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Category: Residential Real Estate Update
Real Estate Alert: Did you know…a Broker may lose out on a commission in D.C. if the Broker’s disclosure of dual representation is incomplete or inconspicuous?
On March 23, 2022, the United States District Court for the District of Columbia decided the case of Jones Lang LaSalle Brokerage, Inc. v. 1441 L Associates, LLC, D.D.C. No. 20-3687 (FYP) (“JLL v. 1441”) where a Broker lost out on a commission of almost $800k for failure to properly disclose dual representation of a Tenant and Landlord.
The D.C. Brokerage Act requires Brokers to obtain written consent of the parties to a dual representation and provides a Sample Form for consent. If the dual representation disclosure is given in combination with other disclosures or provided with other information, the disclosure must be conspicuous, printed in bold lettering, all capitals, underlined or within a separate box. D.C. Code § 42-1703(i).
In JLL v. 1441, the Landlord and Tenant did not sign the Sample Form or any separate disclosure form consenting to the Broker’s dual representation. The commission agreement between the Landlord and Broker contained an exhibit mirroring the Sample Form but the exhibit was not signed by the Landlord or Tenant. The lease contained a provision on page 51 of a 65-page lease which stated Tenant and Landlord “consent to the dual agency” and “waive any conflict of interest” but the provision was not bolded, in all capitals, or underlined. Further, the lease did not contain language that the Broker may not disclose to either client any information given to the dual representative by the other client within the confidence and trust of the brokerage relationship. For these and additional reasons, the Court found the Broker’s disclosure of dual representation was incomplete and inconspicuous, making the commission agreement void and unenforceable.
The contents of this Alert are for informational purposes only and do not constitute legal advice. If you have any questions about this Alert, please contact the Shulman Rogers attorney with whom you regularly work or a member of the Shulman Rogers Real Estate Group.
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This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
Real Estate Alert: Did you know . . . that title companies in Maryland, DC and NoVA now have to report certain cash buyers to the Financial Crimes Enforcement Network?
Real Estate Settlements Alert: New Guidance for Virginia Settlement Agents Regarding Split Settlements
Real Estate Alert – Did you know…that GCAAR released revised forms on October 1, 2021?
Did you know … that Maryland’s Wet Settlement Act requires lenders to disburse the proceeds of purchase money loans on or before the closing date?
Due to reports of lenders delaying funding of purchase money loans, Maryland’s Commissioner of Financial Regulation has recently issued guidance reminding consumer mortgage lenders that Section §7-109(b) of the Real Property Article of the Maryland Code requires lenders to disburse the proceeds of purchase money loans to the settlement agent on or before the date of closing. Lenders who fail to comply with the Wet Settlement Act are prohibited from charging interest on the loan for the first 30 days following the date of closing.
Anecdotally, we are hearing that funding delays are the result of lenders’ difficulties in verifying borrowers’ employment on the day of closing, a new requirement of many mortgage loan investors as a result of the COVID-19 pandemic. Regardless of the cause, any delays in disbursement risk violating the Wet Settlement Act, and triggering the penalties imposed by the Act. To avoid conflict between investors’ requirements and lenders’ obligations under the Wet Settlement Act, we recommend that lenders communicate with borrowers early in the process regarding the required verification of employment, so that borrowers can help facilitate a timely response from their employers.
MORE INFORMATION
For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact the Group Chair at settlements@shulmanrogers.com.
This publication/newsletter is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
Did you know…DC Recently Passed Legislation to Grant Relief to DC Residents and Businesses
In response to the financial burdens experienced by individuals and businesses because of COVID-19, DC has passed emergency legislation providing various relief for DC residents and businesses, including a moratorium on evictions and foreclosures. Recently, the COVID-19 Response Supplemental Emergency Amendment Act of 2020 (the “Act”) was enacted, which extends additional relief to residents and businesses impacted by COVID-19 in the form of a residential mortgage and commercial mortgage deferment program.
Specifically, the Act requires mortgage lenders to develop and implement a deferment plan for borrowers of residential or commercial loans. The definition of “mortgage lender” under the Act is broad, and includes just about any entity that services a residential or commercial loan for real property located in DC. However, there are a few exceptions to the definition of mortgage lender, including the Federal Home Loan Mortgage Corporation, the Federal National Mortgage Association, and the Government National Mortgage Association.
The Act also provides an exemption for property for which a mortgage foreclosure proceeding was initiated, or for which a mortgage lender exercised its right to accelerate the loan, on or before March 11, 2020. The mortgage relief provisions are set forth in Section 202 of the Act. Pursuant to Section 202, mortgage lenders that make or hold residential or commercial mortgage loans under the jurisdiction of the Commissioner of the Department of Insurance, Securities and Banking (“DISB”) must develop and implement a deferment program for borrowers that, at a minimum: (1) grants at least a 90-day deferment of mortgage payments; (2) waives any late fee, processing fee, or any other fee accrued during the pendency of the public health emergency; and (3) does not report to any credit bureau any delinquency or other derogatory information resulting from the deferral. Mortgage lenders must make applications for the deferment program available to borrowers online or by telephone, and must approve each application in which a borrower: (1) demonstrates evidence of a financial hardship resulting from the public health emergency, including an existing delinquency; and (2) agrees in writing to pay the deferred payments within a reasonable time agreed to by the borrower and the mortgage lender, or if no reasonable time can be agreed on, then five years from the end of the deferment period, or the end of the original term of the mortgage loan, whichever is earlier. The Act does not specify what documentation may be required or may satisfy the demonstration of financial hardship; however, for each application that is denied, the mortgage lender shall provide a detailed reason for the denial in the Mortgage Deferment Status Report that the mortgage lender must provide to DISB. A person or business whose application for deferment is denied may file a written complaint with the Commissioner for formal investigation.
Borrowers also have certain obligations under the Act. If a borrower receiving a mortgage deferral has a tenant (whether commercial or residential) on the property, then the borrower shall, within five days of the approval, provide notice of the deferral to any “qualified tenant,” which the Act defines as a tenant of a property owned or controlled by a person or entity receiving a mortgage deferral under the Act that has notified the landlord of an inability to pay all or a portion of the rent due as a result of the public health emergency. Furthermore, the borrower must provide a reduction in the rent charged to any qualified tenant during the period of time in which there is mortgage deferment in place. The amount of the reduction must be proportional to the deferred mortgage amount paid by the borrower to the mortgage lender as a percentage of total expenses reported to the Office of Tax and Revenue in the borrower’s 2019 Income and Expense report. The Landlord/Borrower may require the qualified tenant to repay the difference in the amount of the rent as stated in the lease and the reduced rent, without interest or fees, within 18 months, or upon cessation of the tenancy, whichever occurs first.
DISB recently promulgated information about the residential mortgage and commercial mortgage deferral program in the form of FAQs and Guidance.
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MORE INFORMATION
For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact us at settlements@shulmanrogers.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
Did you know … that the list of essential services was expanded to include “real estate services”?
As you may know, the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency (CISA) issued guidance on operations and services that should continue during the COVID-19 response to ensure the continuity of functions critical to public health and safety, as well as economic and national security. In response to the efforts of the real estate industry, on March 28, 2020, CISA released updated guidance (Version 2.0) that now includes “Residential and commercial real estate services, including settlement services” within the list of essential services. As we have previously reported, Governor Hogan has issued several executive orders setting forth various business and travel restrictions in an attempt to control the spread of the coronavirus in the State of Maryland. Those executive orders incorporate CISA’s guidance, and thus Maryland’s COVID-19-related business and travel restrictions do not apply to “real estate services.”
However, this does not mean that it is business as usual for the real estate industry. Those who perform essential services, including those who perform “real estate services,” must still adhere to all relevant public health guidance and the decisions of State and local governments. Therefore, like all essential workers, those who perform “real estate services” should gather in groups of no more than 10 people, adhere to social distancing, and practice good hygiene (i.e., frequent hand washing).
While CISA’s guidance indicates that “real estate services” includes “settlement services,” it does not provide any clarification on the types of activities that fall within the scope of “real estate services.” Neither does Governor Hogan’s Amended and Restated Executive Order issued on March 30, 2020, which requires, among other things, Non-Essential Businesses to remain closed to the general public and Maryland residents to stay in their homes or places of residence except to conduct or participate in Essential Activities. Follow up guidance from Maryland’s Office of Legal Counsel indicates that conducting real estate closings or settlements is an essential activity for one’s self or household and is a permissible reason to leave one’s home or residence. Accordingly, Maryland’s travel restrictions do not apply to those who conduct or participate in real estate settlements, or to travel to or from real estate settlements.
However, the question remains, what other activities fall within the scope of “real estate services”?
In an attempt to provide clarity to real estate professionals who do business in Maryland, Maryland Association of Realtors communicated with public officials and issued an interpretation of the Governor’s Order in the form of frequently asked questions (FAQs). The FAQs indicate that the overall intention of the Governor’s Order is for Maryland residents to stay at home. Therefore, consumers should not leave their homes to attend open houses or visit properties. In fact, there should be no open houses, and to the extent possible, consumers should “tour” homes through virtual or video tours rather than in-person tours. Although consumers should not leave their homes, real estate agents are not prohibited from travelling to meet clients at their homes, provided that they adhere to social distancing and good hygiene. Furthermore, the FAQs indicate that real estate agents should limit their contact with others in the community, and they should not take any action which makes themselves or their clients uncomfortable or which may jeopardize the health or safety of themselves or their clients. Accordingly, to the extent possible, real estate agents should engage in electronic and virtual marketing, show properties through virtual or video tours, and conduct business by telephone or video conference.
Shulman Rogers is an essential business, and we will continue to conduct real estate closings as scheduled. To that end, our office remains open for parties to real estate settlements appearing to sign documents that require wet-ink signatures and acknowledgment by a notary. However, for the health and safety of our employees and customers, we are asking that only parties who are physically required to sign closing documents (borrowers, buyers, and sellers) attend the signing appointment. If requested, we are be able to coordinate remote access to the closing for lenders, real estate agents, and any other third-party advisers representing the parties. Moreover, we continue to monitor developments in the implementation of Remote Online Notary (“RON”), and we will be working with the vendor Notarize to facilitate closings by RON where applicable.
CONTACT
MORE INFORMATION
For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact us at settlements@shulmanrogers.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
Did You Know… … that Maryland residents can travel to and from an Essential Business in order to conduct a real estate settlement?
As you may know, the outbreak of COVID-19 has resulted in the issuance of several Executive Orders by Governor Hogan. Today, Governor Hogan issued a stay-at-home order (Executive Order 20-03-30-01) that requires, among other things, Non-Essential Businesses to remain closed to the general public and Maryland residents to stay in their homes or places of residence except to conduct or participate in Essential Activities, which includes obtaining necessary supplies or services for one’s self or household.
Shulman Rogers is considered an Essential Business, and as such, our office remains open and we will continue to conduct real estate settlements. All staff that are not essential to the completion of real estate closings are working from home, to limit the number of individuals in our office space. Our office is closed to the public, except for parties to real estate settlements appearing to sign documents that require wet-ink signatures and acknowledgment by a notary.
Maryland’s Office of Legal Counsel has indicated that persons leaving their homes to go to and from an Essential Business is permissible under the Governor’s Order issued March 30, 2020. Specifically, Section II.b.i. of the Order defines Essential Activities as “obtaining necessary supplies or services for one’s self or household.” According to the Office of Legal Counsel, a real estate closing is an essential activity for one’s self or household, and is a permissible reason to leave one’s home or residence.
Accordingly, our office remains open for parties to real estate settlements appearing to sign documents that require wet-ink signatures and acknowledgment by a notary.
We will be working with the vendor, Notarize, to facilitate closings by Remote Online Notary (“RON”). Borrowers/Buyers should confirm that their lenders will permit loan documents to be signed electronically via RON. If the lender will not permit the Note and Deed of Trust to be signed electronically, then your closing cannot be completed via RON, and an in-person signing appointment will be necessary. We continue to monitor developments in the implementation of RON.
CONTACT
MORE INFORMATION
For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact us at settlements@shulmanrogers.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
Residential Settlements Team Continues to Conduct Real Estate Closings
Our firm is considered an essential business, and we will continue to conduct real estate closings as scheduled. All staff that are not essential to the completion of real estate closings are working from home, to limit the number of individuals in our office space. Our office is closed to the public, except for parties to real estate settlements appearing to sign documents which require wet-ink signatures and acknowledgment by a notary. Maryland’s Office of Legal Counsel has indicated that persons leaving their homes to go to and from an Essential Business is permissible under the Governor’s Order issued March 30, 2020. Specifically, Section II.b.i. of the Order defines Essential Activities as “obtaining necessary supplies or services for one’s self or household.” According to the Office of Legal Counsel, the settlement of real estate is an essential activity for one’s self or household, and is a permissible reason to leave one’s home or residence.
We are committed to doing our part to protect the health and safety of our customers, employees, and communities during the novel coronavirus (COVID-19) outbreak. To that end, we are asking that only essential parties to the signing attend the signing appointment (Borrowers, Buyers and Sellers) and that everyone attending a signing appointment adhere to the following guidelines:
Prior to the signing appointment, we ask that everyone attending a signing appointment consider the following questions:
- Have you or anyone in your household had any cold or flu-like symptoms, such as fever, cough, or shortness of breath, within the last 14 days?
- Have you or anyone in your household been in contact with anyone diagnosed with or suspected of having COVID-19 within the last 14 days?
- Have you traveled out of state in the last 14 days? Will you be coming from another state to attend closing?
- Do you have any reason to believe that you may have been exposed to COVID-19 while you were traveling domestically or internationally within the last 14 days?
- Are you at higher risk for serious illness from COVID-19? (for more information, click HERE.
If a client answers YES to ANY ONE of these questions, we are requesting them to contact the us for details about how we can help with the coordination of their closing.
We are ready, willing and able to allow remote access to the closing for lenders, real estate agents, and any other third-party advisers representing the parties, but those third-party advisers may NOT come to the signing appointment.
At the signing appointment, we are asking that everyone use good hygiene and other preventative measures to prevent potential spread of germs. We recommend that they:
- Follow prevention and preparation guidelines from the Centers for Disease Control and Prevention, which are available HERE.
- Do not shake hands.
- We will provide new pens for your use at settlement, and ask that you do not share pens. These pens are yours to keep after settlement, or will be disposed of. You are, of course, welcome to bring and use your own pen.
- Wash your hands before and after the appointment with soap and water for at least 20 seconds.
- If soap and running water are not available, use an alcohol-based hand rub that contains at least 60% alcohol.
- Avoid touching your eyes, nose, or mouth with unwashed hands.
- Avoid close contact.
CONTACT
MORE INFORMATION
For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact us at settlements@shulmanrogers.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
Did you Know… that Banks are Experiencing Wire Room Delays as a Result of COVID-19?
As you may know, any funds required for a real estate transaction must be “good funds,” meaning that the funds must be deposited in the settlement company’s escrow account at the time of closing and immediately available for disbursement after settlement is complete.
Recently, we have received reports of wire room delays from all banks. Under normal conditions, wires can be processed and received within the hour; however, as a result of COVID-19, we are now seeing delays of at least 4-6 hours. It is our understanding that these delays are due to the fact that banks may be working with a reduced staff, and employees may be working remotely. Practically speaking, this means that anyone who needs to bring funds to settlement (typically, buyers and borrowers) should take the potential delay into account, and plan to send out their wires further in advance of closing. Moreover, they should call their bank to inform the bank that the funds are for a real estate closing, and to request prioritization of the wire. Again, the requirement to deliver “good funds” means that the funds must be received in the settlement company’s escrow account at the time of closing, so that the funds can be disbursed immediately after the settlement is complete.
Sellers may also experience a delay in receiving funds wired by the settlement company. If sellers are using the sales proceeds from the sale of their current home towards the purchase of a new home, they should take this potential delay into account when scheduling the closing for their purchase transaction to allow sufficient time for wire processing. They should also give advance notice to the settlement company handling their sale so that the wire for the sales proceeds can be prioritized.
CONTACT
MORE INFORMATION
For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact us at settlements@shulmanrogers.com.
This publication is for informational purposes and does not contain or convey legal advice. The information herein should not be used or relied upon in regard to any particular facts or circumstances without first consulting a lawyer.
Did you know that the DC Council recently passed a bill that will increase recordation and transfer taxes to 5% on certain commercial transactions?
Did you know that the DC Council recently passed a bill that will increase recordation and transfer taxes to 5% on certain commercial transactions? B23-0209 (the “Fiscal Year 2020 Budget Support Act of 2019” or the “Bill”) will increase transfer and recordation taxes from 2.9% to 5% on commercial transactions of $2 million or more. The tax increase will apply to both direct transfers of commercial property by deed and to transfers of economic interests in certain entities that own commercial property in D.C. Additionally, the recordation tax payable on applicable Deeds of Trust will increase from 1.45% to 2.5%. The Bill was unanimously approved by the D.C. Council at the Final Reading on June 18, 2019. Next, the Bill will be sent to the Mayor for consideration. It is anticipated that the Mayor will sign the legislation given that the Mayor’s FY 2020-2023 budget and financial plan included a proposal to increase recordation and transfer taxes on commercial transactions of $2 million or more in order to increase funding for affordable housing. Additionally, the Bill must go through a 30-day congressional review period. If Congress does not withhold its approval, then the Bill will become law. The effective date will be October 1, 2019. For a copy of B23-0209, click here.
If you have any questions, please don’t hesitate to contact us.
CONTACT
MORE INFORMATION
For more information regarding our Residential Real Estate Settlements Group or our general real estate transactions and litigation practice, please contact the Group Chair at settlements@shulmanrogers.com.
