MAR pursues Agency Responsibility Act

REALTOR® associations across the country have been working to establish minimum service
requirements in their respective states. As a result, MAR dispatched a task force to review Michigan’s statutory scheme and see if such legislation made sense for us. After several months of discussion with two state legislators (in consultation with the MAR Public Policy
Committee, staff, and legal counsel), a pair of bills called the Agency Responsibility Act has been introduced.

This package, consisting of House Bills 4849 and 4850, establishes minimum performance requirements for agents acting as fiduciaries in the state of Michigan. Specifically, HB 4849, which has been introduced by Representative Tonya Schuitmaker (R-Lawton, and featured in this month’s “Legislator Profile”) to amend Section 2512 of the Occupational Code and to require brokers entering an exclusive agency relationship to, at minimum, fulfill the following obligations:

• When representing a seller or lessor, marketing the client’s property in the manner agreed upon in the service provision agreement.
• Accepting delivery and presentation of offers and counteroffers to buy, sell, or lease the client’s property or the property the client seeks to purchase or lease.
• Assisting in developing, communicating, negotiating, and presenting offers, counteroffers, and related documents or notices until a purchase or lease agreement is executed by all parties and all contingencies are satisfied or waived.
• After execution of a purchase agreement by all parties, assisting as necessary to complete the transaction under the terms specified in the purchase agreement.
• Furnishing, or causing to be furnished, a complete and detailed closing statement as required by R 339.22311 of the Michigan administrative code.

Note the important distinction: These elements only become requirements when someone enters into an exclusive agency relationship. Any number of services traditionally related to the sale of real estate can be divided up and/or provided by any real estate licensee. Obviously, this legislation only ensures that contracting to become an agent necessitates performing the attendant responsibilities and fiduciary duties required of agents.

Michigan has always had a heavily regulated real estate market with many rules and statutes devoted to protecting consumers, but it was only after a thorough discussion with our legal counsel that our task force realized almost all of the rules listed in our “red book” could be avoided simply by the avoidance of one phrase. For example, by not “receiving offers,” it is possible for even an unscrupulous agent to avoid liability while shelving a number of fiduciary and regulatory obligations. Our task force and board of directors believe that this industry needs to have these consumer protections that have become well-known to the public and practitioner for nearly a century. Rep. Schuitmaker has introduced this bill to ensure that this technicality does not result in the kind of violations she ruled on while serving on Michigan’s Board of Real Estate Brokers and Salespersons (BREBS), an entity created for the expressed purpose of punishing unethical and illegal activity.

House Bill 4850, introduced by Rep. Kevin Green (RWyoming), amends the agency disclosure form by inserting the service provision requirements stated in HB 4849 under the subheading titled “Seller’s Agents.” MAR is currently working with House Committee on Regulatory Reform Chair Tory Rocca (R-Sterling Heights) and other members of the committee to gain support for this legislation. We are hopeful that positive developments will begin to take place later this summer or early fall.

It may be worth noting that legislation in other states known as minimum service requirements have caused some unrest with media sources, discount brokerages, and bureaucrats in the United States Department of Justice (DOJ). Most of these statutory schemes are far more
aggressive and stringent about the various business models available in their respective state; however, they should have little to do with our legislative success here in Michigan. MAR has reviewed articles and editorials in several publications describing minimum service requirements in real estate as “blocking potential competitors to the traditional real estate business model.” The DOJ even went so far as to take an advocacy role in lobbying the Oklahoma state legislature and the Texas real estate commission in the hopes of defeating their requirements.

Nevertheless, the heavy lobbying attempts were defeated in Oklahoma, Texas, and other states that have recently adopted the requirements, but the fundamental difference in Michigan’s statutory framework, to say nothing of our unique goal, should obviate any motivation for such federal efforts during the passage of this package.

To learn more about how the Agency Responsibility Act will impact REALTORS®, be sure to read this month’s “Legal Lines.”

WPW Issue Attempts A Comeback

August’s “Capitol Report” highlighted the Single Business Tax (SBT) restructuring plan announced by House Republicans to counter the proposal offered by Governor Granholm several months ago. The heart of the plan addresses the concerns raised by manufacturing and others in the business community by lowering the SBT rate from 1.9 to 1.7 percent, eliminating the health care add-back and providing some much-needed relief from the personal property tax.

In order to broker a compromise with the administration and House Democrats, the House Republicans offered to eliminate approximately $100 million in “tax loopholes” and expenditures. To this end, the House Tax Policy Committee and its chairman, Fulton Sheen (R- Plainwell), held a series of committee meetings throughout the summer to take testimony on the alleged loopholes. Among the tax policies discussed would be the elimination of calculating
“loss” due to vacancy when determining the taxable value on commercial rental property — or as it has come to be known, the “WPW” issue.

As you may recall, MAR formed a task force of commercial members to look closely at the currently proposed legislation. The task force recognized a benefit to commercial landlords in allowing a “loss” due to vacancy, especially in depressed markets found in many of Michigan’s urban cores. Current law provides incentives to invest in existing commercial properties — especially when weighed against the other state benefits for investing in brownfields — and
select areas of the state. The task force concluded that there may be an opportunity for a “win-win” situation if the legislature can provide greater certainty that local assessors will grant losses when commercial buildings experience an increase in vacancy.

To that end, MAR staff continues to meet with members of the House Tax Policy Committee on language that would ensure the preservation of the loss provision, while at the same time addressing some of the concerns raised by local governments.

MAR’s Website Offers Redesigned Current Legislation Page

MAR recently unveiled a redesigned “Current Legislation” webpage that offers members a source for the latest information on legislation impacting REALTORS® and the real estate industry. This page was designed to reflect the work accomplished by the MAR Public Policy Committee by presenting legislation that is supported or opposed by MAR. Links to www.michiganlegislature.org are provided for each bill in order to view in-depth legislative analysis and history. We are pleased with the potential this new page offers, and we hope that you find it useful. It is available at:
www.mirealtors.com/advocacy/legislation.html.