The language of law
REALTORS® advised with scenarios that affect business

Proposal A has been in effect for 10 years, and many of Michigan’s long-time homeowners are enjoying significant tax benefits because their property taxes are not being assessed on the entire value of their homes.

When one of these homeowners finally does sell his home, the real property taxes will “pop up” to the actual assessed value, sometimes catching a purchaser by surprise.

Typically, the scenario is something like this: Bob and Mary are ready to move out of their apartment and into their first home, but are on a tight budget. Their mortgage broker has calculated they can afford the $900 monthly payment on their new home, which includes $250 per month for their property tax escrow. They are subsequently notified by their lender that their monthly tax escrow in the following year will be $450 per month. They are surprised by the increase and angry no one told them this would happen. They direct their anger at the agent who helped them buy the house. Is the agent liable for nondisclosure?

It has long been our position that REALTOR® members have no legal duty to advise members of the public as to this law or any other law. This type of information is not more readily available to REALTORS® than it is to any other member of the public. In addition, as a service to consumers, MAR was involved in amending the Seller Disclosure Act form a couple of years ago to warn buyers of possible significant property tax increases:

BUYERS ARE ADVISED THAT THE STATE EQUALIZED VALUE OF THE PROPERTY, HOMESTEAD EXEMPTION INFORMATION AND OTHER REAL PROPERTY TAX INFORMATION ARE AVAILABLE FROM THE APPROPRIATE LOCAL ASSESSOR’S OFFICE. BUYER SHOULD NOT ASSUME THAT BUYER’S FUTURE TAX BILLS ON THE PROPERTY WILL BE THE SAME AS SELLER’S PRESENT TAX BILLS. UNDER MICHIGAN LAW, REAL PROPERTY TAX OBLIGATIONS CAN CHANGE SIGNIFICANTLY WHEN PROPERTY IS TRANSFERRED.

This all being said, as a service, REALTORS® acting as buyers’ agents may nonetheless wish to voluntarily provide information on the “pop up” tax to their buyer-client. REALTORS® should not attempt to calculate the new real property tax amount for clients. Instead, we would strongly recommend that REALTORS® direct their buyer-clients to the following site:

https://treas-secure.state.mi.us/ptestimator/PTEstimator.asp

This service, provided by the Michigan Department of Treasury, provides an estimate of property tax amounts based upon the taxable value and the county, municipality and school district in which the property is located.

REALTORS® should direct their buyers to the group responsible for their taxes — the government.

Notary Law Changes

REALTOR® Jones is at a closing of a transaction for which he will be paid a commission. He is asked to notarize the sellers’ signatures on the deed. Can he do so lawfully?

As many REALTORS® may have heard, the Michigan Notary Public Act was recently overhauled. The reason for the overhaul was due in large part to concern over persons posing as “notario publico” in order to defraud immigrants with vastly different expectations of notarial responsibilities.

One of the many significant changes in the law prevents a notary from performing any notarial act in connection with a transaction if the notary has a “conflict of interest.” A “conflict of interest” is defined to include a situation where the notary has a “direct financial or beneficial interest” in the transaction. This would appear to prevent the REALTOR® in our hypothetical from notarizing the deed. Fortunately, that is not the case.

A notary public shall NOT be deemed to have a “direct or financial beneficial interest in a transaction” if the notary is simply acting in the capacity of an agent for another person. Based upon this language, it would appear that a REALTOR® earning a commission may in fact act as a notary in connection with the transaction, at least in the situation where he or she represents the buyer or seller in the transaction. A transaction coordinator is in a more difficult position, there being no exception in the statute in which she squarely fits, i.e., she is not the agent of anybody.

REALTORS® should also be aware there are other important changes to the Act. First, the Act provides that a notary may not notarize any document that contains a blank space. This eliminates the practice of notarizing documents in advance, i.e., before the date or other information is filled in. Second, a notary cannot notarize documents for a “spouse, domestic partner, descendant or sibling, including in-laws, steps or half-relatives.” Finally, a notary is required to determine from either personal knowledge or satisfactory evidence that the person signing the document is who he claims to be.

REALTORS® acting as notaries should take these requirements seriously as the potential penalties are severe. Violations of the Notary Public Act are misdemeanors, punishable by fines up to $5,000 or imprisonment for not more than one year or both. As importantly, the Act provides that a court may invalidate any document which has not been notarized in compliance with the Act.

Tortious Interference: Be Careful

There is probably no worse situation than when a REALTOR® has worked diligently to sell a property for a homeowner, and then discovers that the homeowner and the prospective buyer have gone around the REALTOR® and arranged to have a secret closing after the expiration of the REALTOR®’s listing agreement. In such a situation, the REALTORS® are entitled to zealously pursue the payment of the commission owed them. However, sometimes the REALTOR® and his lawyer can let their zeal almost take them over the top.

In a case decided by the Court of Appeals, a REALTOR® had pursued payment of his commission through a lawsuit in the Oakland County Circuit Court. While the REALTOR® had the listing, the Tarrants made an offer to Stritmatter, the seller, through the seller’s REALTOR®. Stritmatter rejected the Tarrants’ offer. After the expiration of the REALTOR®’s listing agreement, the Tarrants purchased the property from Stritmatter.

At trial, the REALTOR® was able to produce evidence showing that, while the listing agreement was still pending, the Tarrants and Stritmatter negotiated the terms of their deal. The REALTOR® was able to demonstrate that, during the term of the listing agreement, the property had been inspected and appraised, and the Tarrants had applied for a mortgage which specified the ultimate purchase price they paid Stritmatter. The REALTOR® also submitted evidence to demonstrate that the Tarrants had obtained a loan commitment and applied for title insurance, again, while the listing agreement was still pending. Based on this evidence, the jury awarded the REALTOR® a verdict against Stritmatter, the seller.

Nobody appealed the verdict against Stritmatter, the seller, as there was no question that he owed a commission to the REALTOR®. However, the REALTOR® had also sued the Tarrants, the buyers, claiming that the Tarrants had engaged in a civil conspiracy and had also tortiously interfered with the REALTOR®’s contractual relationship, business relationship and the REALTOR®’s business expectancy with Stritmatter. The trial court summarily dismissed the REALTOR®’s claims against the buyers, the Tarrants.

The Tarrants claimed the REALTOR® should be required to pay their attorneys’ fees, because the REALTOR®’s claims of tortious interference against them were frivolous. After the trial court refused to award the Tarrants their attorney’s fees, the Tarrants appealed. The Court of Appeals agreed with the Tarrants that the REALTOR®’s claim in the case was “novel.” The Court of Appeals noted that no reported cases have ever applied tortious interference with a contract of civil conspiracy against a buyer in favor of the seller’s REALTOR® where the seller has attempted to avoid paying a commission. The REALTOR® had contended that he could prove tortious inference, claiming that the Tarrants’ actions in setting up the sale before the listing agreement had expired “were, at a very minimum, unethical [in] that they [the Tarrants] undertook numerous affirmative acts as set forth herein that substantiated motives in aiding and assisting Defendant Stritmatter to avoid and breach his contractual relationship and/or business relationship with Plaintiff.” The trial court disagreed, finding that the REALTOR® could not allege or prove the intentional doing of a person in a wrongful act, or the intentional doing of a lawful act with malice. The Court of Appeals concluded that it was a close question as to whether the REALTOR®’s claims against the Tarrants were frivolous. Fortunately for the REALTOR®, the Court of Appeals concluded that the REALTOR® had made a good-faith argument for the extension of existing law.