.  The statutory language states:

Before signing an agreement to sell or transfer residential real property, the seller shall disclose in writing to the buyer any knowledge the seller has of radon concentrations in the dwelling.

(Minn. Stat. Sec. 144.496, subd. 3)

  • Additional requirements.  The disclosure must also include additional information, including whether radon tests have been performed on the property, recent records pertaining to radon concentration levels, a description of any remediation/mitigation efforts taken, etc.  Additionally, the law requires two very specific disclosure obligations be met: 1) the seller must provide a very specific radon disclosure statement containing language specified within the statute (Minn. Stat. Sec. 144.496, subd. 4); and 2) the seller must provide the buyer with a copy of the Minnesota Department of Health publication entitled “Radon in Real Estate Transactions”.  You can find that publication here: http://www.health.state.mn.us/divs/eh/indoorair/radon/rnrealestateweb.pdf
  • Certain transactions are excepted from the requirements.  The statute lists an array of transactions for which the Radon Awareness Act does not apply.  Minn. Stat. Sec. 144.496, subd. 3(d). To determine if your transaction may be excepted from the requirements, review the statute carefully and speak with your legal counsel to clarify any questions.

Some trade organizations, like the Minnesota Association of Realtors(R), and the Minnesota State Bar Association have created forms that incorporate the disclosure requirements.  If you are already utilizing an attorney or real estate agent in your transaction, hopefully they are assisting you with understanding and complying with this disclosure obligation.  If they aren’t, or you have not already engaged a real estate agent or attorney you should be sure to speak with a competent real estate attorney to ensure you obtain the advice and counsel you may need to help you fulfill this disclosure, and other applicable disclosure obligations.

For residential buyers, it is important that you understand that while a seller is obligated to disclose what they know, regarding radon, many sellers have no reason to know radon levels are normal or abnormal unless they have had an inspection done.  Buyers are free to negotiate a radon inspection into the terms of a purchase agreement.

If you are curious about the health concerns or rationale for why the legislature believed a radon disclosure to be necessary, radon facts and background information can be found at the Minnesota Department of Health website, here.  According to the Minnesota Department of Health,

High radon exist [sic] in every state in the US.  In Minnesota, 2 in 5 homes has radon levels that pose a significant health risk, and nearly 80% of counties are rated high radon zones.

Source: http://www.health.state.mn.us/divs/eh/indoorair/radon/index.html?utm_source=print&utm_medium=brochure&utm_campaign=general

Additional radon-related information can be found within the MDH website, here.

As real estate transactions become increasingly complex, it is prudent to engage professionals such as a real estate agent and attorney to help you navigate disclosure obligations and other responsibilities involved in buying or selling residential real estate.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  a

Finally a break in the real estate industry

30 May

Last week the United States Supreme Court decided a case which refines a commonly debated interpretation of the Real Estate Settlement Procedures Act (“RESPA”) by lower courts.  RESPA is a Federal law that plays a significant role in how real estate brokerage companies (among others) conduct day-to-day business.  It has myriad prohibitions, restrictions and disclosure requirements that are applicable to such “settlement service providers” as title companies, mortgage lenders, real estate brokers and more.  Generally, it prohibits referral fees and unearned fees by settlement service providers in connection with a federally-related mortgage, imposes restrictions and requirements on “affiliated business providers”, mandates certain disclosures to increase transparency of transactions for consumers, and more.

Until this month, the issue of how RESPA impacts “administrative fees” charged by real estate brokers and agents was a controversial and often debated real estate brokerage issue, nationwide.  There was a split in how the decisions in various cases across the country interpreted Section 2607(b) of RESPA.  That section provides:

“[n]o person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a real estate settlement service […] other than for services actually performed.” 12 U. S. C. §2607(b)

The various split in decisions and HUD interpretations addressing this issue left some unanswered questions as to whether a real estate brokerage would find itself in hot water when charging an “administrative fee” or similar charge in addition to a commission, if the real estate broker could not readily identify what service was being rendered pursuant to that admin fee.

The United States Supreme Court decided a case last week (May 24, 2012) which clarifies this issue significantly, and simplifies this issue for real estate brokers.  In the case of Freeman v. Quicken Loans, the Supreme Court found that there is no violation of §2607(b) of RESPA without showing that a charge for a settlement service was divided with a third party.

The full decision of the Freeman case can be found here: http://www.supremecourt.gov/opinions/11pdf/10-1042.pdf.  An interpretation of how this decision impacts real estate brokerage companies and brokers/agents was offered by the National Association of Realtors(R) (“NAR”), and their article can be found here: http://speakingofrealestate.blogs.realtor.org/2012/05/24/supreme-court-rules-fee-split-required-for-respa-violation/.

In short, this author suspects that some of the national controversy and confusion surrounding real estate brokerage admin fees will now become an easier topic to  address consistently, and with less controversy. Prior cases, including the controversial 2009 decision in Busby v. JRHBW Realty, Inc. d/b/a Realty South, had suggested that merely charging an “admin fee” in addition to a commission, even if it is disclosed to the consumer paying such fee, is in and of itself a violation of RESPA.  In January 2010, a HUD letter from Helen Kanovsky (Office of the General Counsel at HUD) clarified that there may be some room from brokerages to have commissions composed of a flat fee or commission or both.

Now that the Supreme Court has weighed in, it would seem likely that admin fees charged by real estate brokers should draw less scrutiny.  Additionally, the prior caselaw and unfavorable decisions interpreting RESPA in such a way as to further restrict the real estate industry than was explicitly stated in RESPA are probably of dramatically less impact, or their impact is narrowed significantly by this decision.

Stay tuned to the Thomsen Nybeck Legal Update blog for further discussion of this issue as more information, interpretations, and decisions bring this issue into even sharper focus.  For now, real estate brokerage companies, agents, and brokers who charge (or have ceased charging) administrative fees may wish to discuss these issues once again with their legal counsel to identify how they want their business practices to fit within the fluid and evolutionary laws surrounding these practices.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

Recent Freddie Mac Bulletin May Stop or Stall Short Sales After Sheriff’s Sale

3 Apr

Last Friday the Minnesota Association of Realtors® (“MNAR”) released a member update identifying that there has been some recent disruption in the short sale process (where lenders/servicers are sometimes refusing to allow a short sale after the sheriff’s sale has taken place).  This is apparently due, in large part, to reaction by lenders/servicers to a recent (March 13th) Freddie Mac bulletin.

This bulletin (Freddie Mac Bulletin 2012-7) identified a revised definition for the term “REO Rollback”.  Additionally, it changed the calculation and fee structure for various workout or modification programs, changed fees and costs for researching/reconstructing servicer records, and made other changes that may impact how servicers approach mortgage modification or workout arrangements.  According to the MNAR update, a few days after the Bulletin was published, mortgage servicers began notifying homeowners who were past the sheriff’s sale that the investor would no longer approve short sales during redemption, and that the homeowner should contact Freddie Mac.

So, for those who were planning to accomplish a short sale during the redemption period, after sheriff’s sale, that option may be much more limited.

Exploring Options – Seek Legal Advice

For those who are exploring options in advance of foreclosure, you should speak with an attorney experienced in real estate transactions and distressed property scenarios.  Scenarios such as foreclosure postponement (a process detailed in Minnesota Statute §580.07) may be well worth exploring.  While it is important to seek the advice of a competent attorney to ensure you are not making a decision that creates more risk/problems than benefit, some homeowners in distress do not believe they can afford to do so.  Such individuals may wish to seek out attorneys who may offer a limited scope review or advising at a contained cost.

Exploring Options – Consult Other Resources

Since many foreclosure and short sale related scenarios have significant financial, credit, or tax consequences, exploring scenarios with your financial advisor, tax, advisor, real estate agent and other professionals is also important.  For those who want to make better use of their time with an attorney or who are looking for additional or independent resources while considering options in connection with mortgage foreclosure or distressed property, you may also wish to explore the Minnesota Home Ownership Center’s website.  The MN Home Ownership Center (HOCMN) such as the following:

  • the “Know your Options” summary guide, found here
  • an overview of foreclosure postponement by a mortgagee (borrower) and an online tool to help with the process, found here
  • a summary of common scams and warning signs for those who prey upon individuals in financial distress, found here.
None of the resources above replace or substitute for the advice of an attorney.  However, they can be helpful for those looking for preliminary information or to supplement the advice or information that individuals may be gathering from other (sometimes far less reliable) resources.  Although it is uncertain when or how the short sale process will adjust to the Freddie Mac bulletin that is the subject of this article, we will continue to monitor this issue and try to release new information as it becomes available.
By searching within the Thomsen & Nybeck Legal Update blog, you can find many articles and lots of information about short sale, foreclosure and other legal updates that address similar issues.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

Can Minnesota real estate agents negotiate short sales?

21 Nov

Yes.  The short answer to the question of whether properly licensed real estate agents/brokers in the state of Minnesota can negotiate short sales is yes, presuming a few basic rules are followed.  One such rule (and among the most important) is that the agent/licensee has to be performing this role pursuant to the listing of the home for sale by that licensee’s company (rather than as a third-party negotiator).

This subject has been somewhat controversial lately, with various attorneys or companies opining on what the Minnesota Department of Commerce does or does not allow, and what licensing is required to serve the role of negotiating the release of a mortgage lien (and possible satisfaction or partial satisfaction of the underlying debt) in the event a homeowner is selling a home with insufficient property value to satisfy the outstanding debt, and cannot otherwise satisfy the debt with his/her own funds.

The Minnesota Association of Realtors® (“MNAR”) and this author have participated in discussions with representatives of the Minnesota Department of Commerce Enforcement division to try to ascertain whether a listing broker/agent (properly licensed under Minnesota Statute Chapter 82) may list a short sale property for sale and, pursuant to that listing agreement and the agent’s fiduciary and contractual relationship with the seller, work on the seller’s behalf to negotiate the release/satisfaction of liens attached to the property.

The Department of Commerce has indicated that such a scenario is permissible, so long as certain rules are followed, which are explained in more detail in a substantive memo published by the Minnesota Association of Realtors® at their website: http://www.mnrealtor.com/.  Or, find the memo directly via this link.  Separately, Chris Galler (CEO for the MNAR) has created a summary video that identifies the key issues and practice tips.  View the video here.

Real estate licensees in the state of Minnesota must be aware that having a real estate license does allow a certain degree of latitude in negotiating the release of a lien as part of the licensee’s efforts to assist the homeowner in selling the home the licensee has been engaged to sell, but such a license does not provide blanket authority to negotiate short sales on properties that the licensee or the licensee’s company does not have listed for sale.  The “third-party negotiator” role is one the Department of Commerce suggests requires a Chapter 58A (mortgage loan originator) license, as the negotiation of the release of lien or satisfaction of debt will be considered by the Commerce Department as a negotiation of the terms of the mortgage loan (as defined in Minn. Stat. Sec. 58A.02) .

Certain exemptions from such licensing requirements (such as for attorneys representing the property owner and engaging as the negotiator in the attorney’s role) exist, provided this is also done properly without improperly using a title company or other entity in the role of short sale negotiator on the premise that an attorney within such a company may serve as the negotiator.

These issues, and the nuances that may arise in any individual circumstance, are complicated, so this overview should not be considered as a definitive set of all the rules applicable.  Each scenario as to what licensing is proper is ultimately a case-by-case analysis.  Readers interested in this issue who want to assess their own specific scenarios should speak with an attorney.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck.  Brad’s practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals, and is a frequent speaker for real estate continuing education throughout the state of Minnesota.

Navigating MARS

16 Jun

An attorney’s insight on MARS

Hopefully the title makes you wonder what an attorney would know about space exploration.  Since my fourth-grade dream of becoming an astronaut didn’t quite pan out, I don’t have much insight to offer about the planet Mars.  Instead, this article will serve as an update to real estate agents, brokers, and real estate brokerage companies impacted by the FTC’s Mortgage Assistance Relief Services (“MARS”) rule.

In short, the MARS rule (the “Rule”) regulates providers of mortgage assistance relief, particularly those businesses who deal with mortgage modification, short sale, and the like (including but not limited to real estate agents and brokers, mortgage brokers, lenders and servicers, accountants and financial planners, and attorneys.  A description of the businesses the MARS rule applies to, and an overview of how/when it applies can be found at the FTC’s “Mortgage Assistance Relief Services Rule: A Compliance Guide for Business”, found here.

Among other things, the Rule requires specific disclosures for oral, written, video, radio, and telephone advertising of MARS services and for referrals to MARS providers; it prohibits the collection of upfront fees for MARS services; it allows contracts between MARS providers and consumers to be cancelled by the consumer; etc.

Resources to help understand MARS

  • MARS Memo – For real estate agents and brokers, particularly those who are members of the Minnesota Association of Realtors® (“MNAR”) it is important to note that a memo offering a comprehensive overview of the MARS rule and its application to the real estate brokerage business was published in the MNAR eResource, here: http://www2.realtoractioncenter.com/site/MessageViewer?em_id=52481.0.
  • Disclosure forms (for real estate agents and brokers) have also been released by the MNAR, to help ensure that MNAR members have the tools to comply with the new disclosure obligations.  If you are not already using these forms within your brokerage, or aware of them, you might want to verify what forms your brokerage company is using to address the required MARS disclosures, in the event that you offer MARS services.

Why should we care?

This recent federal rule carries penalties for violation in the amount of $16,000 per violation.  Although many in the real estate industry did not expect to be navigating the craters and rough terrain of MARS, it is of great importance that those who might be classified as “MARS providers” familiarize themselves with the rules, and learn how to comply with them.  Developing a plan for compliance, a policy to ensure agents/employees follow suit, and ensuring the appropriate disclosures are made may require involving your attorney or legal counsel.

As you begin to explore MARS and adapt to the new environment, it’s wise to understand the rules of the road and obtain appropriate guidance and counsel.

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This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck. Brad is the chair of the firm’s Transactional Group, and his practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals.

Good news! Fannie Mae loosens up on Dual Agency Prohibition

27 May

For real estate agents, real estate brokers, and brokerage companies dealing with REO property, you may already be familiar with a provision in Fannie Mae “master listing agreements” which stated (in at least one version of this agreement) that real estate broker (who holds the Fannie Mae REO listing):

“shall not represent both Fannie Mae, as seller, and a potential buyer in connection with the same real estate transaction; dual agency is prohibited under this Agreement.”  (Fannie Mae   Master Listing Agreement effective May 1, 2011, section 10E(iii))

For those real estate brokers or agents who noticed, read, and understood this prohibition, it meant that they could not list the Fannie Mae property and represent a buyer in the same transaction, even though in many states (such as Minnesota) such “dual agency” is specifically allowed by state law where both parties agree to such representation.

Where’s the problem?  Envision that a brokerage company represented a buyer for the last 9 months in that buyer’s search for the perfect home.  Then, buyer finds just such a home, only to find out the brokerage with whom it is listed is listing the property for Fannie Mae.  Given the terms of the Fannie Mae master listing agreement, that brokerage would have to tell the buyer they can no longer represent them, both upsetting the buyer who has invested 9 months in developing a relationship with that brokerage and the brokerage, who would then not be able to conclude the buyer representation with a successful closed transaction, and who would consequently not get paid.

What’s the good news?  Fortunately the good news that can be relayed in time for you to enjoy your Memorial Day weekend, is that Fannie Mae appears to have determined that they will not enforce that term, and will cease incorporating it into their listing agreements.  To view the Fannie Mae information release, check this link: http://bit.ly/iFBDkF

Please spread the word among other real estate agents or brokers, particularly those who deal with REO property and Fannie Mae, as this may be an important new development for them to be aware of.

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Follow brokerageatty on Twitter

This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck. Brad is the chair of the firm’s Transactional Group, and his practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals.

Update for MN Real estate agents using social media

3 May

As real estate licensees (brokers and agents alike) begin to utilize social media for promoting themselves and their services, and for advertising or marketing property, it is important to understand the “rules of the road” for using social media.

As you may already know if you’ve been following the updates from the Minnesota Association of REALTORS (“MNAR”), MNAR staff (and I) have met with the Minnesota Department of Commerce (“DOC”) on a couple of occasions to try to clarify these issues.  The Department has stressed that all advertising (including web, blog, social media such as Twitter/Facebook/LinkedIn, etc.) had to comply with the Chapter 82 rules regarding advertising.

The “rules” are defined in statute in MN Stat 82.69, 82.68 (Subd. 1), and 82.82 (Subd. 12), primarily, and elsewhere in Chapter 82.  Commerce appeared to expand on those rules, somewhat, with their interpretation that each “Tweet” in Twitter, Status update in Facebook and the like needed to identify your name and your company name.  Given the difficulty that causes in a limited amount of space (such as the 140 characters in Twitter), such a concept is a bit onerous to apply.

Fortunately, the Department of Commerce has confirmed that in the event an agent or broker’s “profile” page contains all the required information, and that the profile page is only “1 click” away from the post/tweet/etc., they intend to consider that as satisfying the requirements on properly identifying the information deemed necessary in advertising.

Although you should discuss your own personal marketing or real estate brokerage company rules and marketing strategy with your attorney, it should be helpful to know that the expectation that you include more information than can reasonably be added into any given “tweet” or “update” now appears to be a bit more relaxed.  That said, you should be vigilant to ensure that proper procedures are in place withing your brokerage to review/supervise the online and social media activities of your agents, and that the necessary licensee information, licensed name, company name, and related information is properly identified in each and every blog, agent profile, profile page on social media sites, and the like.

For more information, please discuss this issue with your broker and/or company attorney.  Additionally, Linda Modlinski, MNAR Senior Vice President, authored an article on this subject that appeared in the MNAR eResource publication on May 2, 2011, which you can find here: http://www2.realtoractioncenter.com/site/MessageViewer?em_id=36121.0#five

If you are interested in these and similar real estate brokerage updates, follow @BrokerageAtty on Twitter:

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Follow brokerageatty on Twitter

This blog entry is written by Brad Boyd, a Shareholder at Thomsen Nybeck. Brad is the chair of the firm’s Transactional Group, and his practice focuses primarily in Real Estate, Real Estate Brokerage, Business and Corporate law, and Wind Energy Law.  Brad provides legal advice, guidance, and representation related to risk management in a wide variety of real estate and business law matters.  He is counsel to the Minnesota Association of Realtors, many individual Realtors and brokerages, business clients and individuals.

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