Legal Action Fund Legal FAQ Legal Hotline

Frequently Asked Questions

Is earnest money required for a buy-sell agreement to be valid?

No.  While it was originally believed that earnest money was necessary from the buyer to constitute a binding contract, courts have determined that is no longer the case.  Therefore, a party may have a valid binding contract even though both the buyer and the seller have mutually agreed that no earnest money will be paid.

 However, to the extent, the buyer and the seller have agreed that earnest money is required, but the buyer has not deposited that earnest money within the applicable deadline, language in all buy-sell agreement permits (but does  not require) the seller to terminate the agreement. 

Can property be marketed while the earnest money is in dispute?

One of the remedies available to buyers and sellers pursuant to the buy-sell agreement is specific performance.  In the event that either party intends to pursue this remedy, an agent should not attempt to replace property back on the market.  If, however, specific performance is not a remedy which has been requested by either party, and no lis pendens has been filed, a seller is free to market the property as the dispute merely involves the disbursement of earnest money.

May a buyer agent provide forms to an unrepresented seller?

All MAR members authorized to use the MAR forms should strive to limit use of the forms for the clients they represent.  However, providing an unrepresented seller MAR forms on behalf of a buyer the member represents is not inconsistent with MAR policies on the use of MAR forms.  However, the agent should clearly explain to the seller that the offer is being submitted to the seller by the agent on behalf of the buyer and that the agent in no way represents the seller.

Is use of the MAR forms permissible when acting as a statutory broker?

Yes. The MAR forms policy states that a member of MAR is entitled to use the MAR forms in connection with a transaction in which the member is involved as a real estate agent, property manager or a principal (i.e., buyer, seller, lessor or lessee).  Acting as a statutory broker, even though the member does not represent either side and merely acts as a facilitator of the transaction, is still a transaction in which the member is involved.  Therefore, the member is able to use MAR forms even when such member acts merely as a statutory broker.

How should agents handle disputes concerning earnest money?

Both the law and the buy-sell agreement are very clear as to the obligations imposed upon holders of earnest money.  If a real estate licensee has the earnest money in the licensee’s trust account and are made aware of a dispute concerning that earnest money upon termination of a buy-sell agreement, the licensee is obligated to hold that earnest money until the parties have submitted written instructions concerning disbursement of the earnest money or the licensee has placed the funds into a court of law pursuant to an interpleader action. 

Regardless of how strongly a licensee may feel that one party or the other is entitled to the earnest money, under no circumstances should the licensee disburse that earnest money without the agreement of both parties in the event of a dispute concerning that earnest money.

What is required for lead-based paint disclosure?

MAR forms relating to lead-based paint, which were drafted based on the EPA suggestion, work in conjunction with one another. The first of these forms, the Disclosure, is designed for use in any transaction in which the lead-based paint requirements apply (i.e., residential property built before 1978). The Disclosure is given to the buyer, detailing the seller's knowledge about the existence of any lead-based paint hazards or inspections, and providing the buyer the opportunity of taking advantage of a 10-day inspection contingency, or to waive that right. If a buyer desires to take advantage of the contingency, that is when the second document, the Contingency Form, comes into play. This Contingency Form is designed to large extent like the existing Inspection Addendum and provides the necessary language creating a contingency, which allows the buyer to conduct a hazard inspection and remove himself from the transaction if it is not approved. If a buyer elects on a Disclosure Form to waive the contingency, the Contingency Form is not utilized.

Concerning the timing of the lead-based paint disclosure and documents, it is a literal violation of federal law for the seller to provide the disclosure and applicable documents after accepting an offer from a buyer.  However, the EPA and HUD have agreed that this practice is acceptable if a buyer contractually has an unconditional right to unilaterally cancel the agreement for 3 days after the lead disclosures are delivered or 5 days after the disclosures are mailed.  The MAR Residential and Farm & Ranch Buy-Sell agreements have language stating that a buyer has the unconditional right to cancel the agreement (without risk of loss or other adverse effects) within three (3) days after electronic or hand delivery of the lead-based paint documents, or five (5) days after deposit of the lead-based paint documents in the mail. 

Is a seller agent obligated to disclose the existence of a group home?

Probably not.  State and federal law prohibit a real estate licensee from discriminating against persons with disabilities.  Therefore if the group home consists of individuals who may be protected under state or federal law (e.g. race, color, religion, national origin, sex, disability, and familial status) applicable law prohibits a listing agent from affirmatively disclosing the existence of such a group home.

 

Is a seller agent obligated to disclose a back-up offer?

While a seller agent has an obligation to present all offers to a seller, there is no affirmative obligation imposed on a seller agent to disclose to a buyer in primary position that there is an offer in a backup position.  Of course, it may be advantageous to do so as the buyer in primary position may be less willing to seek concessions from the seller.  Notwithstanding the foregoing, Standard of Practice 3-6 does require that a seller agent disclose to a broker seeking cooperation the existence of accepted offers on the property.  Therefore, the seller agent would be required to disclose to agents representing potential buyers if the seller had already accepted another offer.

Is a mold disclosure required in all transactions?

Montana law concerning mold can be broken into two separate sections.  The first section states that a seller may disclose the possible existence of mold in and about the property.  While this disclosure is not mandatory, a seller who does so (and the seller’s agent(s)) is absolved of any liability for the subsequent discovery of mold.

 The second part of Montana law concerning mold states that a seller or seller agent must disclose the known presence of mold and provide any documents relating to the testing, remediation or mitigation of the mold.  Therefore, to the extent that a seller has tested for mold and/or has taken steps to mitigate or remediate the mold, that information and any documentation related thereto must be provided by the seller to any prospective buyers.

How may a purchaser of real property remain anonymous?

The best way for a purchaser to remain anonymous is for the purchaser to set up a limited liability company, which will be wholly owned by the purchaser or purchasers, and appoint a manager with the authority to act on behalf of the limited liability company to sign documents.  Information concerning the ownership of limited liability companies in Montana is not public unless the limited liability company is managed by the members.  However, if it is managed by a manager the only person who would be known as to the limited liability company would be that manager.

 Another alternative is to have a strawman buyer who would then assign the property to the true purchaser after closing.  However, this becomes difficult if there is financing involved and can be problematic if the strawman buyer refuses to transfer the property to the intended purchaser after closing.

What does Montana’s version of Megan’s require of real estate agents?

MCA § 37-51-105 states as follows:

           The responsibility of a broker or salesperson with respect to sexual or violent offender registration information maintained by a governmental entity under Title 46, Chapter 23, Part 5, is limited to the disclosure of:

    1) the fact that the information may be maintained and by whom; and

    2) the actual knowledge, if any, that the broker or salesperson has of sexual or violent offender registration information that pertains to the property in question.

 Thus, to meet the requirement of the first subsection, the broker should disclose to a prospective buyer that this kind of information is available and where this information is located. The sources of such information include Federal Probation Department, Montana Department of Justice, and local county sheriff's offices.  This obligation is covered by language that is in all MAR buy-sell agreements.  To meet the requirements of the second subsection, if the broker has actual knowledge of the presence of a registered sexual or violent offender that pertains to the property, that information must be disclosed to the prospective buyer as well.

Is a suicide or murder an adverse material fact requiring disclosure?

No.  Montana law requires that seller agents disclose adverse material facts that are known to the seller agent.  MCA § 37-51-313(3)(a).  However, the term adverse material fact does not include the fact that an occupant of that property had a communicable disease or that the property was the site of a suicide or felony.  MCA § 37-51-102(2)(b).  Therefore, it is not necessary that a seller agent disclose, as an adverse material fact, that the property listed for sale has been the site of a suicide or felony.

However, and while it is not incumbent upon a listing agent to affirmatively disclose the fact that a house was the site of a suicide or murder, this does not mean that the listing agent is permitted to mislead a potential buyer if questions regarding that issue are raised. When marketing a property with this sort of history, it may be well worthwhile consulting with the seller before commencing marketing activities to see how they would prefer to deal with such questions, should they arise.

What is the proper use of a disclosure statement?

As set forth above, in Montana a seller agent is obligated to disclose any adverse material facts that concern the property and that are known to the seller agent.  An adverse material fact is defined as “a fact that should be recognized by a broker or salesperson as being of enough significance as to affect a person's decision to enter into a contract to buy or sell real property” and includes a fact that “materially affects the value, affects structural integrity, or presents a documented health risk to occupants of the property.”  MCA § 37-51-102(2)(a)

Repeated studies have shown that the leading sources of litigation against real estate agents are lawsuits alleging either misrepresentation or failure to disclose a material fact brought by buyers against the seller and all real estate agents involved in the transaction.  Court decisions from around the country strongly suggest that disclosure forms – when used properly – are an effective tool in reducing the cost of litigation filed against real estate agents.

While proper use of the MAR disclosure statements can reduce liability for MAR members, improper use may increase the risk of a lawsuit.  For example, a licensee should never complete the owner’s disclosure form for a seller. This avoids claims by the seller that the seller agent filled out the disclosure form out improperly.  Additionally, the disclosure form should never be used to advertise or market the amenities of the property listed for sale by the agent including any remodeling, improvements or other upgrades to the property.  While Montana law does not require that a seller agent verify any statements made by a seller, an agent is obligated to avoid exaggerating or misrepresenting facts about the property. Using the disclosure statement to represent benefits or amenities of a property increases the risk that a seller agent could be held responsible if the features listed are not as represented.

Use of the disclosure statements is an effective tool to shield real estate agents from claims by buyers of misrepresentation or failure to disclose. However, the forms must be used properly and for the intended purpose of disclosing adverse material facts concerning the property.

What happens if a buyer or seller dies before closing?

If a seller dies and the seller is under contract to sell real estate, it is likely that the buyer could legally seek to have the seller’s estate perform the buy sell and transfer the property to the buyer for the agreed upon purchase price.  The seller’s death does not extinguish the obligation to perform under the buy-sell agreement and there is express language in all MAR buy-sell agreements that states that the agreement is binding on the heirs, successors, and assigns.

 However, a buyer who dies creates a bit more of a problem.  Specifically, if the buyer was financing the purchase it is likely that the financial institution will be unwilling to lend the money to the state.  A seller might be entitled to retain the earnest money and might be able to sue the buyer’s estate for damages relating to the failed sale.  However, a buyer’s performance may be excused based on impossibility. 

What is the difference between a contract for deed and a trust indenture?

Both a contract for deed and a trust indenture are vehicles by which a seller can provide financing to allow a buyer to purchase property.  While there are a number of differences, the primary difference between a contract for deed and a trust indenture is that in a trust indenture property is conveyed to the buyer at closing and then the buyer conveys that property to a third party, known as the trustee, in trust as security for the buyer’s payment of the promissory note to the seller.  Generally speaking, a trust indenture is a lien against the property with the buyer being the legal owner.

 In a contract for deed, a contact is executed between a seller and a buyer whereby a seller agrees to transfer title to the property once the amount set forth in the contract has been paid in full.  In a contract for deed, the seller retains legal title until the contract is paid and the buyer has equitable title.  To reflect this a warranty deed is not recorded transferring a property from the seller to the buyer at closing.  Instead, that deed is held in escrow until the contract is paid in full.

May a seller unilaterally terminate an offer in a back-up position?

Probably not.  Although the binding effect of a backup offer is not as strong as a primary offer, only the buyer has the contractual right to terminate.  Specifically, the MAR Back-Up Offer Addendum expressly provides that until the buyer has received written notice that the buyer in backup position is now in primary position, the buyer may cancel or terminate the buy-sell agreement.  However, there is no corresponding right in favor of the seller.

May a seller modify the terms of an offer in primary position while there is a backup offer?

The term days always means calendar days.  Days are never business days unless a document expressly states “business days.”  When using time in a document (for example, “72 hours”) all calendar days are included when counting the hours.

Is a buyer’s consent is needed for a seller to assign the seller’s interest in a buy-sell agreement?

No. In general, contracts are freely assignable by either party to a contract unless the contract states otherwise.  In all MAR buy-sell agreements there is a prohibition against the buyer assigning the buyer’s interest in the agreement without first obtaining the seller’s written consent.  However, the seller is free to assign the seller’s interest in the contract without having to obtain the buyer’s consent.

What language should be used if a buyer desires to assign the buyer’s interest in a buy-sell agreement?

As set forth above, all MAR buy-sell agreements contain a clause that prohibits assignment by a buyer.  A buyer may eliminate this prohibition by striking the language prohibiting assignment or by including language in the additional provision section stating that the buy-sell agreement is freely assignable notwithstanding language contained in the agreement to the contrary.  While simply placing the words “and/or assigns” at the beginning of a buy-sell agreement is a common practice, it is arguably insufficient and can create an inconsistency in the agreement.

May a buyer or seller terminate a transaction between the deadline for the buyer to provide an inspection notice and the deadline by which a buyer and seller must reach an agreement concerning the items set forth in such notice?

No. Until the inspection contingency deadline has passed a buyer has two choices relating to the buyer’s disapproval of the condition of the property.  The buyer can terminate the transaction or the buyer can elect to attempt to renegotiate the conditions upon which the disapproval is based.  If the buyer chooses the latter, the buyer and the seller then have until the second deadline to attempt to reach an agreement.  During this time the parties are to continue to try and reach an agreement.  During this period the buyer must either (i) give the seller the opportunity to consider the renegotiated terms proposed by the buyer or (ii) withdraw the buyer’s disapproval of the conditions noted. 

Can a seller terminate a listing contract?

Generally speaking, a contract may be terminated by a party to the contract at any time.  The question, therefore, is not whether a contract can be terminated but the legal effect of doing so.  With respect to a listing contract, there is language set forth in all MAR listing contracts stating that if a seller revokes the exclusive right to list the property (i.e. terminates the contract) the broker may demand that the commission be paid immediately.  In other words, a seller is permitted to terminate a listing contract early but may assume a financial obligation for doing so.

Does a new buy-sell from a buyer to a seller constitute a rejection of the counteroffer from the seller to the buyer?

Probably. A buyer’s preparation and presentation of a new buy-sell agreement to a seller, in response to the counteroffer from the seller to the buyer, would be considered a rejection of the seller’s counteroffer.  As a result of that rejection, the seller’s counteroffer is incapable of acceptance by the buyer without the seller’s express consent.

Can an agent sign a buy-sell agreement on behalf of a client?

A seller is able to execute a power of attorney granting to another the right to make decisions concerning property that the seller has for sale.  Nevertheless, it is not recommended that a licensee act as an attorney-in-fact for the licensee’s client.  A power of attorney grants the agent a lot of discretion and authority.  It also places the agent in a situation where a potential conflict of interest might exist.  For instance, a seller unhappy with an offer might argue that the agent’s acceptance of an offer from a buyer was not analyzed on the basis of whether it was best for the seller but rather whether it was best for the agent and the ability of the agent to obtain a commission quickly.

Is it lawful to pay compensation to a licensee whose license is on inactive status?

It depends.  BRR rules state that an inactive licensee may not receive compensation for real estate activity that was not earned while the license was active.  ARM § 24.210.624.  In other words, an inactive licensee may receive compensation provided the compensation is for services rendered while the license was still on active status.

Can an out-of-state real estate licensee be paid a referral fee?

Yes. A Montana licensee may pay a referral fee to a real estate broker licensed by another state or jurisdiction (e.g. a Canadian province) provided the out of state broker does not conduct, in Montana, “a service for which a fee, compensation, or commission is paid in Montana.  See Mont. Code Ann. MCA § 37-51-306

Does expiration of a listing contract before closing affect the seller agent’s right to a commission?

Probably not. All MAR listing agreements state that a seller agent is entitled to compensation upon procuring a buyer ready and willing to purchase the property listed for sale by the seller agent.  So long as the procurement of a buyer occurs when the listing agreement is in effect it does not matter if the closing and, therefore, the date upon which payment is made is after expiration of the listing agreement.  While it is a good idea to attempt to obtain an extension of the listing until the closing date, if a seller refuses to execute such an extension it should not affect the right to compensation payable after expiration of the listing contract.

Is it acceptable for a listing agent to modify the commission set forth in the Multiple Listing Service?

Once a listing is placed in a Multiple Listing Service the listing agent must state the commission payable to cooperating brokers.  However, the listing agent is able to modify that commission as to all or a certain number of agents provided the listing agent does so in writing prior to any such agent producing an offer.  It is, therefore, possible for a listing agent to agree to pay a commission to one agent that is different from the commission an agent agrees to pay to other agents.

May a listing agent disclose information regarding an offer to a potential buyer?

No. A listing agent is prohibited from disclosing the name of a person making an offer or the amount or terms of that offer.  However, there are not similar obligations imposed upon the seller.  A seller is able to disclose the terms of any other offer and the name of the offeror if the seller desires to do so.  In fact, the Code of Ethics requires buyer agents, when entering into a buyer broker agreement, to advise potential clients that their offer may not be treated as confidential by the seller.

 In short, there is nothing that would prohibit the seller from providing the name of a buyer to another buyer or the terms of one buyer’s offer to another buyer.  In fact, in some situations, such as a right of first refusal, a seller may be obligated to disclose this information.  However, a seller agent should be careful to not be involved in any disclosure by a seller.

Can a buyer agent refund a commission to the buyer?

Yes. Under Montana law, a real estate licensee may refund or rebate all or any portion of a commission to his or her principal.  Because a buyer is the principal of a buyer agent it is acceptable for a buyer agent to refund to the buyer all or any portion of the buyer agent’s commission.  However, this refund should be reflected on the closing documents and known to any lender.

What is procuring cause?

A North Carolina court defined "procuring cause" as follows:

 

The term "procuring cause" refers to a cause originating or setting in motion a series of events which, without break in their continuity, results in the accomplishment of the prime object of the employment of the broker, which may variously be a sale or exchange of the principal's property, an ultimate agreement between the principal and prospective contracting party, or the procurement of a purchaser, which is ready, willing and able to buy on the principal's terms. Hecht Realty v. Whisnant.

 The determination of who is the "procuring cause" is wholly dependent upon the facts of a particular case. The National Association of REALTORS® suggests inquiry into several factors in determining the answer to this question. Those factors are listed in the Code of Ethics and Arbitration Manual published by NAR. Copies of this Manual are available at your local board office or online in the member's area of NAR's web site.

What is the proper signature block for an individual to sign on behalf of an entity?

Below is the format to use when an individual is signing on behalf of an entity such as a corporation, LLC, etc.:

CORPORATION, INC.

By:    (signature of individual signing)     

Its:    (insert title of person signing (i.e., president, manager, etc.))

One other thing that is strongly recommended is that licensees obtain a document, signed by the owners of the entity that states that the individual is authorized to act on behalf of the entity.  This is typically known as an authorization resolution.  Title companies will typically require this as a condition of closing. 

 

Must a seller agent obtain the signatures of all owners of a property before listing the property for sale?

A listing agreement is an agreement between a seller and a seller agent for the sale of real estate.  MCA § 37-51-102(14).  Additionally, Montana statutory law states that “it is unlawful for a broker or salesperson to openly advertise property belonging to others, whether by means of printed material, radio, television, or display or by other means, unless the broker or salesperson has a signed listing agreement from the owner of the property” and that “the listing agreement must be valid as of the date of the advertisement.”  MCA § 37-51-321(2)(a).  Based on the foregoing, the signatures of all owners of a property should be obtained before that property is listed for sale. 

Is a buy-sell signed by less than all of the sellers binding?

Probably not. The Montana Supreme Court addressed this issue in a case that arose in the case of Thorton v. Songstad.  In that case, four individuals, along with a corporate trustee were the vested owners of a particular piece of property. The four individuals signed an agreement to sell the property, but the corporate trustee did not sign the agreement. The buyer brought a claim seeking specific performance of the agreement. In discussing the situation, the Montana Supreme Court noted that the agreement anticipated that 100% ownership of the property was to be sold. Absent the signature of 100% of the owners, evidencing their consent to the sale contract, the Court held that no valid contract had been entered. As a result, the buyer's specific performance action was dismissed.

What are a seller’s remedies in the event a buyer refuses to adhere to the obligations imposed on the buyer in a buy-sell agreement?

If a buyer is in breach of a buy-sell agreement the seller has the remedies set forth in the buy-sell agreement, including, without limitation, retention of the earnest money, a suit for specific performance or a suit for damages.  While the seller has the option of suing for specific performance, that remedy might be difficult to obtain if monetary damages can adequately compensate the seller.

When is a personal transaction notice required in Montana?

The personal transaction law, set forth at MCA § 37-51-309, was changed in 2013.  This law formerly required that in order for a supervising broker and agency to be shielded from liability for the personal transaction of a salesperson that (i) a notice of personal transaction had to be provided by the salesperson and (ii) the supervising broker and real estate agency could not be “involved” in the transaction.  The statute now simply states that a supervising broker or real estate firm is not responsible or liable for the for-sale-by-owner personal transactions of a salesperson.  There is therefore no longer a requirement that the broker/agency not be involved in the transaction. 

 Therefore, under the law, as revised neither a supervising broker or real estate firm is liable for the personal transactions of a salesperson regardless of whether or not they are involved in the transaction.  The law still requires, in all personal transactions involving a salesperson, that a salesperson provide a personal transaction disclosure.  However, neither the supervising broker nor the agency is liable for the failure of a salesperson to provide this disclosure.  Since the change in 2013 it is therefore at least arguable that the salesperson may use the MLS, forms, office, etc. without jeopardizing the liability shield enjoyed by the supervising broker and his or her real estate firm.

Must a seller initial the pages of a buy-sell agreement when the seller intends to present a counter-offer to the buyer?

When a seller desires to provide a counter offer to an offer presented by a buyer, it is recommended that the seller initial all of the pages of the buy-sell agreement provided by the seller and then check the box and insert the seller’s initials in the appropriate area.  Initialing at the bottom of all pages demonstrates that the seller has reviewed and understands the terms set forth in the buy-sell agreement.

Who is responsible for a salesperson’s listings and pending transactions when the salesperson’s affiliation with a brokerage terminates?

BRR rules are clear that the supervising broker is responsible for listings and pending transactions of a salesperson.  Specifically, ARM 24.210.601(8) states that listings and pending transactions of a salesperson are the responsibility of the supervising broker upon termination of the association between the salesperson and the supervising broker.  Additionally, upon termination of the relationship between a salesperson and a supervising broker the supervising broker must immediately notify all principals as to the listings or pending transactions in which the salesperson was involved, that the salesperson is no longer affiliated or associated with the supervising broker, and that the listings and pending transactions are the responsibility of the supervising broker.  ARM 24.210.601(7)

May a real estate licensee conduct property valuations?

Yes. Montana law does not specifically require a special license or certification for a real estate licensee to conduct a valuation of real property.  However, a real estate licensee may not advertise or otherwise represent themselves as being a certified or licensed appraiser unless they have received such license or certification

May a licensee act as a statutory broker for one party to a transaction and a seller agent or buyer agent for the other party?

No. By definition, a statutory broker is one who assists one or more parties to the transaction but doesn’t represent any party to the transaction.  It is therefore not possible to be a statutory broker for one party while representing the other party as a seller agent or buyer agent.

Should an agent have a new buyer who has been assigned the buyer’s rights under a buy-sell agreement execute new relationship disclosure documents?

Probably. Unless the assignee buyer is simply an entity owned by all of the assignor buyers who assigned the buyer rights under the buy-sell agreement, the new assignee should be review and sign a relationship disclosure form.  The buyer agent should also have the assignee buyer sign a new buyer broker agreement.

May a licensee act as a statutory broker for one party to a transaction and a seller agent or buyer agent for the other party?

No. By definition, a statutory broker is one who assists one or more parties to the transaction but doesn’t represent any party to the transaction.  It is therefore not possible to be a statutory broker for one party while representing the other party as a seller agent or buyer agent.

Should an agent have a new buyer who has been assigned the buyer’s rights under a buy-sell agreement execute new relationship disclosure documents?

Probably. Unless the assignee buyer is simply an entity owned by all of the assignor buyers who assigned the buyer rights under the buy-sell agreement, the new assignee should be review and sign a relationship disclosure form.  The buyer agent should also have the assignee buyer sign a new buyer broker agreement.

Is it permissible for an agent to represent a seller when the agent is the buyer?

No. The BRR considers it unprofessional conduct for a real estate licensee to act as a seller agent in a transaction where the licensee is the buyer.  It is also unprofessional conduct for the licensee to act as a buyer agent in a transaction in which the licensee is the seller. This is clearly set forth in ARM § 24.210.641.

May a licensee represent a buyer in making an offer on a for-sale by owner property?

Yes. There is nothing that precludes a licensee from being involved in a transaction where the seller is unrepresented.  The licensee may also use the MAR forms in such a transaction.  However, the licensee representing a buyer who desires to purchase a property that is for-sale by owner should be very careful to clearly explain to the seller that the licensee is not representing the seller and therefore is unable to provide the seller any guidance or advice.

May a supervising broker supervise salespeople who are not physically located in the same office?

Probably.  BRR regulations impose requirements on a supervising broker to train and supervise salespeople.  However, there is no requirement that the salespeople be in the same office for the supervising broker to do so.  However, a supervising broker needs to analyze how effectively she or he can supervise salespeople when the supervising broker is not in the same location as the salespeople over whom they are supervising.  Therefore, while the rules do not specifically require that a supervising broker is in the same location as the salespeople being supervised, it may create additional risk for the supervising broker.

Is an active real estate license required to host an open house?

Yes.  The BRR has provided guidelines concerning what is acceptable conduct by an unlicensed sales assistant.  These guidelines may be found here.  One of the things an unlicensed sales assistant may not do is host an open house.  The unlicensed assistant may attend the open house, prepare it for showing and gather information from potential buyers during the open house.  However, the unlicensed assistant must be under the guidance and supervisions of a real estate licensee.

What is an in-house agent designate and when may it be used?

Prior to the effect of the 1995 amendments to the Real Estate Licensing Act (RELA), a concern was presented that if a broker took a listing all other brokers in his or her office were deemed the agent of the seller. This often led to a real or perceived need to act as a dual agent on in-house transactions (e.g. those transactions in which a licensee in an office took the listing and another licensee in the same office was representing a buyer as a buyer agent). In order to provide an avenue other than dual agency on transactions where the buyer agent and seller agent are affiliated with the same brokerage, RELA was amended to provide for the designation of a particular broker or salesperson in an office to serve as a "in-house seller agent designate" and another to serve as an "in-house buyer agent designate" thus avoiding the potential need to disclose or obtain consent to a dual agent relationship. The designations are made by a broker (preferably a manager or owner) in the office designating one broker or salesperson as the in-house seller agent designate and another as the in-house buyer agent designate.  Such designation can be best memorialized by a memorandum to the files detailing the designations.  After the designation and throughout the transaction, the two in-house designates, despite being in the same office, will represent the buyer and seller individually.

Unfortunately, Montana law does not provide any statutory guidance concerning what policies or procedure should be adopted by an office to take advantage of in-house designation.  At a minimum, it is likely that policies and procedures should be in place to protect information which might be deemed confidential from inadvertent disclosure. 

Is it legal for a seller to use a security camera or other recording device during showings of the seller’s property?

Probably. Sellers occasionally use using security cameras to record activity taking place during a showing of the sellers’ homes.  While there is no federal law expressly governing the use of security cameras in a home, they are presumptively permitted as long as they do not record audio. 

Similarly, Montana does not have a statute that addresses whether hidden video cameras that do not record audio are permitted.  While the Montana Constitution provides a higher level of individual privacy protection when compared to other states and the federal government, the Montana Supreme Court has stated, “What a person knowingly exposes to the public is not protected, but what an individual seeks to preserve as private, even in an area accessible to the public, may be constitutionally protected.” State v. Goetz, 2008 MT 296, ¶ 16, 345 Mont. 421, 191 P.3d 489.  Therefore, as long as devices are recording in an area that does not offend a reasonable expectation of individual privacy (i.e., it is not located in a bathroom) such devices are likely permitted in Montana. 

 However, in Montana, it is illegal to record someone’s voice without their express permission.  Specifically, it is a criminal offense to record a conversation using a hidden device unless all parties to that conversation have knowledge of the recording.  MCA 45-8-213(c).   This law clearly prohibits sellers from surreptitiously making an audio recording of buyer comments unless the buyers have knowledge of that recording.

 It would, therefore, appear that in Montana it is legal for a seller to make a video-only recording of events happening inside of the seller’s home and that it does not matter whether the camera is hidden (such as in a child’s teddy bear) or visible and obvious.  However, sellers must be certain that the recording is video only does not also record any conversations taking place in the seller’s home unless consent has been provided by all parties to that conversation.

May a licensee advertise lots for sale while final subdivision approval is pending?

Probably.  Montana law specifically allows for the sale of real estate under a contract for deed after a preliminary subdivision plat has been approved but before approval of the final subdivision plat.  See, MCA § 76-3-303.  Based on this, it appears that a licensee may enter into a listing agreement concerning a property with only preliminary plat approval.  However, the description of the property as set forth in the listing agreement should reflect the best description available, perhaps even referring to the preliminary plat which has been submitted.  The licensee should also list as a contingency that the ability to close the transaction is subject to final subdivision approval. 

What are the requirements for Internet advertising in Montana?

With respect to any advertising which is done, either pursuant to a listing contract or the consent of the listing agent, the BRR requires that certain information is provided for all Internet advertising.  This information as it pertains to Internet advertising is found in the rules adopted by the BRR, specifically ARM § 24.210.430

What information must be provided when advertising agent-owned property for sale?

Montana law states that the license of a real estate licensee may be revoked or suspended for “acting in a dual capacity of broker and undisclosed principal in a transaction, including failing to disclose in advertisements for real property the person's dual capacity as broker and principal.”  MCA § 37-51-321(1)(g).  Therefore, a Montana licensee selling his or her personally-owned property must disclose his or her status as a real estate licensee in any advertising.  Although the law is not clear, it is recommended that this disclosure in advertising be made even if the licensee owns the property with other or through a partnership, a limited liability company or other entity.

May a licensee advertise incentives or inducements?

Probably. In 2008, based on comments received from the United State Department of Justice, the Montana Board of Realty Regulation (the BRR) deleted a rule that previously stated it was considered unprofessional conduct for a licensee to solicit business by using gifts, rebates or promotional items.  There is, therefore, no law or regulation in Montana that prohibits such conduct. However, it is important to note that this amendment does not specifically state what is permissible.  Rather, it removes language stating what is not permissible. It, therefore, appears that it is permissible for a licensee to advertise, in an effort to solicit new business, certain incentives to be provided to clients who engage the services of that licensee.  Nevertheless, licensees are encouraged to consult with their own legal counsel prior to instituting any advertising program to verify that their proposed program is in compliance with applicable law.

Is notice required to be given by a landlord to enter property occupied by a tenant?

MCA § 70-24-312 states that a landlord may enter a rental dwelling in the case of an emergency, to make necessary repairs or to show the property to prospective purchasers, among other reasons.  However, if the reason for entering is other than an emergency, the landlord must give 24 hours’ notice to the tenant.  A tenant may not unreasonably withhold consent to the landlord’s right to enter the premises.  However, if a tenant does so (even unreasonably) the landlord is likely prohibited from entering without a court order except in the case of an emergency or if the tenant has failed to maintain the premises and that failure affects health and safety.

What are an agent’s rights if all of the tenants of a property will not sign a lock box agreement?

The primary purpose of a lock box agreement is to advise tenants that the property may be shown for sale and that the tenants should secure any valuables owned by the tenants that are located in the property.  There is nothing unlawful about one or more of the tenants refusing to sign a lock box agreement.  In such a situation an agent will need to decide whether she or he is willing to take the listing without having a lock box agreement signed by all tenants.  While it is permissible for an agent to do so, the agent will not have anything on file to show that all tenants acknowledged the need to secure their valuables.

Does the Montana Residential Landlord Tenant Act apply to pre-closing occupancy?

Generally speaking, the Montana Residential Landlord Tenant Act (the MRLTA) does not apply to situations in which the buyer is renting the property from the seller prior to closing and pursuant to a contract whereby the buyer will buy the property from the seller.  However, it is possible that the MRLTA could apply if the parties contractually agree to its application through a rental agreement.  If a rental agreement exists, the terms of the relationship between the parties is likely dictated by that contract and the parties and their agents should refer to that contract concerning their respective rights and obligations.

Must a property manager or real estate agent use a trust account for security deposits or rent related to property owned by the agent/manager?

The requirements related to trust accounts primarily pertain to money held by a licensee agent on behalf of others.  Therefore, rent paid by tenants on property owned by a licensee does not have to be deposited into a property management trust account.  This is because once paid the rent belongs to the licensee.  However, security deposits remain the property of the tenant until they may be legally used to pay for such things as unpaid rent, cleaning charges or damages to a rental property.  Therefore, any security deposits received by a licensee, even if pertaining to property owned by the licensee, must be placed into a trust account. 

What documentation should be provided when accepting a listing from a limited liability company or other entity?

Limited liability companies, partnerships, corporations and the like are legal entities under applicable law.  However, these entities can only act through an individual or individuals designated with the authority to act as such.  For purposes of a listing agreement, licensees should either have the listing agreement signed by all owners of the entity or have the entity prepare a resolution, signed by all the owners, granting the necessary authority to one or more individuals.

 Almost without exception title companies will require a resolution granting an individual or individuals authority to execute closing documents.  Licensees should talk to the closing agent concerning the resolution he or she desires for closing and mirror that document or amend it to also include the authority to sign all documents related to the marketing of the property.

What is the status of a listing agreement when the seller files for bankruptcy?

When a person or entity files for bankruptcy, if it is a Chapter 7 liquidation case, a bankruptcy trustee is charged with selling the assets in an attempt to maximize the money available to pay off creditors.  A listing agreement with a seller who has filed for bankruptcy is what is known as an executory contract in bankruptcy.  As such, the trustee of the seller’s bankruptcy estate has the power to either reject or assume the listing contract, subject to court approval. 

 In addition, in order for a real estate licensee to be entitled to a commission, the licensee will need to be approved and/or employed by the bankruptcy estate, with court approval, as a professional.  If a licensee is not approved, any commission due can be avoided by the powers of the bankruptcy trustee.  It is, therefore, recommend that licensee representing bankrupt sellers contact the seller’s bankruptcy attorney or the trustee in order to seek approval by the bankruptcy court.

Who is the proper party authorized to act on behalf of a trust?

Generally speaking, the trustee is the person authorized to act on behalf of a trust.  Therefore, it is generally recommended that a real estate agent obtain a copy of the trust agreement to verify that the person is, in fact, the trustee and that she or he has the authority to enter into the transactions contemplated.

Are net listings legal in Montana?

No.  Net listings are not illegal in Montana. Despite this, their use is strongly discouraged. This is due to the liability exposure involved. The liability stems from the potential for a seller's complaint, after a transaction has been closed, that the broker misled the seller as to the value of the property for the broker's personal profit.

Must a rejection to an offer be in writing?

Montana law provides that an offer may be accepted until it is either withdrawn or the offer terminates by its own terms.  An offer can terminate by its own terms when the offer contains a deadline by which an acceptance must be provided by the offeree, typically the seller.  Most offers from buyers provide that the offer expires if it is not accepted by a certain time.  Therefore, in most situations a seller’s written rejection of an offer from a buyer is not legally or contractually required.

May a party accept an offer after a party has submitted a counter offer?

No.  A counter offer is deemed to be a rejection and a new offer.  Once an offer is rejected, it is no longer capable of acceptance.  Therefore, the presentation of a counter offer in response to an offer is a rejection and cannot be subsequently accepted. 

Are terms that are set forth in the MLS binding on the seller?

Information contained in the Multiple Listing Service is an advertisement.  The terms and conditions set forth therein, including the price, are not binding on the seller.  Therefore, if there was personal property that was mentioned in the MLS as potentially transferring with the property but that personal property was not specifically provided for in the buy-sell agreement, it is unlikely that the personal property is part of the contract between the buyer and the seller.  

How is personal property transferred from a buyer to a seller at closing?

Recently, the MAR Forms Subcommittee adopted a bill of sale that is to be used, exclusively in residential transactions, to transfer personal property at closing.  However, the Bill of Sale form is strictly a document of conveyance – it is not an agreement for the transfer of personal property.  Therefore, it is not the document to be used if, for example, a lender does not want any personal property referenced in a buy-sell agreement.  If that is the case then the parties will need to create a separate purchase and sale agreement related solely to the personal property.

Is a home warranty for new homes required in Montana?

Yes.  A newly constructed residence that has not been previously occupied and where the seller is the builder or a developer who has built or had the residence built for the purpose of resale must provide a written warranty.  MCA § 28-2-2202.  This warranty must be valid for a period of at least 1 year from the date of the sale of the residence and must provide detailed descriptions of those components that are included or excluded from the warranty, the length of the warranty, and any specialty warranty provisions or time periods relating to certain components.

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