LEGAL NOTES

TRANSLATING THE LAW FOR YOU

{legal Realtor ®}

Do I Have to Sell to Him?

BY STEPHEN M. PERRY, ESQ., Casner & Edwards, LLP

We’ve probably all heard stories about the expansion of political disagreements into retail establishments. A restaurant in Virginia refused to serve the President’s former press secretary. A burger franchise in Alabama declined to serve police officers. A New York City bar refused admittance to a patron who was wearing a MAGA hat. Meanwhile, store workers have been shot for asking patrons to wear a mask, a request that itself has become embroiled in politics.

Those involved in real estate transactions are not immune from the extreme political divide that grips our country. Owners of real estate who are listing those properties may very well say, “I won’t sell to anyone who supports [fill in the blank].” What does the law have to say about the injection of politics into the world of real estate sales? Is it lawful for a property owner to refuse to sell real estate to those whose political views are deemed offensive to the property owner? The case of the disgruntled wearer of a MAGA hat who was refused admittance to the bar, he actually went to court. The bar won. The judge determined that applicable federal and New York law protected discrimination on account of race, religion, and gender, but not discrimination on account of political beliefs. As fervent as some of the President’s supporters may be, the judge rejected the plaintiff’s argument that his wearing a MAGA hat was a bona fide part of his religion. And the plaintiff’s First Amendment rights to freedom of speech did not come into play because the First Amendment only restricts the actions of governmental bodies and not private establishments. Some commentators have opined under similar reasoning that there was no legal problem a few years back when a woman in California instructed her real estate broker not to entertain any offers on her house from Donald Trump supporters. They pointed out that the fair housing laws do not protect against discrimination on account of political beliefs. While it is true that political beliefs, as such, are not protected by the fair housing laws, things may not be so simple as that. To illustrate this point, let’s go back to the situation with the bar. Only this time, suppose that it was a bar in Birmingham, Alabama, and that it put up a sign stating that only registered Republicans would be allowed to enter. This would likely keep out the overwhelming majority of Black patrons. In fact, it would be a pretty good way of bringing back the Jim Crow laws. For that reason, even though the civil rights laws do not protect against political discrimination, a refusal to admit into the bar those who were not Republicans would almost certainly constitute unlawful race discrimination. The same problem would potentially apply in the real estate scenario if sellers were to advertise their property with a statement that said, “Democrats need not apply.” On the face of things, this advertisement might seem to be addressing

only political affiliation. But its effect would be to potentially prevent the overwhelming majority of Black buyers and a disproportionate share of other minority groups from buying the property. Because the advertised political restriction would have a disparate impact on members of protected minority groups, it would likely be found to violate the Fair Housing laws. Now, let’s turn the tables and suppose that a seller were to advertise that offers from supporters of the President will not be considered. This would not necessarily have a disproportionate impact on the minority groups referred to above, nor would it support a claim of socalled “reverse discrimination.” Still, it would not be without its risks. For example, one could imagine a case being asserted by a potential buyer who adamantly opposed abortion rights on religious grounds and who claimed that the advertised refusal to sell to any supporters of the President constituted religious discrimination. There are conservative leaning groups that finance this type of litigation. Perhaps such a claim would find some success, particularly with a Supreme Court that is increasingly protecting against perceived religious discrimination. No one’s religion requires that they wear a MAGA hat when they go out for a drink, but there are individuals who profess that their religious beliefs require the support of one candidate over another. So far, we’ve been talking about publicly advertised or announced statements that only offers from one or the other side of the aisle would be accepted. Even though the fair housing laws do not protect against political discrimination, we’ve seen how such announcements or advertisements could be problematic if challenged based on their disparate impact on members of legally protected groups. But suppose the sellers do not make public their intention to pay attention to political affiliations. Suppose they simply elect when the time comes to reject the offer from the supporter of a political adversary and to accept instead a lower offer from a buyer whose political beliefs align with theirs. In such a case, they might very well end up in the position of the New York City bar that prevailed against the man in the MAGA cap. Just as a seller would be free to reject a buyer that the seller disliked, the seller could legally reject an offer from a buyer whose politics the seller disliked—as long as the rejected higher offer did not come from someone who could claim to be have discriminated against based on protected attributes such as race, religion, national origin or sexual preference. From the perspective of the Realtor®, it would be best to treat all prospective buyers equally and not to participate in or to communicate limitations based on political affiliations. If the seller then chooses to be influenced by political considerations in choosing which offer to accept, that is just another sign of the times.

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Notes from the MAR Legal Hotline

BY JUSTIN DAVIDSON, ESQ., Government Affairs Director & General Counsel

CATHERINE TAYLOR, ESQ., Associate Counsel

JONATHAN SCHREIBER, ESQ., Legislative & Regulatory Counsel Attorney

Q. Is the agent who first showed the property to the buyer entitled to compensation?

A: Maybe. For transactions involving properties listed in the MLS, the agent who is the procuring cause is entitled to compensation once the transaction has closed. A broker is regarded as the procuring cause if it was his or her efforts that laid the foundation on which negotiations resulting in the sale began. The broker’s efforts cannot be interrupted by a break in continuity. Determining procuring cause requires a nuanced analysis of several factors and must be determined on a case-by-case basis. No one factor alone is determinative. Furthermore, there is no “threshold rule” that dictates that the agent who first showed the property is the procuring cause. Disputes related to procuring cause that brokers are unable to resolve themselves must be submitted to Realtor® sponsored arbitration. Procuring cause disputes submitted to arbitration will be resolved by a panel of Realtor® members who will consider some of the following questions:

■ Were any agency disclosures made? When? ■ Was there any buyer representation agreement? Was it an exclusive agreement? ■ How was the first introduction to the property made? ■ When was the first introduction to the property made? ■ What subsequent efforts were made by the broker/agent? ■ Was contact with the buyer maintained by the original broker/agent? ■ Did the original introduction of the buyer to the property start an uninterrupted series of events leading to the sale? ■ Were there any interruptions? ■ Did the buyer terminate the relationship with the agent? Why? ■ Was there interference in the relationship? ■ Did the buyer seek to freeze out the buyer agent? ■ Did the seller act in bad faith to deprive the agent of the commission? The full Arbitration worksheet can be found by searching for ‘NAR Arbitration worksheet. Realtors® must always remember to never let a compensation dispute interfere with the transaction. Disrupting an otherwise successful transaction with a commission dispute may lead to both an ethics complaint and a licensing complaint.

Q. My seller has received multiple offers on their home, and one has an escalation clause – how does that work?

A: Escalation clauses are sometimes used by buyers to make their offer more appealing to the seller, especially in a competitive market. An escalation clause is a provision that is added to a buyer’s offer that allows the offer price to increase by specified increments if there is a competing offer. Escalation clauses can be helpful in multiple offer situations, but prior to using one a buyer should be carefully counseled on the pros and cons.

As a Realtor®, it is critical to understand the components of an escalation clause regardless of whether you are representing a buyer or a seller. The components include the original offer, the amount by which the buyer is willing to escalate his or her offer, the total amount that the buyer is willing to offer (the “cap”), and information about how the buyer will cover the cost differential in the escalated offer. To trigger the escalation clause, the seller must have received

a higher bona fide offer from a competing buyer. A bona fide offer is an offer that is made in good faith and is legitimate and enforceable. At the buyer’s request, the seller must provide documentation to the buyer of the other offer. A seller may refuse to accept an offer that contains an escalation clause and may instead counteroffer, asking the buyer for their “highest and best.” A buyer should also be aware that using an escalation clause reveals more information to a seller than a traditional offer. The seller will know the buyer’s “cap” and may use that information to their advantage in negotiations. The MAR Escalation Form (#520), requires a seller who accepts the buyer’s offer as escalated to deliver a signed copy of the Offer to Purchase with the purchase price modified to the escalated amount within 48-hours. The buyer would then sign the counteroffer. Once accepted, the parties have a binding contract and the escalation provisions terminate. Realtors® and buyer clients using an escalation clause should work closely with an attorney to ensure proper understanding and use of the escalation clause.

Written by: by Justin Davidson, General Counsel; Catherine Taylor, Associate Counsel; and Jonathan Schreiber, Legislative & Regulatory Counsel. Service 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 legalhotline@marealtor.com.

Landlord Liability for Snow & Ice Injuries to Tenants

The evolution of liability for snow and ice injuries has left many landlords wondering what they need to do to best protect their tenants and themselves. The Massachusetts Supreme Judicial Court recently shed more light on this issue, finding that a tenant was not owed damages under the implied warranty of habitability and the covenant of quiet enjoyment when the tenant was more than fifty percent liable for their injuries.

The Case, Robert Goreham v. Jose C. Martins Robert Goreham occupied the second-floor unit in a three-family property owned by the Martins. The premises had two entrances – the main entrance on the side of the building and a fire escape in the back of the building. Goreham regularly used the rear fire escape because it was easier and never complained to the Martins about the quality of snow removal. After slipping on ice in the driveway during the winter of 2010, Goreham sued the Martins and the snow plowing company for his injuries. The jury found the Martins negligent for failing to exercise reasonable care, but also found the tenant to be more responsible for the injury than the Martins, resulting in a judgment in favor of the Martins. The tenant appealed. On appeal, the court considered whether the jury’s finding of negligence required a finding that the landlords breached the implied warranty of habitability and covenant of quiet enjoyment.

The Law

A landlord has a duty to exercise reasonable care in removing snow and ice in common areas of the premises. A plaintiff who is more than fifty percent responsible for their injuries is not entitled to damages. The implied warranty of habitability requires landlords to provide rental property that meets basic living and safety standards. The covenant of quiet enjoyment protects tenants from serious interference with their tenancy through acts or omissions of the landlord that impair the character and value of the premises.

The Decision

The Supreme Judicial Court rejected the tenant’s claims and ruled that the tenant was not entitled to personal injury damages on his claim for breach of the implied warranty of habitability or the covenant of quiet enjoyment. The Court made three key findings: 1. The tenant’s use of the fire escape, rather than the main entrance, constituted “unreasonable misuse.”

2. The implied warranty of habitability applies only to significant defects in the property itself that render the dwelling uninhabitable, and, as such, does not apply to the accumulation of snow and ice.

3. Where a tenant is able to pursue damages for a personal injury under tort liability (negligence), a court will not allow recovery of damages under a contract theory (implied warranty of habitability). The covenant of quiet enjoyment applies to defects that “impair the character and value” of the leased premises. Here, because the tenant did not lose the ability to park his vehicle and the building had a second main entrance available for use, the “character and value” of the leasehold remained intact, rendering the protections of the covenant of quiet enjoyment inapplicable.

What This Means for Realtors®

This case does not modify the long-standing law in Massachusetts requiring landlords to exercise reasonable care in removing snow and ice from common areas, however, it is a good reminder of the importance of taking necessary precautions to assure tenant safety. Realtors® who work with landlords and property management companies should make sure that their clients take appropriate steps to ensure tenants have safe egress from their units when there are snow and ice conditions present. Failure to clear snow and ice may lead to liability if someone suffers a personal injury as a result of unsafe conditions in a common area of the premises.

What Happens if Your Seller Dies During the Term of the Exclusive Listing Agreement?

Have you ever encountered a situation where a seller has unexpectedly passed away during the term of an exclusive listing? The Massachusetts Court of Appeals recently addressed this question for the first time.

The Case, Newton Centre Realty, Inc. v. David R. Jaffe, personal representative Shirley Jaffee had entered into three separate Exclusive Right to Sell agreements with Newton Centre Realty for her three residential properties. During the term of the agreements, Ms. Jaffee passed away and her estate’s representative sold the properties without using the brokerage during the exclusivity period of the agreements. Newton Centre Realty then sued to collect the commissions owed under the agreements. The case addresses the question of whether the death of the seller terminates a real estate brokerage agreement.

The Decision

The court relied on well-established common law principles and held that the seller’s death terminated the agency relationship between the seller and real estate agent. Therefore, the broker was not entitled to a commission in this instance. Additionally, the court distinguished agency relationship agreements, such as listing agreements, from other contracts, noting that while the agency relationship does not survive the death of the principal there are certain situations where an agreement would survive. One key example for Realtors® is that a contract to purchase real estate is a type of agreement that does survive the death of the principal because it includes an interest in real property.

What This Means for Realtors®

If the unfortunate situation arises where a seller passes away prior to entering into a contract to sell the home, a Realtor® may not be entitled to a commission, even if the property sells during the period of exclusivity. A seller’s estate is not obligated to continue working with that brokerage, though may choose to do so. If that is the case, the brokerage should enter into a new Exclusive Right to Sell Listing Agreement with the estate’s personal representative before selling the property.

Earlier this year, NAR released its 2020 home buyers and sellers generational trends report. The report was conducted by the National Association of Realtors® Research Group. The report studied a wide variety of topics ranging from characteristics of home buyers, home sellers and their selling experience, to home selling and real estate professionals methodology.

Most Important Factors When Choosing An Agent (based on all buyers)

19%

Agent is honest and trustworthy

17%

Agent’s experience and reputation of agent

15%

Agent is a friend or family member

8%

Agent’s knowledge of the neighborhood

7%

Agent has caring personality/good listener

6%

Agent is timely with responses

Benefits Provided by Real Estate Agent During Home Purchase (process by age)

Home buyers age 22 to 29

85%

Helped buyer understand process

Home buyers age 30 to 39

61%

Pointed out faults with property

Home buyers age 40 to 54

Home buyers age 55 to 64

48%

Negotiated better sales contract terms

44%

Provided better list of service providers

Home buyers age 65 to 73

48%

Improved buyer’s knowledge of search areas

Home buyers age 74 to 94

36%

Negotiated a better price

For the full report go to: https://www.nar.realtor/sites/default/files/documents/2020-generational-trends-report-03-05-2020.pdf