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How the Courts Ruled: This Year's Key Real Estate Decisions

Court decisions on real estate issues can help guide your business practices. Reflect on these recent cases to understand how they may impact you and your clients.

COMPILED BY MARIWYN EVANS

From disclosure requirements to compensation disputes, court decisions interrupt how laws and regulations play out in real life and how you can do business legally.

To help you stay on top of important real-estate related court decisions, and learn from others’ mistakes, we’ve complied an easy-to use summary of all of the pertinent legal decisions and law columns that appeared this year in REALTORŪ Magazine. So take a minute to scan what the courts had to say this year. It may keep you from ending up in one.

November: Disclosure, Interference, Listing Data

Disclosure: Don’t volunteer information
A real estate broker had to pay damages when he volunteered incorrect zoning information that the buyer relied on in making a decision to purchase the property.

Interference: Tactics may have lowered sale price
A condominium owner who sold several units at a “no reserve” auction claimed he received lower prices because several other unit owners posted spurious For Sale signs just before the auction.

Law Column: Controlling and protecting listing content
Certain portions of listing content — particularly photographs and property descriptions—are intellectual property and can be copyrighted by the creator. NAR has developed documents that will show you how.

October: Due Process, MLS, Bankruptcy

Professional Standards: Association hearing gives due process
A REALTORŪ association’s hearing process for a violation of the local MLS’s rules provided adequate due process for an accused member.

MLS Ruling: No need for public Web site
A local REALTORŪ association has no legal obligation to continue to allow the public to access an association-sponsored listing Web site.

Law Column: Single-asset bankruptcy rule two-edged
The Bankruptcy Abuse Prevention and Consumer Protection Act aims to lessen abuses of bankruptcy statutes. But one provision, which effectively shortens the stay period before a property can be foreclosed, makes it harder for owners of single-asset real estate to retain their property.

September: Online Marketing, Property Seizure, Termites

Trademarks, Online Marketing: Suit settled over use of rival’s name
Edina Realty Inc. charged that another brokerage in the same market was using the trademarked name “Edina Realty” as an embedded search term on its site to capture Internet leads.

Property Taxes: Inadequate notice before property seizure
The Arkansas Commissioner of State Lands didn’t provide sufficient notice to a home owner who owed back taxes before seizing and auctioning off his home.

Law Column: When to get a termite inspection
Even if an inspection isn’t mandatory, encourage buyers to have the property inspected. The report should note exactly which areas were inspected and any areas not visible to the inspector.

August: School Districts, Mortgage Woes, Family Lawsuit

Misrepresenting home details: The wrong school district
After the closing, buyers found out that their new home was located in a different school district than the one their salesperson had said. Since that was a major criterion for their purchase, they sued the practitioner.

Mortgage problems: Preapproval is no guarantee of a loan
An Illinois appeals court has ruled that a lender’s rejection of buyers for a loan after preapproving them doesn’t constitute fraud.

Law Column: Don’t get sued by Uncle Joe!
It’s natural to want to help your friends and relatives buy or sell a home. But that doesn’t mean that you can take any shortcuts in the sales process. Just consider this true story.

July/June: Relying on Experts, Free Speech, Appraisals

Disclosure: When two experts disagree, share both with buyers
A sales associate was liable for failing to inform buyers about the difference in the damage estimates between two termite inspections.

Free speech: Limiting political statements infringes on rights
A homeowners’ association that prohibiting the display of political signs on private property was interfering with residents’ constitutional right of free speech.

Law Column: Don’t pressure an appraiser to raise estimate
While you can provide additional comps and other facts to support your claim, it’s illegal to push an appraiser to change his estimate of a property’s value.

May: Disabled Tenant, Mobile Home, 1031 Exchange

Discrimination: Landlords must make reasonable accommodation for disabled
A tenant whose illness made it difficult for her to climb the stairs to her apartment was entitled to a ground-floor unit at the same rent, ruled the court.

Disclosure: You can’t tell what you don’t know
A broker and salesperson were not liable for failing to tell buyers that a property was a converted mobile home when they didn’t know that fact.

Law Column: Common myths about 1031 like-kind exchanges
Among frequent misconceptions are that these tax-saving deals can be used for a primary residence and that the properties exchanged must be used for the same purpose.

April: Antitrust, Commission, Business Structure

Antitrust: MLS may restrict use to members
An association-owned MLS is within its legal rights to allow only its association’s members access its database of property listings.

Compensation: No commission damages on personal deal
A broker purchasing property as an investment wasn’t entitled to damages for the loss of a commission when the seller cancelled the transaction.

Law Column: Business structure can offer protection
Structuring your brokerage as a limited liability partnership or corporation can protect your assets from many types of claims.

March: Structural Problems, Taxes, Giving Advice

Inspection: Indicators of structural problems
Foundation cracks, water stains, and sagging floors can all spell trouble for a buyer.

Taxes: 5 Ways to Give less to Uncle Sam
Becoming a subchapter S corporation, deducting part of your vacation when you do business, and opening a Roth 401(k) are just a few of the ways to pay less in taxes this year.

Practicing Law Unlawfully: Watch what advice you give clients
Explaining a contract clause or signing on behalf of a client can get you in legal hot water.


February: Settlement Costs, Fraud, Flipping

RESPA: Markups can violate settlement laws
Even with full disclosure, significantly marking up settlement costs secured from third-party vendors can be illegal.

Disclosure: No need to reveal future assessment
Sellers weren’t committing fraud when they didn’t tell buyers about the possibility of a future special assessment on the property by the local government.

Law Column: Cases involving real estate decline
Court actions against real estate practitioners declined significantly in recent years, although property managers are still by far the most likely to get sued. Flipping properties is also a common cause of disputes.

January: Association Membership, Consumer Rebates

Antitrust: Association can require membership to access MLS
Requiring a real estate practitioner to belong to the REALTORŪ association in order to access the local MLS isn’t necessarily tying — a practice prohibited by federal antitrust law.

Law Column: Consumer rebates and gifts not permitted in all states
A recent study determines that legal language intended to prohibit commission kickbacks that violate RESPA may also make rebates to consumers illegal.

More Resources

Track Legal Trends in Real Estate: 2005 Legal Scan (REALTOR.org login required.)

Search NAR Legal Documents


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