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Legally speaking: Nonuse of required forms…a problem?

By Lorie Garland, OAR Assistant Vice President of Legal Services

The OAR Legal Assistance Hotline receives an array of real estate-related legal questions — including license law issues, disclosure, contract law, ethics and commission problems, among others. In an effort to help you work within the law, our “Legally Speaking” series spotlights some of the timely questions that are being asked by REALTORS. This one involves the agency and property disclosure forms and the ramification of not using them as the law requires…

Q: Does an agent’s failure to provide the Consumer Guide to Agency Relationships on the Agency Disclosure Statement invalidate a signed purchase contract? What about the failure to provide a Residential Property Disclosure Form?

A: An agent’s failure to provide the agency documents would not invalidate a purchase contract but would constitute a license law violation. Ohio license law provides when and how the Consumer Guide and the Agency Disclosure Statement are to be used. Both documents provide consumers with important information regarding agency and the brokerage the consumer has chosen to work with. The Agency Disclosure Statement plays an additional role when an agent is acting as a dual agent. Ohio law requires an agent to obtain the written authorization of his clients to act as a dual agent and an executed Agency Disclosure Statement meets this requirement. As agent’s failure to properly use the agency forms could subject the agent to disciplinary action by the Ohio Division of Real Estate & Professional Licensing.

Nonuse or misuse of the Residential Property Disclosure Form could also subject an agent to disciplinary action. However, use of the disclosure form may also affect the purchase contract. Failure to provide the disclosure form would not invalidate a closed transaction, but it may allow a buyer to rescind a pending contract. Failure to provide the disclosure form prior to the purchase contract being entered into provides the buyer with the right to rescind the contract for 30 days after the contract is entered into or the closing date, whichever is earlier. An agent may also be liable to his client in a civil suit if the agent’s mishandling of the disclosure form results in damages to the client.

To prevent a license law sanction or civil liability an agent must be vigilant in their compliance with all requirements for use of the agency and disclosure forms.

Tags: legal, Legally Speaking