January 5, 2024 - Introduced by Representatives Krug, Allen, Brooks, Dallman,
Murphy, O'Connor and Ortiz-Velez, cosponsored by Senators Jagler,
Agard
and Feyen. Referred to Committee on Housing and Real Estate.
AB918,1,7
1An Act to renumber 452.14 (2);
to renumber and amend 452.14 (4m) (a);
to
2amend 452.01 (5g), 452.14 (4r), 452.17 (1), 452.17 (3), 452.19 (1), 452.23 (title)
3and 452.23 (4);
to repeal and recreate 452.23 (3); and
to create 452.07 (4),
4452.12 (5) (e), 452.14 (2) (b), 452.14 (2) (c), 452.14 (3) (im), 452.14 (4m) (a) 1.,
5452.23 (5) and 710.13 of the statutes;
relating to: various changes regarding
6the laws governing real estate practice, disclosures regarding real property
7wholesalers, and providing a penalty.
Analysis by the Legislative Reference Bureau
This bill 1) revises the law governing the practice of real estate by real estate
brokers and salespersons (real estate practice law) and 2) requires real property
wholesalers to provide certain disclosures to other parties involved in residential
real property transactions.
Changes regarding real estate practice law
Current law regulates the practice of real estate, which can only be practiced
by real estate brokers and real estate salespersons. Real estate brokers and
salespersons (licensees) are licensed by the Real Estate Examining Board, which is
attached to the Department of Safety and Professional Services. A real estate
broker's license may be issued to either an individual or a business entity. The bill
makes various changes to real estate practice law, described in further detail as
follows:
Disclosures
Current law imposes on a real estate firm providing brokerage services to a
party to a transaction the duty to timely disclose in writing all material adverse facts
that the firm knows and that the party does not know or cannot discover through
reasonably vigilant observation, unless the disclosure of a material adverse fact is
prohibited by law. The law defines both “adverse fact” and “material adverse fact.”
Furthermore, each licensee associated with a firm owes the same duties to a party
that the firm owes to that party. Separately, current law contains a requirement that
a licensee disclose to the parties to a real estate transaction any facts known by the
licensee that contradict any information included in a written real estate condition
report. Current law further contains a list of specific types of information that a
licensee is not required to disclose.
The bill 1) harmonizes the disclosure requirement and the duty described
above; 2) clarifies that the “material adverse facts” that licensees have the duty to
disclose do not include anything on the list of specified types of information that
current law provides are exempt from needing to be disclosed; 3) prohibits the board
from promulgating rules that conflict with these provisions or that mandate
additional disclosures; and 4) provides that a licensee that in good faith provides
information attributable to a state or local governmental or quasi-governmental
entity may not be held civilly liable if that information is subsequently determined
to be inaccurate.
Discipline and licenses
The bill makes various changes pertaining to the discipline of licensees,
including the following:
1. The bill requires the board to notify a real estate brokerage firm in writing
as to all investigations and disciplinary proceedings and actions that are related to
a licensee associated with that firm, including the contents of any administrative
warning issued by the board. The bill also provides that if an application for renewal
of a license issued to a licensee who is associated with a firm is not filed with the board
on or before the renewal date or if the renewal is not granted, DSPS must notify the
firm.
2. The bill expressly provides that a real estate brokerage firm is not
responsible for ensuring compliance with, or for the monitoring of, any license
limitations set forth by the board of a broker or salesperson associated with that firm.
3. Current law contains a list of prohibitions, violations of which subject a
licensee to professional discipline. Current law further allows the board to assess a
forfeiture of not more than $1,000 for such violations. The bill raises the maximum
forfeiture that the board may assess for a number of these violations to $5,000.
Criminal penalties
Under current law, any person who engages in or follows the business or
occupation of, or advertises or holds himself or herself out as or acts temporarily or
otherwise as, a broker or salesperson in this state without a license or who otherwise
violates the real estate practice law may be fined not more than $1,000 or imprisoned
for not more than six months or both. The bill raises the maximum criminal fine for
violations to $5,000. The bill does not affect the maximum term of imprisonment.
Disclosures regarding real property wholesalers
The bill requires a real property wholesaler to provide certain disclosures to
other parties involved in a real property transaction. Under the bill, “real property
wholesaler" is defined as a person that enters into a purchase agreement as a buyer
and intends to sell the person's rights as buyer to a third party, and “purchase
agreement” is defined as a contract for the sale, exchange, option, rental, or purchase
of residential real property that includes one to four dwelling units.
The bill requires a real property wholesaler, no later than entering into a
purchase agreement as a buyer, to provide written notice to the seller that the buyer
is a real property wholesaler. Under the bill, if the real property wholesaler fails to
provide the notice, the seller may rescind the purchase agreement at any time before
the closing and retain any deposits or option fees paid by the real property
wholesaler.
In addition, if the real property wholesaler contracts to sell its interest in the
purchase agreement to a third party, the bill requires the real property wholesaler,
no later than entering into the contract, to provide written notice to the third party
that the real property wholesaler is a real property wholesaler that holds an
equitable interest in the property as a buyer under the purchase agreement and that
the real property wholesaler is conveying its interest in the purchase agreement, not
title to the property. Under the bill, if the real property wholesaler fails to provide
the notice, the third party may rescind the contract at any time before the closing and
is entitled to the return of any deposits or option fees paid by the third party.
Because this bill creates a new crime or revises a penalty for an existing crime,
the Joint Review Committee on Criminal Penalties may be requested to prepare a
report.
Because this bill may increase or decrease, directly or indirectly, the cost of the
development, construction, financing, purchasing, sale, ownership, or availability of
housing in this state, the Department of Administration, as required by law, will
prepare a report to be printed as an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB918,1
1Section
1. 452.01 (5g) of the statutes is amended to read:
AB918,4,22
452.01
(5g) “Material adverse fact" means an adverse fact that a party
3indicates is of such significance, or that is generally recognized by a competent
4licensee as being of such significance to a reasonable party, that it affects or would
5affect the party's decision to enter into a contract or agreement concerning a
6transaction or affects or would affect the party's decision about the terms of such a
1contract or agreement.
“Material adverse fact” does not include anything specified
2in s. 452.23 (2) (a), (c), or (d).
AB918,2
3Section
2. 452.07 (4) of the statutes is created to read:
AB918,4,64
452.07
(4) The board may not promulgate rules regarding disclosures by
5brokers or salespersons that conflict with s. 452.23 or that require disclosures beyond
6what is required under s. 452.23.
AB918,3
7Section
3. 452.12 (5) (e) of the statutes is created to read:
AB918,4,118
452.12
(5) (e) If an application for renewal of a license issued to a licensee who
9is associated with a firm is not filed with the board on or before the renewal date or
10if the renewal is not granted, the department shall notify the firm with which the
11licensee is associated.
AB918,4
12Section
4. 452.14 (2) of the statutes is renumbered 452.14 (2) (a).
AB918,5
13Section
5. 452.14 (2) (b) of the statutes is created to read:
AB918,4,1914
452.14
(2) (b) The board shall notify a firm in writing as to all investigations
15and disciplinary proceedings and actions that are related to a licensee associated
16with the firm. Notwithstanding s. 440.205, a notice shall include the contents of any
17administrative warning issued under s. 440.205. A notice shall be made to the
18mailing address of the firm and to the email address of the individual broker acting
19as a sole proprietor or the email address for the licensed business entity.
AB918,6
20Section
6. 452.14 (2) (c) of the statutes is created to read:
AB918,4,2321
452.14
(2) (c) A firm is not responsible for ensuring compliance with, or for the
22monitoring of, any license limitations set forth by the board of a licensee associated
23with the firm.
AB918,7
24Section
7. 452.14 (3) (im) of the statutes is created to read:
AB918,4,2525
452.14
(3) (im) Violated s. 710.13 (2).
AB918,8
1Section
8. 452.14 (4m) (a) of the statutes is renumbered 452.14 (4m) (a) (intro.)
2and amended to read:
AB918,5,33
452.14
(4m) (a) (intro.) Assess
a forfeiture against a licensee
a as follows:
AB918,5,5
42. A forfeiture of not more than $1,000 for each violation enumerated under
5sub. (3)
that is not enumerated under subd. 1.
AB918,9
6Section
9. 452.14 (4m) (a) 1. of the statutes is created to read:
AB918,5,87
452.14
(4m) (a) 1. A forfeiture of not more than $5,000 for each violation
8enumerated under sub. (3) (a), (b), (c), (d), (f), (h), (i), (im), (j), (jm), (k), or (n).
AB918,10
9Section
10. 452.14 (4r) of the statutes is amended to read:
AB918,5,1110
452.14
(4r) The board may assess against a licensee who is an individual a
11forfeiture of
$1,000 $5,000 for a violation under s. 452.25 (2) (a).
AB918,11
12Section
11. 452.17 (1) of the statutes is amended to read:
AB918,5,1813
452.17
(1) Any person who engages in or follows the business or occupation of,
14or advertises or holds himself or herself out as or acts temporarily or otherwise as
, 15a broker or salesperson in this state without a license under this chapter shall be
16prosecuted by the district attorney in the county where the violation occurs or by the
17attorney general and may be fined not more than
$1,000 $5,000 or imprisoned not
18more than 6 months or both.
AB918,12
19Section
12. 452.17 (3) of the statutes is amended to read:
AB918,5,2220
452.17
(3) Any person who otherwise violates any provision of this chapter may
21be fined not more than
$1,000 $5,000 or imprisoned for not more than 6 months or
22both.
AB918,13
23Section
13. 452.19 (1) of the statutes is amended to read:
AB918,6,524
452.19
(1) No licensee may pay a fee or a commission or any part thereof for
25performing any act specified in this chapter or as compensation for a referral or as
1a finder's fee to any person who is not licensed under this chapter or who is not
2regularly and lawfully engaged in the real estate brokerage business in another
3state, a territory or possession of the United States, or a foreign country
, unless the
4person was licensed under this chapter when the commission was earned or when
5the referral fee arrangement was made.
AB918,14
6Section
14. 452.23 (title) of the statutes is amended to read:
AB918,6,8
7452.23 (title)
Disclosures, investigations and inspections by brokers
8and salespersons.
AB918,15
9Section
15. 452.23 (3) of the statutes is repealed and recreated to read:
AB918,6,1310
452.23
(3) (a) A licensee shall, except as provided in par. (b), disclose in writing
11to a party to a real estate transaction all material adverse facts known by the licensee
12that the party does not know or cannot discover through reasonably vigilant
13observation.
AB918,6,1514
(b) Paragraph (a) does not require the disclosure of a material adverse fact to
15a party if any of the following applies:
AB918,6,1716
1. The material adverse fact is addressed in a written report described under
17sub. (2) (b).
AB918,6,1918
2. The material adverse fact has otherwise been disclosed to the party in
19writing.
AB918,6,2020
3. Disclosure of the material adverse fact is prohibited by law.
AB918,16
21Section
16. 452.23 (4) of the statutes is amended to read:
AB918,6,2522
452.23
(4) In performing an
investigation or inspection and in making a
23disclosure in connection with a real estate transaction, a licensee shall exercise the
24degree of care expected to be exercised by a reasonably prudent person who has the
25knowledge, skills, and training required for licensure under this chapter.
AB918,17
1Section
17. 452.23 (5) of the statutes is created to read:
AB918,7,72
452.23
(5) A licensee that in good faith provides information attributable to a
3state or local governmental or quasi-governmental entity, including an agency,
4department, board, commission, bureau, or division, or a military or public safety
5organization, may not be held civilly liable if that information is subsequently
6determined to be inaccurate. For the purpose of any proceeding, the good faith shall
7be presumed.
AB918,18
8Section
18. 710.13 of the statutes is created to read:
AB918,7,11
9710.13 Disclosures regarding real property wholesalers. (1) 10Definitions. (a) “Purchase agreement” means a contract for the sale, exchange,
11option, rental, or purchase of residential real property.
AB918,7,1412
(b) “Real property wholesaler” means a person that enters into a purchase
13agreement as a buyer and intends to assign the person's rights as buyer under the
14purchase agreement to a 3rd party for consideration.
AB918,7,1615
(c) “Residential real property" means real property in this state that includes
16one to 4 dwelling units, as defined in s. 101.61 (1).
AB918,7,18
17(2) Required disclosures. A real property wholesaler shall provide all of the
18following disclosures:
AB918,7,2119
(a) No later than entering into a purchase agreement as a buyer, written notice
20to the seller of the residential real property that the buyer is a real property
21wholesaler.
AB918,8,222
(b) No later than entering into a contract with a 3rd party to assign the real
23property wholesaler's rights as buyer under a purchase agreement to the 3rd party,
24written notice to the 3rd party that the assignor is a real property wholesaler that
25holds an equitable interest in the residential real property as a buyer under the
1purchase agreement and that the assignor is conveying the assignor's interest in the
2purchase agreement, not title to the residential real property.
AB918,8,8
3(3) Rights to rescind. (a) If a real property wholesaler fails to timely provide
4the disclosure to a seller as required under sub. (2) (a), the seller may rescind the
5purchase agreement at any time before the closing, without any liability on the
6seller's part, by providing written notice of rescission to the real property wholesaler,
7and the seller is entitled to retain any deposits or option fees paid by the real property
8wholesaler in connection with the transaction.
AB918,8,149
(b) If a real property wholesaler fails to timely provide the disclosure to a 3rd
10party assignee as required under sub. (2) (b), the assignee may rescind the
11assignment of the purchase agreement at any time before the closing, without any
12liability on the assignee's part, by providing written notice of rescission to the real
13property wholesaler, and the assignee is entitled to the return of any deposits or
14option fees paid by the assignee in connection with the transaction.
AB918,8,17
15(4) Waiver prohibited. A person may not waive the person's rights under this
16section. If the person proceeds to closing, the person's right to rescind under sub. (3)
17is terminated.
AB918,19
18Section
19.
Initial applicability.
AB918,8,2119
(1)
Disclosures regarding real property wholesalers. The treatment of s.
20710.13 first applies to a purchase agreement or an assignment of a purchase
21agreement entered into on the effective date of this subsection.