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Topics – Legal
Issues
- Seller’s Disclosure Law
Changes
- Statutory Cancellation
Changes
- Common Interest Ownership
Act Changes
- Unreasonable Delay in
Mortgage Loan Closing
- Form Changes
- Agency Law
- Q&A
Seller’s Property
Disclosure Law
- Seller’s Disclosure
Obligation Prior to August 1, 2004:
- Always in writing.
- Seller must disclose all
material facts pertaining to adverse physical conditions in the
property of which the seller is aware that could adversely and
significantly affect:
- An ordinary buyer’s use and
enjoyment of the property; or
- Any intended use of the
property of which the seller is aware.
What Changed?
- Seller must disclose all
material facts pertaining to the adverse
physical condition in the property of
which the seller is aware that could adversely and significantly
affect:
- An ordinary buyer’s use and
enjoyment of the property; or
- Any intended use of the
property of which the seller is aware.
Disclosure
Statement Revisions
What does it all
mean?
- Material Fact
- That Seller is aware of
- That adversely and
significantly affect
- An ordinary buyer’s use and
enjoyment of the property
Who’s ordinary,
anyway?
- Should this come to a
dispute, it will be decided by a judge, jury or arbitrator.
- No special knowledge or
secret standards
- Complaining party present
- Difficult to conclude
complaining party not ordinary
Reminder
- Any intended use of the
property of which the seller is aware.
- Examples
- Swimming Pool, drainage
easement
- Home business prohibition
- Accessory building
prohibition
Agent’s
Disclosure Obligation
- Licensees shall disclose to
any prospective purchaser all material facts of which the licensees
are aware, which could adversely and significantly affect an ordinary
purchaser’s use or enjoyment of the property, or any intended use of
the property which the licensees are aware.
- Essentially the same
standard
Results of Change
- Expands to require
disclosure of facts not related to
physical condition
- Expands to require
disclosure of facts outside the property
Practical
Pointers
- Seller Remains Author
- You must review the
disclosure
- Is anything Missing?
Exceptions
Remain
- Occupant with AIDS
- Site of suicide, accidental
death, natural death or perceived paranormal activity
- Located in neighborhood
containing adult family home, community-based residential facility, or
nursing home
- Registered sex offenders
Statutory
Cancellation
Why Have A
Statutory Cancellation?
- History
- Problems
- Forfeitures
- Clouds on Title
- Litigation Expense
How Does
Statutory Cancellation Work? (Before Statute Change)
- Seller Can Cancel If Default
Occurs
- Form Notice Served on Buyer
- 30 Days to Cure Default
- Also pay costs and some
attorney fees
- Can Get Court Order
Suspending Cure Period
- Contract Cancelled at End of
30 Days
- Can Record an Affidavit
Showing Cancellation
Problems with
Procedure
- Seller Only
- Length of Time
- Courts Confuse Statute
- Ability to Cure
New Statute
- MAR Lobbies for Change
- Minnesota Statute 559.217
- Applies Only to Residential
Real Property
Two New
Procedures
- Two ways to cancel
- Can Still Use Old Procedure
- Cancellation with Right to
Cure
- Declaratory Cancellation
Cancellation with
Right to Cure
- Similar to old cancellation
- Serve Form Notice
- Right to Cure
- Cancelled if No Cure or
Court Order
Cancellation with
Right to Cure
- Changes
- Seller or Buyer May Cancel
- Shorter Cure Period (15
Days)
- Can’t Necessarily Recover
Costs/Fees
- Must Serve Notice on Third
Party Holding the Earnest Money
Declaratory
Cancellation
- Completely New
- Seller or Buyer Can Use
- Use if Purchase Agreement
Cancels by its Own Terms
- No Right to Cure
- Can Only Stop Cancellation
by Getting Court Order
Other Changes
- Ability to Recover Attorney
Fees, Costs
- To Prevailing Party
- If One Party Starts Court
Proceeding
- Limited to $3,000
Other Changes
- Dueling Cancellations
- Where Both Parties Serve
Notice
- Agreement Canceled as of
Second Notice
- Court Decides Earnest Money
Dispute
More Legislative
Changes:
Common Interest Ownership Act
- Simple change to right of
cancellation:
- Ten-day right is now a
five-day right
- Remember: Time period runs
from date disclosure statement is received (same as old law)
- Warning: old MAR forms
attached to new purchase agreements
Unreasonable
Delay in Mortgage Loan Closing
- Consumer protection
legislation
- Applies to lender who
“unreasonably delays” processing a loan application beyond expiration
date of lock agreement or point agreement
What’s an
“Unreasonable Delay”?
- Left open, but includes:
- failure to return phone
calls or respond to inquiries
- Addition of new
undisclosed requirements during the process
- Failure to take actions
necessary to approve the loan within a reasonable time
The Teeth
- Lender who violates liable:
- Actual out-of-pocket
damages
- Damage may include the
present value of increased interest costs over the normal life of the
loan
- Attorneys’ fees
- Statutory damages of $500
for each unreasonable delay
Other Form
Changes
- Buyer’s Financial Disclosure
Statement
- Any Future?
Agency
Refresher
- Types of Relationships with
Consumers:
- Seller’s Broker
- Buyer’s Broker
- Fiduciary Duties: Loyalty,
Obedience, Disclosure, Confidentiality, Reasonable Care and Skill,
Accountability (L.C.D.O.R.A.)
More
Problematic:
- Dual Agency
- Facilitator
- Subagent
Facilitator and
subagent:
- Facilitator
- Default
- May change if Edina Realty
represents the buyer or seller
- Confidentiality
- Subagent – Legal changes
have limited use
Dual Agency
- When it applies:
- When one agent represent
both parties
- When two agents licensed to
the same broker each represents a party to the transaction
Duties Under Dual
Agency
- Still a fiduciary to both
- Confidentiality/Disclosure
obligation changes:
- Limited to price, terms, and
motivation
- Cannot advocate for one
party to the detriment of the other
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