AB783: Bill Text

LRB-1387/6

CTS:lxk:jf

2005 - 2006 LEGISLATURE

2005 Assembly BILL 783

October 25, 2005 - Introduced by Representatives Wieckert, Gard, Kreuser, Huebsch, Kestell, Nischke, Lehman, Vos, Fields, Albers, Ott, Gunderson, Sheridan, Hundertmark, Lothian, Bies, Freese, Montgomery, Meyer, LeMahieu, F. Lasee, Zepnick, Musser, Hubler, Davis, Towns, Nelson, Krawczyk, Steinbrink, J. Fitzgerald, Gronemus, Pocan and Sinicki, cosponsored by Senators Stepp, Schultz, Robson, A. Lasee, Olsen, S. Fitzgerald, Plale, Jauch, Zien, Ellis and Brown. Referred to Committee on Housing.

AB783,1,12 An Act to repeal 452.01 (2) (d), 452.01 (2) (e), 452.01 (2) (f), 452.01 (2) (g), 452.01 (5m) (d) and 452.137; to renumber and amend 452.133 (2) (a); to amend 452.01 (1m), 452.01 (2) (a), 452.01 (2) (b), 452.01 (2) (h), 452.01 (3e), 452.01 (4d), 452.01 (4h), 452.01 (4p), 452.01 (4t), 452.01 (5m) (intro.), 452.01 (5m) (a), 452.01 (5m) (c), 452.01 (5r), 452.01 (7), 452.12 (3), 452.133 (1) (intro.), 452.133 (1) (a), 452.133 (1) (b), 452.133 (1) (c), 452.133 (1) (d), 452.133 (1) (e), 452.133 (1) (f), 452.133 (1) (g), 452.133 (2) (intro.), 452.133 (2) (b), 452.133 (2) (c), 452.138, 452.139 (1) and 452.14 (3) (f); to repeal and recreate 452.135; and to create 452.01 (2) (bm), 452.01 (3w), 452.01 (5j), 452.01 (5w), 452.01 (7r), 452.133 (2) (a) 2., 452.133 (2) (am), 452.133 (2) (d), 452.133 (4) and (5), 452.133 (6) and 452.134 of the statutes; relating to: duties of real estate brokers and salespersons.

Analysis by the Legislative Reference Bureau

This bill makes several changes to current law regarding real estate practice.

Brokers' duties to parties and clients

Under current law, a broker providing brokerage services owes certain duties to all parties to a transaction, including the duties to: 1) provide brokerage services to all parties honestly, fairly, and in good faith; 2) when negotiating on behalf of a party, present contract proposals in an objective and unbiased manner and disclose the advantages and disadvantages of the proposals; and 3) account for all property coming into the broker's possession within a reasonable time after receiving it. The bill deletes a broker's duty to provide brokerage services in good faith and replaces a broker's duty to account for property within a reasonable time with a duty to safeguard property held by the broker according to rules promulgated by the Department of Regulation and Licensing under authority granted by current law.

Under current law, a broker owes to the broker's client all the duties owed to a party, and additional duties to: 1) loyally represent the client's interests by placing the client's interests ahead of the interests of any other party; 2) disclose to the client all material information known to the broker and not known to the client or discoverable through reasonably vigilant observation, unless the information is confidential; and 3) fulfill any legal obligation required by the agency agreement and any legal order by the client that is within the scope of the agency agreement.

This bill modifies the duty to loyally represent the client's interests. Under the bill, a broker satisfies this duty by doing the following: 1) placing the client's interests ahead of the broker's interests; and 2) placing the client's interests ahead of the interests of nonclients in the transaction by not disclosing information and advice to nonclients if disclosure is contrary to the client's interests. The bill also creates a duty to provide, upon the client's request, information and advice on matters that are material to a transaction and a duty to negotiate on behalf of a client. Under the bill, a client may waive the broker's duty to negotiate, but only in writing.

Brokerage services

Under current law, a person may not engage in brokerage services unless the person is a licensed broker. Currently, brokerage services include promoting certain transactions in real estate or business opportunities. This bill specifies that brokerage services include promoting certain transactions in real estate, time shares, or businesses or their goodwill, inventory, or fixtures, whether or not the business includes real property.

Under current law, a broker may not provide brokerage services to a party to a transaction without an agency agreement that authorizes the broker to provide the services. The agency agreement must contain a statement of the terms and conditions of the brokerage services that the broker will provide. Also under current law, a broker may not provide brokerage services to a party or a client unless the broker has provided the party or client with a disclosure form that: 1) identifies the broker's clients in the transaction; 2) states the broker's duties to the broker's clients; 3) states the broker's duties to a party; and 4) contains a statement, the text of which is prescribed by current law, describing the broker's duties to disclose certain known defects affecting a property and to maintain the confidentiality of certain other information.

Under the bill, a broker may provide brokerage services to any person in a transaction, whether or not the broker has entered into an agency agreement with a party to the transaction or has been engaged to provide brokerage services in the transaction as a subagent (see "Subagency," below), except that a broker may not negotiate on behalf of a person who is not the broker's client unless another party to the transaction is the broker's client or is a client of another broker who has engaged the broker to provide brokerage services in the transaction as a subagent, and the broker has provided to the party a disclosure form stating the broker's duties to a person receiving brokerage services from the broker. The bill deletes the requirements that the disclosure form identify the broker's client in the transaction and state the broker's duties to the broker's client. Under the bill, the disclosure form summarizes the broker's duties to parties and the broker's disclosure and confidentiality duties.

The bill creates a separate disclosure form for a broker's client. Under the bill, a broker is required to provide the form to a client not later than the time the broker enters into an agency agreement with the client. The client disclosure form summarizes the broker's duties to clients, the broker's disclosure and confidentiality duties, and the broker's duties if the client is involved in a transaction in which another party is also the broker's client (see "Multiple representation relationships and designated agency," below). The client disclosure form also contains a space for the client to indicate whether the client consents to certain multiple representation relationships.

Under the bill, if a broker is providing services to a person in a transaction in which no party is the broker's client or a client of another broker who has engaged the broker to provide brokerage services as a subagent, the broker may not provide to any party advice or opinions relating to the transaction in which the person is receiving brokerage services if doing so is contrary to the interests of the person or another person receiving services from the broker.

The bill also modifies the current definition of "negotiate." The bill specifies that providing advice or opinions that are material to a person's transaction or showing real estate to a party does not, in and of itself, constitute negotiation.

Subagency

This bill defines a subagent as a broker who is engaged by a principal broker to provide brokerage services in a transaction but who is not the principal broker's employee. A broker may not engage another broker to provide brokerage services to the broker's client as a subagent unless the agency agreement between the broker and the client authorizes the broker to engage a subagent.

Under the bill, a broker who has been engaged to provide brokerage services in a transaction as a subagent owes all parties the duties owed by a broker who is not a subagent. Additionally, in a transaction in which a subagent has been engaged by a principal broker, a subagent may not place the subagent's interests ahead of the interests of the principal broker's client in the transaction, or provide advice or opinions to parties in the transaction if doing so is contrary to the interests of the principal broker's client. A broker who has been engaged by another broker as a subagent does not owe the principal broker's client the additional duties that a broker owes to the broker's own client.

Multiple representation relationships and designated agency

Currently, a broker may not provide brokerage services to more than one client in a transaction (multiple representation relationship) unless the broker has entered into an agency agreement with, and made certain written disclosures to, each client, and each client has given written consent. Under current law, a broker who represents more than one client in a transaction may not place the interests of any client ahead of the interests of another client in the transaction.

Under the bill, if a broker's client does not give written consent to multiple representation relationships or if the client withdraws such consent, neither the broker nor the broker's employees may place the interests of any client ahead of the interests of any other in negotiations. A client may withdraw consent to multiple representation relationships at any time by written notice to the broker.

Also under the bill, if a client consents to multiple representation relationships the client may also consent to receiving negotiation services from the broker in a multiple representation relationship only from an employee of the broker who is not providing negotiation services to another client of the broker in the transaction ("designated agency"). In a designated agency relationship, the broker's employee may provide to the client on whose behalf the employee is negotiating information, opinions, and advice to assist the client in the negotiations, whether or not the information, opinions, and advice place the interests of one of the broker's clients ahead of the interests of another client of the broker.

If a client consents to multiple representation relationships but not to designated agency, the broker and the broker's employees may not place the interests of any client ahead of the interests of any other in negotiations.

Broker liability

Current law provides that duties imposed on brokers by statutes or by rules supersede fiduciary duties the broker has to a party based on common law principles of agency, to the extent that common law is inconsistent with the statutes or rules. Under the bill, a broker's duties under the statutes or rules supersede any inconsistent common law duties or obligations, not just fiduciary duties based on agency principles.

Under current law, a broker must supervise, and is responsible for, the acts of any broker, salesperson, or time-share salesperson employed by the broker. Under the bill, a broker is responsible for brokerage services provided on behalf of the broker by a broker, salesperson, or time-share salesperson employed by the broker.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

AB783, s. 1 Section 1. 452.01 (1m) of the statutes is amended to read:

AB783,5,3 452.01 (1m) "Agency agreement" means a written agreement between a broker and a client under s. 452.135 (1) in which the client authorizes the broker to provide brokerage services to the client.

AB783, s. 2 Section 2. 452.01 (2) (a) of the statutes is amended to read:

AB783,5,9 452.01 (2) (a) For another person, and for commission, money, or other thing of value, negotiates or offers or attempts to negotiate a sale, exchange, purchase, or rental of, or the granting or acceptance of an option to sell, exchange, purchase, or rent, an interest or estate in real estate, a time share, or a business or its goodwill, inventory, or fixtures, whether or not the business includes real property.

AB783, s. 3 Section 3. 452.01 (2) (b) of the statutes is amended to read:

AB783,5,17 452.01 (2) (b) Is engaged wholly or in part in the business of selling or exchanging interests or estates in real estate or businesses, including businesses' goodwill, inventory, or fixtures, whether or not the business includes real property, to the extent that a pattern of real estate sales or exchanges is established, whether or not such the person owns the real estate is owned by such person or businesses. Five sales or exchanges in one year or 10 sales or exchanges in 5 years is presumptive evidence of a pattern of sales or exchanges.

AB783, s. 4 Section 4. 452.01 (2) (bm) of the statutes is created to read:

AB783,5,22 452.01 (2) (bm) For another person, and for commission, money, or other thing of value shows real estate or a business or its inventory or fixtures, whether or not the business includes real property, except that this paragraph does not include showing a property that is offered exclusively for rent.

AB783, s. 5 Section 5. 452.01 (2) (d) of the statutes is repealed.

AB783, s. 6 Section 6. 452.01 (2) (e) of the statutes is repealed.

AB783, s. 7 Section 7. 452.01 (2) (f) of the statutes is repealed.

AB783, s. 8 Section 8. 452.01 (2) (g) of the statutes is repealed.

AB783, s. 9 Section 9. 452.01 (2) (h) of the statutes is amended to read:

AB783,6,8 452.01 (2) (h) For another person, and for a commission, money, or other thing of value, promotes the sale, exchange, purchase, option, rental, or leasing of real estate, a time share, or a business opportunities or its goodwill, inventory, or fixtures, whether or not the business includes real property. This paragraph does not apply to a person who only publishes or disseminates verbatim information provided by another person.

AB783, s. 10 Section 10. 452.01 (3e) of the statutes is amended to read:

AB783,6,11 452.01 (3e) "Brokerage service" means any service described under sub. (2) (a) to (h) provided by a broker to another person.

AB783, s. 11 Section 11. 452.01 (3w) of the statutes is created to read:

AB783,6,17 452.01 (3w) "Designated agency" means a multiple representation relationship in which each client of the broker in the multiple representation relationship receives negotiation services from the broker only from employees of the broker who are not providing negotiation services to any other client of the broker in the transaction.