Publications

Phillip C. Querin
Partner - Portland, Oregon Office

philquerin@dwt.com
(503) 241-2300

Realtor® Trivia
[March 2007]

Over the years, we develop perceptions and make assumptions about the laws affecting our industry, without knowing exactly what they say. Certain anomalies, quirks, oversights and errors continue to exist because they “fly under the radar” and no one notices. Here are a few curiosities that exist, from the “betcha didn’t know this” department of trivia and little known facts.

1. The Oregon property disclosure laws do not apply to the sale of a residence if the buyer indicates to the seller that the buyer will use it for purposes other than a residence for the buyer or the buyer’s spouse, parent or child . This means that the sale of a house to a person who tells you that he/she is acquiring it as a rental is excluded from the property disclosure requirements, and that investor has no statutory five business day right of revocation.¹ However, from a risk management point of view, you may still want to provide a property disclosure form (since it was probably already prepared anyway), although you should discuss with your seller whether or not to allow the five business day right of revocation. Certainly, if the buyer is not purchasing the property to use as a residence for themselves, or their spouse, parent or child, this fact should be memorialized in writing.
   
   
2. Most Realtors® know that a seller’s agent and buyer’s agent both owe a duty of confidentiality to their respective principals.² This duty applies even after termination of the agency relationship.³ However, did you know that the statutory definition of “confidentiality” only applies to information communicated by a seller or buyer of one to four residential units?⁴ In other words, if the transaction involves commercial property, e.g. an apartment house, office building, or even a six-plex, the statutory confidentiality provisions are not intended to apply. However, what was legislatively given by one hand, was taken away by the other. Elsewhere in the licensing law, there is a statute that provides that all fiduciary duties, including confidentiality, shall be interpreted under the common law of agency.⁵ This means that the fiduciary duty of confidentiality as developed over the years in Oregon’s appellate court cases is not intended to be diminished by the statutory definition of confidentiality. Certainly, a Realtors’® common law duty of confidentiality is not limited by the type of property they’re selling.
   
   
3. Over the years, principal brokers, managers, and agents have regarded the physical delivery of a license to the Real Estate Agency as the only method by which an agent could change companies. It was also the point in time at which the duty of principal broker supervision over the licensee ended. This was because two Oregon statutes,⁶ when read together, gave the Real Estate Agency the legal authority to require licenses to be delivered to them as a part of the re-issuing process. This procedure was also memorialized in Oregon Administrative Rule 863-015-0065. Unfortunately, House Bill 2096, which was passed in the 2005 Legislative Session, quietly repealed the two enabling statutes. This means that today, the Oregon Real Estate Agency has no existing authority to first require an agent or their principal broker to physically turn in a license before it can be re-issued. As a result, an agent can transfer their license to another company today without the knowledge of the principal broker they worked for yesterday. And since the licensee search on the Agency website is not updated daily, there is no easy means of verifying which company an agent works for today. To go from the ridiculous to the sublime, Rule 863-015-0065 was never repealed, so it still provides that the old principal broker has a continuing duty to supervise their agent until that agent’s license is actually received in Salem – an event that is no longer required to occur before a new license is issued. PMAR is currently in discussions with the Agency on this issue, and the acting Commissioner, Katie Cannon, is cooperatively working with us to fix the problem as quickly as possible. In the meantime, principal brokers may want to establish a temporary office policy creating a protocol for their agents wishing to change companies.
   
   
4. ORS 105.464 provides that the Oregon Property Disclosure form shall be in “substantially” the form set out by that statute.⁷ The statutory form provides, in capital letters, that the buyer has “ … FIVE DAYS FROM THE SELLER’S DELIVERY OF THIS SELLER’S DISCLOSURE STATEMENT TO REVOKE BUYER’S OFFER BY DELIVERING BUYER’S SEPARATE SIGNED WRITTEN STATEMENT OF REVOCATION TO THE SELLER DISAPPROVING THE SELLER’S DISCLOSURE STATEMENT UNLESS BUYER WAIVES THIS RIGHT AT OR PRIOR TO ENTERING INTO A SALE AGREEMENT.” (Emphasis added.) The “five day” right of revocation is repeated at the end of the form, above the buyer’s acknowledgment line. There is no question that without clarification, the term “five days” mean five calendar days, since “a day” means any day. Therefore, a buyer receiving a property disclosure form that follows the statute verbatim, could be led to believe that their right of revocation will expire at the end of five consecutive days, including weekends and holidays. However, later in the property disclosure laws, ORS 105.475 provides that the buyer’s right of revocation actually continues for five business days following delivery. Realtors® using a form that follows the statute literally may be inviting a dispute over whether the period of revocation includes weekends and holidays. This error has existed unchanged ever since the statute was amended in 2003. OREF caught it when the legislation was passed, so their form correctly states that the right of revocation runs for five business days. If you are using a non-OREF form, you should check the five-day language.
   
   
5. Oregon Administrative rule 863-015-0186, entitled “Clients’ Trust Accounts -- Disbursal of Disputed Funds” sets forth a procedure allowing sole practitioners and principal brokers to disburse disputed funds that are held in their CTAs. Although the rule purports to be discretionary - i.e. the licensee is not required to follow it - if followed, “…as soon as practicable after receipt of a demand for the funds…” they “must” deliver a written notice to all parties that the demand for disbursal has been made and that the funds “may” be disbursed to the party who delivered them to the licensee within 20 calendar days following the date of the demand. The contents of the written notice are prescribed in the rule, including a statement that the licensee “may” disburse the funds from the CTA to the party who delivered them, unless within 20 days of the date of the demand (a) all parties entered into a written agreement and delivered it to the licensee, or (b) one party gives proof to the licensee that they filed a legal claim to the funds. The rule provides that disbursal…to the party who delivered the funds will end the responsibility of the (licensee) to account for the funds but will not affect any right or claim a person may have to such funds….” (Emphasis added.) While the rule may appear workable based upon a cursory reading, there are some glaring deficiencies that could pose a trap for the unwary: (1) The rule contains no requirement that the licensee must wait a fixed period of time before disbursing. It could be 2 days following the date of the demand, or it could be 20. What if the licensee makes a disbursal to the buyer on the 15 th day and then gets the seller’s notice of filing a legal claim on the 19 th day? There is no way for the parties to know the earliest date the broker can disburse, since there is no limitation – so long as it is within 20 days of the date of demand for disbursal. A better approach would have required notification of a deadline (less than 20 days) for the parties to respond concerning alternatives (a) and (b) above. Then after that deadline, the broker would be free to disburse. (2) What if the broker sending out the letter is a disclosed limited agent as permitted under ORS 696.815? If they get competing demands for disbursal of the funds, can the broker really disburse the funds to one party, while ignoring the instructions of the other? Following the rule simply ends the licensee’s responsibility to “account for the funds,” but says nothing about their fiduciary duty to honor the instructions of their principals. Since the rule seems to be optional, for those Realtors® choosing to follow this procedure, the safest course would probably be to not release the funds. For the more faint of heart, getting the funds to escrow as soon as possible is probably the best way to stay out of the line of fire.

Footnotes

1 ORS 105.465(1)(a).
2 ORS 696.805(3)(f) and 696.810(3)(f).
3 ORS 696.805(3)(f) and 696.810(3)(f).
4 ORS 696.800(3).
5 ORS 696.855.
6 ORS 696.221 and 696.226.
7 ORS 105.464.

© Copyright 2007. Phillip C. Querin, Davis Wright Tremaine. No part may be reproduced without the author’s express written consent.