By early November, the Illinois REALTOR® Legal Hotline had handled 2,617 calls or emails in 2018 (or an average of 262 a month).
So, what were the top legal questions members were asking about? Agency, the scope of the Illinois Real Estate License Act, contracts to purchase, business practices under the license act and advertising rounded out the top five categories.
This article examines those top categories and offers some sample scenarios and answers to your frequent legal questions.
Elizabeth A. (Betsy) Urbance
General Counsel and Vice President of Legal Services
Review of Disclosed Dual Agency Disclosure and Consent Process
Disclosed dual agency is allowed under the Illinois Real Estate License Act (the Act). It is very important to know the disclosed dual agent is limiting her role in the real estate transaction. The disclosed dual agent will become more a messenger and less a counselor to the clients, who are on opposite sides of the transaction. The key concept for the dual agent to abide by is maintaining the confidentiality of the opposing parties.
Here is a quick review of disclosure and consent requirements when acting as a dual agent:
Step 1 for making the proper disclosure and obtaining informed consent is to disclose to each client (likely at separate times), the potential for dual agency to occur.
- The seller might consent to the potential for dual agency within the exclusive listing agreement. The dual agency section of the listing agreement will contain the required language setting forth the do’s and don’ts of the disclosed dual agent. This could be referred to as the “long form” that is the first step in the process. There is a presumption of informed consent when using the language set forth in Section 15-45(a) of the Act.
- The buyer might consent to the potential for dual agency either within a buyer brokerage agreement, or if no brokerage agreement is being signed, by signing a stand-alone “long form.” The buyer needs to sign no later than when the dual agent acts as such. This might occur right before the listing agent shows the buyer her own listing.
Step 2 for completing the required dual agency disclosure is when both clients sign the confirmation of consent to dual agency no later than when a contract is entered. See Section 15-45(c) of the Act.
Note: These provisions apply to sales and/or lease transactions which are either residential or commercial. For more on agency, see the Consumer’s Guide to Real Estate Agency in Illinois (logon required) www.IllinoisRealtors.org/legal/forms.
2. Illinois Real Estate License Act – Scope
The Act Requirement that Licensees be Sponsored by Only One Sponsoring Broker at Any One Time (Section 10-20(a))
The Illinois REALTORS® Legal Hotline receives many calls asking whether a licensee can legally work for one sponsoring brokerage company to do sales, while also working with an entirely separate sponsoring brokerage company to focus on property management. Under the Act, the answer to this question is NO, the licensee must choose one company or the other for which to work. Leasing properties owned by others for compensation is a licensed activity under the Act’s definition of Broker. As a result, the limit placed on licensees requiring them to work for only one sponsoring broker at any one time applies on these facts. The licensee who wants to do both sales and leasing brokerage will need to find a sponsoring company that engages in both types of brokerage. Some companies have separate divisions that operate under the same corporate umbrella. If this is the case, there is only one sponsoring broker, so the licensee who works for that one company would be compliant with the Act.
3. Contracts to Purchase
Amendments to REALTOR® Code of Ethics and Multiple Listing Service (MLS) Policy Requiring Affirmation or Notification to Cooperating Brokers in Contract Negotiations
In response to cooperating brokers’ seemingly constant frustration at a lack of communication from the seller’s broker in contract negotiations regarding whether their offers are being presented in a timely manner, NAR recently adopted an amendment to the REALTOR® Code of Ethics Standards of Practice; and approved an accompanying MLS Policy Statement addressing this concern.
Specifically, under Article 1 of the Code of Ethics, Standard of Practice (SOP) 1-7, NAR, discussing the presentation of offers, amended the language to become effective Jan. 1, 2019, as follows:
Upon the written request of a cooperating broker who submits an offer to the listing broker, the listing broker shall provide a written affirmation to the cooperating broker stating that the offer has been submitted to the seller/landlord, or a written notification that the seller/landlord has waived the obligation to have the offer presented.
Similarly, the NAR MLS Policy Committee adopted amendatory language to its MLS Policy Statement 7.73, Rights of Cooperating Broker in the Presentation of Offers, that is consistent with the new SOP 1-7:
Where a cooperating broker is not present during the presentation of their offer, he or she can request that the listing broker provide them a written affirmation stating that the offer has been submitted to the seller, or a written notification that the seller has waived the obligation to have the offer presented.
This language is mandatory for REALTOR®-related MLSs.
4. Illinois Real Estate License Act – Business Practices
Recordkeeping Requirements for Offices
A managing broker for an office wants to do some “house cleaning” and wonders how long he must keep old files.
This is a good question and one on which the managing broker should consult with the company attorney and accountant.
In addition, he should review Section 1450.755 in the administrative rules under the Act. This rule discusses what records must be kept for the Illinois Department of Financial and Professional Regulation (IDFPR). For IDFPR actions, the time for keeping records is five years. He also should consider different time limits that might apply in different situations.
Some very broad time limits that might apply besides the five-year limit on administrative actions through IDFPR, would be three to seven years for matters involving the Internal Revenue Service (IRS) and 10 years for actions on written contracts.
There are some records in the office that need to be kept forever, such as articles of incorporation and company bylaws.
These are some very general guidelines and examples. Managing brokers should consult their own experts when making file retention and destruction decisions for their business. They might also review the Illinois REALTORS®’ Sample Office Policy Manual which contains a sample document retention/destruction schedule.
Note: This Q&A covers document retention and does not focus on privacy issues and the destruction of private data a company might touch. For more on this subject, start here bit.ly/NAR_DigitalSecurity.
Teams and Advertising
Illinois REALTORS®’ Legal Team helped create an animated video for a quick look at the legal requirements for advertising in the context of a real estate brokerage team. See the sidebar below for more on these new legal videos.
Stay up-to-date with Legal Briefs videos
Illinois REALTORS® Legal Services team makes it easier than ever for you to learn about the hot legal topics affecting your real estate business with the Legal Briefs video series. Check out the first three episodes and watch for more in 2019.