Legal Pulse: Fourth Quarter 2015/2015 Year-In-Review

Video Transcript
NAR LEGAL AFFAIRS DEPARTMENT
April 2016

Welcome to a special edition of the Legal Pulse risk management report. I am

Finley Maxson, NAR Senior Counsel. We are going to discuss the fourth quarter
results from 2015 as well as a look back at the cumulative results from the 2015
research.
By way of background, the Legal Pulse is a quarterly report that explores
legal issues affecting real estate professionals, and reviews a variety of sources such
as case law, jury verdicts, and statutes organized by topic. In addition to the
research component, each edition will analyze trends that will help guide training
for salespeople. The Legal Pulse is available on realtor.org for download.
This quarters report covered 4 major subject areas with over 50 total
subtopics. As in every edition of the Legal Pulse, Agency, RESPA, Property Condition
Disclosure are covered, and in addition this report covers Fair Housing issues.
Lets begin with an overview of 2015. Agency continued to be the number
one topic, with the most cases and statutes. Real estate professionals tended to do
well in agency lawsuits unless they did something egregious, like forge a signature
or put their financial interests above their clients interests. Breach of fiduciary duty
was the most common allegation, but courts strictly scrutinized whether a fiduciary
relationship existed and/or was breached.
Property condition disclosure was the second biggest topic, with mold and
water intrusion being the leading topics in this area. In many of the cases, the
sellers disclosure form protected the real estate professional from allegations
because the mold/water intrusion had been disclosed to the buyer on the property
disclosure form. Another issue that came up in cases was the real estate
professionals duty to inspect the property, as real estate professionals generally do
not have such a duty.
The common theme for the RESPA research was kickback lawsuits where the
plaintiffs were also seeking class action status. The lenders and other defendants
won the vast majority of the cases, but a few of the cases did continue to work their
way through the court system.
In this edition, we also look at the Fair Housing research from 2015. Lending
issues led the way, with both Miami and Los Angeles bringing lawsuits

Legal Pulse: Fourth Quarter 2015/2015 Year-In-Review

Video Transcript
NAR LEGAL AFFAIRS DEPARTMENT
April 2016

against large lenders allegedly predatory lending. Illinois did enact a new statute
prohibiting familial status discrimination.
Now lets turn to some of the interesting cases uncovered in the research.
Stimmel v. Osherow is an interesting premises liability case out of New York. In this
case, a potential buyer allegedly tripped on drapery cord and fell down stairs
leading to a balcony. There was a question as to who opened the drapes and created
the alleged hazard. While real estate professionals dont generally have a duty to
warn visitors about hazards on the property unless they know of the hazard, the
real estate professional may have some responsibility if she created the hazard. The
case was sent back to the trial court for further fact-finding.
The fourth quarter had a lot of agency legislation. Two states starting with
the letter V made changes to their agency laws. Virginia made extensive changes
to its agency laws, including requiring licensees to disclose any ownership interest
they or family members may have in the property. Vermont has created a
distinction in its laws requiring brokerage firms to choose to be identified as either
Designated Agency firms or Non-Designated Agency firms. The Nebraska Real
Estate Commission also promulgated guidance about coming soon listings.
As mentioned above, allegations of illegal kickbacks remained the major
issue in the RESPA cases. An Illinois court looked at whether the payments made by
title companies to attorneys constituted a kickback. The court ruled that because
the attorneys do provide services in exchange for the payment, RESPA is not
violated because RESPA is not a price control statute and so whether the payment
received matched the services provided is not a consideration under RESPA.
In addition to the Fair Housing lawsuits brought by municipalities mentioned
earlier, another interesting case from New York involved whether the purchaser of
commercial property could allege Fair Housing violations. In Germain v. M&T Bank
Corp, a US citizen of Albanian descent claimed he was unable to obtain financing
because the lender believed that he was part of the Albanian mob and also because
he was Muslim. The court found that the Fair Housing Act was intended to protect
interests in residential property and because none of the allegations involved
residents of residential property, the court dismissed the Fair Housing Act
allegations.
This concludes the year-in-review/2016 4th quarter report. Please check
back in May for the first quarter 2016 annual report. Thank you.