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Texas Real Estate Brokerageand Law of Agency, 6th Edition

FEDERAL LEGISLATION AFFECTING REAL ESTATE

BROKERS--PART I

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Chapter 11

Introduction

• Federal law imposes requirements on brokers,

• Including requirements to properly represent facts that could otherwise cause damage to a purchaser.

• There is liability even though there is no fiduciary relationship with purchaser.

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Introduction

• Recent expansion requires that brokers need to keep current with legal developments that may impose new or potential legal duties and liabilities.

• Liability now extends to negligence, negligent misrepresentation, fraud, innocent misrepresentation, conspiracy, failure to exercise due diligence, and disclosure

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The Real Estate Settlement

Procedures Act (RESPA)

• Originally enacted to correct abuse from high settlement or closing costs.

• “Good faith” estimates of closing costs and special information booklets

• GFE of closing costs provides for “tolerances” for variations of those costs

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Two New HUD-1 and HUD-1A Forms

• Rules require loan originator to cure any violation by reimbursing borrower any amount that exceeded the 10% tolerance– Busby v. JRHBW Realty, Inc  

• Section 2607 of RESPA prohibits the giving or acceptance of any kickback fee – charges for services actually performed only

• CLOs

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Exceptions to the Application of RESPA

• farms of 25 acres or more• home equity line of credit

transactions• modification of existing obligations• “bridge” loans

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Exceptions to the Application of RESPA

• assumptions, if no lender approval is required

• temporary financing like a construction loan

• secondary market transactions

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“Final Rule” Addressing CBAs

• Statement of Policy 1996-1 – Computerized Loan Origination

(CLOs)  

• Statement of Policy 1996-2– Sham Affiliated Business

Arrangements (AFBAS)

• Statement of Policy 1996-3– Rental of Office Space, Lock-outs,

and Retaliation© 2015 OnCourse Learning

SECURITIES AND EXCHANGE COMMISSION

(SEC)• SEC regulates certain forms of land use,

which involve securities, investment contracts, or sales of equity interests

• SEC has been very effective in regulating REITs, real estate syndications, and certain types of condominium offerings

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Foreign Investments Real Property Tax Act (FIRPTA)

• FIRPTA was originally enacted to eliminate tax advantages for foreign investors– The statute requires withholding by the

purchaser of 10 % of the proceeds to the sale of a U. S. real estate interest by a foreign entity

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Truth in Lending Act

• TILA is administered by the Fed Board of Governors– Regulation Z (Reg Z) requires

disclosures that enable the consumer to see the total dollar payments for life of the loan and total finance charges broken

– TILA also deals with certain elements of broker advertising and disclosure of assumeability of loans

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Land Use Legislation

• The National Flood and Insurance Program

• Endangered Species Act • Safe Drinking Water Act • Clean Water Act

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Land Use Legislation

• Comprehensive Environmental Response Compensation and Liability Act (CERCLA)

• National Historic Preservation Act

• Zoning Coastal Management © 2015 OnCourse Learning

The Taking/Condemnation

Issue• Excessive land use restrictions

can be considered a compensable “taking”– Nollan v. California Coastal Commission– Dolan v. City of Tigard– Lucas v. South Carolina Coastal Council– Kelo v. City of New London– Matcha v. Maddox, -Galveston– Severance v. Patterson, - Galveston© 2015 OnCourse Learning

Wetlands Legislation

• Provisions of the Clean Water Act – regulates activities in wetland areas

through the Corps of Engineers with oversight by the EPA

– permits for discharging dredged or filled materials into navigable waters (which are defined very broadly)  

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Definition of Wetlands• Those areas that are saturated by a

surface or ground water at a frequency sufficient to support, and that under normal circumstances do support, vegetation typically adapted for life in saturated soil

• Wetlands generally include swamps, marshes, bogs, and similar areas, but many other areas have been designated as wetlands.

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The Endangered Species Act

•  The federal Endangered Species Act protects any species of animal or plant life declared to be endangered

• Prohibits taking of a protected species’ habitat, which includes harassing protected animals or disturbing their environments– There are both civil and criminal

remedies © 2015 OnCourse Learning

Underground Storage Tanks• Hundreds of thousands of storage

tanks are buried all over the U. S. • Many are leaking hydrocarbons and

lead contaminants into the soil• City, state, and federal governments

have enacted courses to give protection against the danger to the environment

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Asbestos• Asbestos is a white, fibrous mineral

that is found in about 20 % of our older public and commercial buildings – insulations, sidings, roofing shingles, and

floor coverings– Use has been limited since the 1970s

• Exposure can lead to illness and death– cancers and tumors, scarring of the lungs,

and thickening of the lung lining membranes

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Lead-Based Paint

• EPA has issued rules concerning lead-based paint disclosures

• Contract addendum available for use with TREC-promulgated forms– A copy is shown in Figure 11-2.

• The rule does not require testing, removal or abatement – just disclosure

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Lead-Based Paint

• The statute targets housing built prior to 1978 and does not cover the following:– housing built after 1977– zero bedroom units– leases for less than 100 days– houses exclusively for the elderly

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Lead-Based Paint

• Not included:– housing for the handicapped – rental houses that have been inspected

by a certified inspector and found to be free

– foreclosures– renewals of existing leases in which the

landlord has previously disclosed all information

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Chlorofluorocarbon (CFC)

• A chlorofluorocarbon (CFC) is an organic compound that has been used in refrigerants, propellants (in aerosol cans), and solvents

• They have been found to be ozone-depleting

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Electromagnetic Fields (EMFs)

• EMFs are created by the flow of electric current through wires

• They occur in the wiring of household appliances and in high-voltage power lines– early studies reported a possible

association between the elevated risk of childhood leukemia and proximity to residential power lines

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Comprehensive Response, Compensation, and Liability

Act (CERCLA)

• CERCLA originally enacted in response to environmental and public health hazards imposed by hazardous waste– intended to effect prompt abatement of

health and environmental risks from leaking hazardous waste dumps and releases of toxic substances

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CERCLA

• The statute created a “super fund” to be utilized to clean up certain waste sites that have been designated “Superfund Sites.”

• Created liability for literally all parties in the chain of title, like the truck driver and any owner in the chain of title, regardless of their knowledge of the hazardous waste deposit.

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