AB456: Bill Text

LRB-1936/1

MED:jld&ae

2015 - 2016 LEGISLATURE

2015 Assembly BILL 456

October 27, 2015 - Introduced by Representatives Allen, Bernier, R. Brooks, Doyle, Krug, Petryk, Weatherston and Young, cosponsored by Senators Lasee and Cowles. Referred to Committee on Housing and Real Estate.

AB456,3,2 An Act to repeal 440.03 (11m) (a) 2., 440.03 (13) (b) 72., 440.08 (2) (a) 69., 452.01 (4d), 452.01 (4h), 452.01 (4p), 452.01 (4t), 452.01 (9), 452.025, 452.025 (4), 452.09 (1) (c), 452.09 (5), 452.10 (4) (a), 452.12 (6), 452.137 (1) (b), 452.137 (1) (d) and 452.17 (2); to renumber and amend 452.03, 452.10 (4) (b) and 452.19; to consolidate, renumber and amend 440.03 (11m) (a) (intro.) and 1.; to amend 73.0301 (1) (a), 108.227 (1) (b), 186.113 (19), 440.03 (11m) (am), 440.03 (11m) (b), 440.03 (11m) (c), 440.13 (2) (c), 452.01 (1m), 452.01 (3) (d), 452.01 (3e), 452.01 (3m), 452.01 (3s), 452.01 (3w), 452.01 (4), 452.01 (5), 452.01 (5), 452.01 (5j), 452.01 (5m) (b), 452.01 (5p), 452.01 (5p), 452.01 (5w), 452.01 (7), 452.01 (7r), 452.01 (9), 452.025 (1) (b) 3., 452.025 (3) (a), 452.025 (3) (b) 2. g., 452.05 (1) (a), 452.05 (1) (a), 452.05 (1) (i) (intro.), 452.05 (1) (i) 1., 452.05 (1) (i) 3. b., 452.07 (1m), 452.07 (2), 452.07 (2), 452.09 (1) (b), 452.09 (2) (c) (intro.), 452.09 (3) (a), 452.09 (4) (a) 1., 452.10 (1), 452.10 (2) (a), 452.11 (1), 452.12 (2) (a), 452.12 (2) (c), 452.12 (3), 452.12 (4), 452.12 (5) (b), 452.12 (5) (c), 452.13 (1) (a), 452.13 (2) (a), 452.13 (2) (b), 452.13 (2) (bm), 452.13 (2) (c), 452.13 (2) (e) (intro.), 452.13 (2) (e) 2., 452.13 (2) (f) 1., 452.13 (3), 452.13 (4), 452.13 (5), 452.132 (2) (c), 452.133 (title), 452.133 (1) (intro.), (c), (d), (e), (f) and (g), 452.133 (2) (intro.), (a) 1. and 2., (b) and (c), 452.133 (3), 452.133 (4) (a) and (b) 1. and 2., 452.133 (5), 452.133 (6) (intro.) and (a), 452.134 (1) (a), 452.134 (1) (b), 452.134 (2), 452.134 (3), 452.134 (4), 452.135 (1) and (2), 452.137 (2) (a) 1., 452.137 (2) (a) 2., 452.137 (2) (b) 1., 452.137 (2) (b) 2., 452.137 (2) (c), 452.137 (2) (d), 452.137 (2) (e), 452.137 (2) (f), 452.137 (2) (g), 452.137 (3) (intro.), 452.137 (3) (c), 452.137 (3) (c), 452.137 (4) (a), 452.137 (4) (b) (intro.), 452.137 (4) (b) 1., 452.137 (4) (b) 3., 452.138, 452.139 (1), (2) and (3), 452.14 (1), 452.14 (2), 452.14 (3) (intro.), 452.14 (3) (a), 452.14 (3) (b), 452.14 (3) (c), 452.14 (3) (d), 452.14 (3) (f), 452.14 (3) (g), 452.14 (3) (h), 452.14 (3) (i), 452.14 (3) (j), 452.14 (3) (jm), 452.14 (3) (k), 452.14 (3) (L), 452.14 (3) (m), 452.14 (3) (p), 452.14 (4), 452.14 (4m) (intro.), 452.14 (4m) (a), 452.14 (4m) (b), 452.14 (4r), 452.15 (1) and (2), 452.17 (4) (a), 452.17 (4) (a) 1. and 2., 452.19 (1), 452.20, 452.21, 452.22 (2), 452.23 (1), 452.23 (2) (intro.), 452.23 (2) (b), 452.23 (3), 452.23 (4), 452.24 (2), 452.25 (1) (a), 452.25 (1) (b), 452.25 (1) (c) 2., 452.25 (1) (d), 452.25 (1) (e), 452.25 (2) (b), 452.30 (7) (b), 707.55 (5) and 707.55 (7); to repeal and recreate 452.01 (7), 452.14 (3) (intro.) and 452.19 (title); and to create 452.01 (1o), 452.01 (1p), 452.01 (3) (i), 452.01 (4w), 452.01 (4x), 452.01 (4y), 452.01 (5c), 452.03 (2), 452.05 (1) (j), 452.12 (5) (bm), 452.132, 452.133 (4m), 452.142, 452.19 (2), 452.30, 452.34, 452.38, 452.40 and 452.42 of the statutes; relating to: various changes regarding the laws governing real estate practice, employment relationships between real estate licensees and real estate brokerage firms, a statute of limitations for actions against persons engaged in real estate practice, extending the time limit for emergency rule procedures, providing an exemption from emergency rule procedures, and granting rule-making authority.

Analysis by the Legislative Reference Bureau

This bill: 1) revises the law governing the practice of real estate (real estate practice law) by real estate brokers, real estate salespersons, and time-share salespersons; 2) establishes a statute of limitations for filing an action against a real estate broker or salesperson; and 3) provides that real estate brokers and salespersons may not be considered "employees" for various purposes.

Changes regarding practice of real estate

Current law regulates the practice of real estate, which can only be practiced by real estate brokers and real estate salespersons and, to a limited extent, time-share salespersons. Real estate brokers and salespersons (licensees) are licensed by the Real Estate Examining Board (REEB), which is attached to the Department of Safety and Professional Services (DSPS). A real estate broker's license may be issued to either an individual or a business entity. Time-share salespersons are registered by the REEB. This bill makes various changes to real estate practice law, described in further detail as follows:

Terminology and related changes

Current law, in various contexts, refers to "brokers," without qualification, and contains various references to the "employment" of licensees. The bill eliminates most references to "employment" in current law and instead refers to licensees as being "associated with a firm." The bill defines being "associated with a firm" as having been engaged by a firm to provide brokerage services to the firm's clients and customers on behalf of the firm and under the firm's supervision, including as an employee of the firm or as an independent contractor. The bill also modifies a number of references to "brokers" so as to refer more specifically either to firms or to firms and licensees associated with the firm, or to refer more generally to licensees. The bill defines "firm" as a licensed individual broker acting as a sole proprietorship or a licensed broker that is a business entity, such as a corporation, limited liability company, or partnership.

Current law defines "agency agreement" as a written agreement between a broker and a client in which the client authorizes the broker to provide brokerage services to the client and defines "client" as a party to a real estate transaction who has an agency agreement with a broker for brokerage services. The bill modifies the definitions of "agency agreement" and "client," as well as other relevant provisions, to specify that an agency agreement is between a firm and a client and that a client is a party to a real estate transaction who has an agency agreement with a firm.

Association with firm; independent practice

Current law provides that a licensed salesperson or broker may transfer to the employment of a licensed broker by paying a transfer fee and filing a transfer form with the REEB, and provides that no salesperson, time-share salesperson, or broker may be employed by a broker whose license has been suspended or revoked during the period of suspension or revocation.

The bill creates more detailed provisions regarding association with a firm and notification of DSPS. The bill provides that no licensee may provide brokerage services on behalf of a firm unless: 1) the licensee is associated with the firm; and 2) the licensee has notified DSPS that the licensee is associated with the firm. A licensee may notify DSPS when the licensee applies for initial licensure or through the use of a form prescribed by DSPS. The bill requires a licensee that ceases to be associated with a firm to send written notice to DSPS within ten days after the date on which the licensee ceases to be associated with the firm and requires a firm that terminates a licensee to send written notice of that termination to DSPS within ten days after the termination. The bill also modifies current law to provide that no licensee may be associated with a firm if the firm's license has been suspended or revoked during the period of suspension or revocation and that a licensee may become associated with another firm, provided the licensee is not a party to the activities causing the suspension or revocation of the firm's license. The bill further specifies that, if the licensee becomes associated with another firm, the licensee may not provide brokerage services on behalf of that firm until the licensee has notified DSPS. The bill also specifies certain consequences that follow if a firm's license is not renewed, including providing that licensees associated with the firm may not engage in activities covered by the firm's license on behalf of the firm and specifying certain notification and termination requirements with respect to such licensees. The bill provides that a salesperson may be associated with only one firm at a given time.

Finally, the bill creates provisions addressing independent real estate practice by brokers, which is not addressed under current law. The bill provides that a broker who is associated with a firm may also engage in independent real estate practice in his or her own name or under the name of a licensed broker business entity, if the broker obtains written approval from, and avoids conflicts of interest with, each firm with which the broker is associated. The approval must contain certain stipulations, and the broker must notify DSPS of the name under which the broker will be engaging in independent practice. The bill provides that a salesperson or time-share salesperson may not engage in independent real estate practice.

Persons required to be licensed by REEB; registration of time-share salespersons

Current law provides that no person may engage in or follow the business or occupation of, or advertise or hold himself or herself out as, or act temporarily or otherwise as a broker or salesperson without a license issued by the REEB.

The bill clarifies that no such license is required for an individual who, on behalf of and under the direction of a firm or one or more licensees associated with a firm, provides the firm or licensee with services that are limited to those that are purely administrative, clerical, or personal in nature.

Under current law, in addition to licensing brokers and salespersons, the REEB also registers time-share salespersons. Current law defines "time-share salesperson" as a person, other than a person licensed as a broker or salesperson, who is employed by a licensed broker to sell or offer or attempt to negotiate an initial sale or purchase of a time share but who may not perform any other acts authorized to be performed by a broker or salesperson.

The bill eliminates registration of time-share salespersons by the REEB at the end of the current biennial registration period and provides that developers engaged in the disposal of interests in a time share are not considered brokers and are therefore not required to be licensed by the REEB.

Duties of REEB licensees

Current law details various duties that are owed by brokers to parties to real estate transactions, including duties that are owed to all parties in a transaction, duties that are owed only to clients, and the duties of a "subagent" firm that is engaged by a principal firm to provide brokerage services in a transaction but that is not associated with the principal firm. Current law also contains prohibitions against licensees engaging in certain conduct.

The bill makes various changes to these duties, including providing that the duties and prohibitions apply to firms, but that: 1) the duties also extend to each licensee associated with that firm; and 2) each licensee associated with a firm owes the same duties owed by a firm. The bill also modifies statutory disclosure statements that are required to be provided to customers and clients of licensees and contain statements of the duties owed by licensees to customers and clients.

Supervision of REEB licensees

Current law requires each broker to supervise, and be responsible for, the brokerage services provided on behalf of the broker by licensees employed by the broker and requires the REEB to promulgate rules that specify the supervisory duties of brokers for the purpose of this provision.

The bill does the following with respect to supervision of and responsibility for the acts of licensees:

1. Instead provides that a firm is responsible for the brokerage services provided on behalf of the firm by a licensee associated with the firm only to the extent that the firm fails to comply with statutory supervision requirements and any additional rules promulgated by the REEB.

2. Creates statutory provisions regarding the supervision of licensees, including requiring review of documents and the receipt and disbursement of client funds and provisions with respect to the designation and responsibilities of supervising brokers for licensees, as well as provisions addressing responsibilities of licensees. The bill provides that a firm is responsible for the custody and safety of all documents and records relating to real estate transactions that are submitted to the firm.

Business representatives for firms

Current law provides that a license may be issued by the REEB to a business entity if the business entity has at least one business representative licensed as a broker and that the license issued to the business entity entitles each business representative of the business entity who is a licensed broker to act as a broker on behalf of the business entity. Current law defines "business representative" to mean a director, manager, member, officer, owner, or partner of a business entity.

The bill specifically provides that only a broker's license may be issued to a business entity. The bill also specifies that a broker may act as a business representative for more than one business entity if the broker obtains the express, written consent of each business entity for which the broker desires to act as a business representative and that a broker may act as a broker on behalf of each business entity for which it is serving as a business representative.

Use of unlicensed personal assistants

The bill creates provisions addressing the use of "unlicensed personal assistants" by a licensee associated with a firm, which is not addressed under current law. The bill requires a licensee associated with a firm, prior to engaging an individual to serve as an unlicensed personal assistant, to enter into a written agreement with the licensee's firm, setting forth the duties of the unlicensed personal assistant, the manner in which the unlicensed personal assistant will be compensated for his or her services, and the responsibilities of the licensee and the firm with respect to supervision of the unlicensed personal assistant's activities. The bill, however, prohibits an unlicensed personal assistant from assisting a licensee at an open house for the sale of real estate or a business without the direct, on-premises supervision and presence of a licensee, and from providing any services at an open house for which a license from the REEB is required. The bill defines "unlicensed personal assistant" as an individual who is employed only to provide services for which a license is not required under this chapter, including an individual who in fact possesses a license issued by the REEB.

Other changes regarding practice of real estate

1. Current law contains provisions allowing brokers and salespersons to register as inactive licensees prior to November 1, 1995. This bill repeals these provisions.

2. Current law provides that any person who is a resident of this state and 18 years of age or over may apply to be indentured to a licensed resident broker in accordance with rules promulgated by the REEB (apprenticeship). The bill repeals this provision concerning apprenticeship.

3. Current law allows the REEB to promulgate rules establishing a procedure that allows an individual who is not licensed by the REEB to apply to the REEB for a binding determination of whether the individual would be disqualified from obtaining a license due to his or her criminal record. The bill allows the REEB to require a fee to be paid to DSPS for such a determination in an amount necessary to cover the cost of making the determination.

4. The bill requires a licensee to retain documents or records related to a transaction, as determined by the REEB, in accordance with any rules promulgated by the REEB. The bill provides that records described in this section may be retained in an electronic file format.

5. The bill requires that, if a licensee is associated with a firm, all fees or commission and all compensation for a referral or as a finder's fee be paid to the firm.

6. In State ex rel. Reynolds v. Dinger, 14 Wis. 2d 193 (1961), the supreme court sanctioned a rule of the Real Estate Brokers' Board (the predecessor to the REEB) that permitted the use of standardized forms by brokers in transferring the titles of the real estate of their clients, holding that although the rule permitted, to a limited extent, the practice of law by nonlawyers, the court would not hold the rule to be invalid under its constitutional authority to regulate the practice of law. The bill codifies the court's holding, providing that licensees may use forms approved by the REEB. The bill provides that a licensee may not provide advice or opinions concerning the legal rights or obligations of parties to a transaction, the legal effect of a specific contract or conveyance, or the state of title to real estate, but that a licensee may provide a general explanation of the provisions in a form approved by the REEB to the parties to a transaction at the time of completing the form or when delivering an approved form for the seller's or buyer's acceptance.

Other changes

Limitation on actions

Current law provides for limitations on when various types of actions may be brought, including that an action upon any contract, obligation, or liability or an action to recover damages for an injury to real or personal property must be commenced within six years after the cause of action accrues or be barred.

The bill provides that, notwithstanding these other periods of limitation, an action concerning any act or omission of a licensee relating to the provision of brokerage services by the licensee shall be commenced within two years after whichever of the following that applies occurs first: 1) a transaction is completed or closed; 2) an agency agreement is terminated; or 3) an unconsummated transaction is terminated or expires.

Definition of "employee"

Certain employment laws, including the family and medical leave law, the unemployment insurance law, the worker's compensation law, and the fair employment law, as well as the tax withholding law, apply only with respect to "employers" and "employees."

The bill provides that, notwithstanding the applicable definitions or meanings of employee under any law, and in any action or proceeding under the common law, a licensee may not be considered an employee of a firm if: 1) a written agreement has been entered into with the firm that provides that the licensee may not be treated as an employee for federal and state tax purposes; and 2) 75 percent or more of the annual compensation related to sales or output paid by the firm to the licensee pursuant to the agreement is directly related to the brokerage services performed by the licensee on behalf of the firm.