Oh, how many times have we tried to clone our state legal department? Real Estate law gurus Justin Davidson, General Counsel of the Massachusetts Association of REALTORS®, and his ever supportive Associate Counsel Catherine Taylor help keep us out of trouble on a daily basis!
Now, both will share their information with you each month; provide you with a highlight of the calls they field on the legal hotline; and keep us posted with changing Massachusetts law. Also included here are national notes from NAR’s legal department concerning federal cases that are of interest to Massachusetts brokers and salespersons.
Members may access the Legal Hotline by calling 800-370-LEGAL (5342), sending an e-mail, or faxing questions to the Legal Department at 781-890-4919
The MAR Legal Hotline offers authorized callers access to staff attorneys who can assist members with questions about current state and federal laws and regulations, permissible business practices, and important court rulings affecting real estate practitioners. To take advantage of the Legal Hotline service, a member’s designated broker must first complete and sign an Authorization Form and return to the MAR Legal Department. Once approved as an authorized caller, MAR members may access the Hotline. The hours of operation are Monday-Friday, from 9 a.m. to 1 p.m.
Legal Summaries by Topic
Is requiring a full year’s worth of rent legal?
- No, prepaid rent is a violation of the Massachusetts security deposit statute, Massachusetts General Laws Chapter 186, Section 15B. The statute prohibits a lessor from requiring a tenant to pay any amount in excess of:
- First month’s rent;
- Last month’s rent at the same rate as first month’s rent;
- Security deposit equal to first month’s rent; and
- The cost to change the lock and key.
While the question often arises in the context of a prospective tenant offering to pay rent in advance, these situations would likely still be a violation of the statute. Generally, a prospective tenant may feel the need to make such an offer to a lessor in order to secure a property they would not otherwise be approved for. Although the landlord may not be making the request for pre-paid rent, the end result is the same.
To stay within the parameters of the law, Massachusetts landlords should never accept rent in advance, regardless of whether the tenant offers, or the landlord demands it.
I am trying to downsize my filing cabinets – what records am I required to maintain?
Many of the “core documents” to a real estate transaction have retention requirements codified in regulations:
Agency Disclosure: 254 CMR 3.00 requires brokers to retain the Massachusetts Mandatory Licensee-Consumer Relationship Disclosure, as well as Consent to Dual Agency Disclosures and Designated Agency Disclosures for a period of three (3) years from the date of the notice.
Escrow records: 254 CMR 3.10(b) requires brokers to maintain records of all funds held in their escrow accounts. Such records should include the date the money was received, the source of the funds, the date the funds were deposited, check number, the date of withdrawal, and “other pertinent information concerning the transaction … and to whom the money belongs.” Copies of checks deposited into and withdrawn from the escrow account should be maintained for three (3) years from the date of issuance.
Lead Paint: 24 CFR § 35.175 requires brokers to retain the Lead Paint Form for three (3) years. HUD recommends maintaining lead paint notification and disclosure forms, as well as inspection, remediation and, maintenance records indefinitely due to the liability associated with lead paint.
Rental Documents: 254 CMR 7.00 (2) requires the following items to be retained for a period of three (3) years: the Tenant Fee Disclosure, from the date on which the notice was provided; “all rental listings and written documents that demonstrate the availability of an apartment at the time it is advertised for rental” from the date on which the apartment was rented; and “a copy of any check, money order and written cash receipt for any fees, deposits or payments made by a prospective tenant or actual tenant” from the date of issuance.
Regardless of the specific retention requirements noted above, it is a good idea to keep all transaction documents for seven (7) years. This includes, but is not limited to: listing agreements, buyer representation agreements, purchase contracts, and communications with the client(s) and other broker(s). The statute of limitations for most contract actions is six (6) years, so it is important to retain documents for at least this long to protect your interests in any potential lawsuit. Certain documents, such as corporate records, partnership agreements, audit reports, general ledgers, tax returns and deeds should be kept permanently. In most cases, it is acceptable to store these documents electronically, as long as you are safely and securely backing up all of your data. Brokerages should work with an attorney and/or accountant to develop and maintain a record retention policy for their office(s).
Written by: Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel.
Services provided through the Massachusetts Association of REALTORS® is intended for informational purposes and does not constitute legal advice, nor does it establish an attorney-client relationship. The Massachusetts Association of REALTORS®, by providing this service, assumes no actual or implied responsibility for any improper use of responses to questions through this service. The Massachusetts Association of REALTORS® will not be legally responsible for any potential misrepresentations or errors made by providing this service. For more information regarding these topics authorized callers should contact the MAR legal hotline at 800-370-5342 or e-mail at firstname.lastname@example.org.
A few years ago, we included a post in the Friday Recap about becoming a buyer’s agent and the steps involved. It’s more than showing up at a listing appointment and having a Mandatory Consumer-Licensee form signed. But, do you know all that it entails? Please see below the full details of that previous post, and take special heed of beginning a relationship electronically!:
Mandatory Steps in Establishing a Client Relationship with a Buyer
- Mutual Agreement between the broker and buyer
Numero uno, if you want to work for a buyer, the buyer has to want to work with you too. They should, having met you and heard what outstanding services you will provide, elect to work with your firm and have you represent their real estate interests. For a day or for a year. On a specific property or in all of their real estate needs. This can be agreed upon verbally or in writing, but you cannot represent someone who doesn’t hire you. And you don’t usually get paid either.
- Explanation of Agency Options in Massachusetts
Explaining the relationship between the parties is a great icebreaker. The licensee-consumer disclosure form is there to help you explain the roles of the agents in a transaction. You should clarify the services the buyer can expect to receive (or not receive) from the various types of agents, and what agents will/will not maintain their confidential information. And you should disclose the type of service that you are offering to provide them. Which leads to…
- Obtain Signed Consumer-Licensee Disclosure
Pièce de ré·sis·tance… the MANDATORY form needs to be signed at the first personal meeting to discuss a specific property. And did you know that the Code of Ethics takes it one further and obligates you to make sure the nature and terms of a contractual relationship are disclosed prior to being established, if handled electronically? Creating a relationship via email or text from an online lead? Yes, this means you have to explain and agree to the nature of your relationship before beginning work on their behalf.
- Advise of company policies of compensation
The Code of Ethics mandates that when entering into buyer/tenant agreements, Realtors® must advise potential clients of your company policies regarding cooperation and compensation, how fees are paid, who is responsible to pay fees, etc. Kind of important for them to know going in, right?
- Use reasonable efforts to determine if buyer is working with another agent
The Code also advises that it is your affirmative responsibility to “use reasonable efforts” to make sure the buyer isn’t already working with another agent. So that’s a great question to ask them!
Then, after you’ve done your job, established a fiduciary relationship with a buyer client, you can make appointments on their behalf – but PLEASE making sure to IDENTIFY YOURSELF as a buyer’s agent with your firm when first speaking to a listing agent.
Extra HELPFUL steps, not required
- Complete an Identification Form to secure in your office for safety purposes.
Follow your office policy if you’re required to complete a client identification form for every buyer, at a neutral location (office, coffee shop etc…). It’s imperative that you meet all prospects in a public location and obtain basic information to protect yourself. Also, it gives you a chance to meet someone face-to-face to talk about the items listed above. Experts from Universal Buyers Agents Sunshine Coast always adhere to it. If you complete an Identification Form and you are not at your office, email to it your office. This form should contain a copy (take a photo) of the buyer’s drivers license, as well as their car and contact details. If this policy exists and is applied for all new clients, it protects all agents in your office (1) from those who wish to remain anonymous / untraceable to do harm (2) allows police to follow up if there is a theft or issues arise from a showing (3) ensures there is no discriminatory behavior when applied uniformly.
- Consult with buyer on qualifications, get pre-approval from a local lender
Don’t waste your time, the co-broker’s time, or seller’s time and appear unprofessional without a basic discussion about the buyer’s financial qualifications and help in obtaining a pre-qualification letter. This is a simple step that not only protects your time, but also promotes the safety of those around you.
- Review how Buyer Clients should handle inquiries, appointment setting, open house attendance.
It’s a confusing process, and the internet has made it more so for buyers to navigate! Explain how you expect buyers to operate, outline your role in the search process, and it will go a long way to helping improve the system. (example: “If you go to an open house, here are a bunch of my business cards. Please make sure to give one to the agent showing the home…” OR, “if you want more information about a home, don’t click a button on Zillow to get more information but instead go to the MLS Portal I created for you”, etc…) It’s an easy way to establish ‘good practices’ and show yourself off as the professional you are!
- Obtain a dual/designated agency consent form if your office offers both seller/buyer agency
If your office offers more than one form of agency, it’s good to have a discussion up front on how your office handles conflicting fiduciary duties. You can also get the buyer to agree, in advance, on how those situations will be handled. You don’t want to wait until the buyer falls in love with an in-house listing to discover they want a FULL buyer’s representative and won’t agree to dual agency.
- Have a signed Buyer Agency agreement that outlines the above terms of agreement.
We love a buyer’s agency agreement to firmly set the obligations and expectations in writing, but if nothing else, those items should be verbally discussed and agreed. Are you exclusive? How will you be paid? Are you representing them on this house or many? Do they want client services such as MLS portal access, email updates, etc…A buyer’s agency agreement is a beautiful thing – it establishes everything in writing so there are no questions later about how the relationship will go and aligns expectations. Pretty please won’t you consider it?
Special thanks the MAR Legal Team for helping to make sure the information was accurate and clearly presented. You rock!