Q: I am representing a couple who are in the middle of a divorce. Both have signed a Listing Agreement with me. Both of my clients are represented by attorneys and, while the divorce started amicably when they signed the Listing, things have progressively gotten much worse to the point where they disagree about everything. For the last several days, the Husband (who is living in the house) has been refusing to cooperate with any showings.
Notwithstanding the difficulties with the Husband, I have received a very good, full-price offer from qualified Buyers. The Wife wants to proceed with these Buyers. Unfortunately, last night the Husband told me that he doesn’t want to sell; he instructed me not to tell his Wife. What do I do?
A: The specific answer to your question is that when representing both the Husband and Wife you cannot keep secrets of one spouse from the other.
However, this is a classic situation involving divorcing Sellers with many issues and challenges. Frequently, one party wants the divorce more than the other who may be bitter about the split-up. The sale of the house becomes the bargaining chip in their disputes over money, support, custody of children, etc. For many divorcing couples, the sale of their house is a physical representation of the end of the relationship that they once had. Typically, the spouse who still resides in that home tends to resent the change more than the spouse who has already moved out.
Navigating these treacherous waters takes skill, tact and an awareness of your legal duties, and those of the clients. Here are some factors to consider when representing divorcing Sellers:
I. WHO IS YOUR CLIENT?
A. Both Parties: If both spouses signed a Listing Agreement with you, then you have equal fiduciary duties to both. This may be difficult if you like the one party who is cooperating and dislike the non-cooperative party who may be making your life miserable. Be careful! You cannot start favoring the one who is most accessible or who is being the most reasonable. Legally, you must treat both clients with the same degree of professionalism, skill and diligence.
B. One Party: If you only have a Listing Agreement with one spouse, then you only owe fiduciary duties to that spouse. Keep in mind, though, that you still owe the duties of honesty, fair dealing and disclosing of material facts to the other spouse as well – as is detailed in the Agency Disclosure form. Representation of only one spouse can occur in several ways:
(1) Co-Listing: One spouse may choose you and the other spouse may choose to be represented by a different Agent from a different brokerage company.
See Weekly Practice Tip entitled “Co-Listings” (03/02/18) for more information.
(2) Court Orders One Spouse to List and Sell the Property: Occasionally there will be a court order authorizing one spouse to choose a Listing Broker and make all decisions regarding the marketing and selling of the Property. The other spouse may be ordered to cooperate but has no official role in the sales process itself. Be certain to confirm with your client exactly what powers were granted by the court order to the spouse authorized to sell by obtaining a copy of all court orders relating to the sale for review by your Manager, Broker and/or your Broker’s risk management attorney.
In this case you only have fiduciary duties to the spouse who has the authority to sign your Listing Agreement.
Confirm any doubts in this area with the attorney for the signing spouse and your Broker or Manager.
(3) One Spouse has signed a Quit Claim Deed (“QCD”) and no longer is on title. In this case the spouse who is on title is your only client.
II. SIGNING DOCUMENTS:
A. Both Parties: If you are representing both spouses and one refuses to sign required documents, you must advise both of your clients, in writing, that you cannot proceed until you have mutually-consistent instructions from both and if there is any disagreement, then everything must stop while the clients confer with their divorce attorneys. It may be necessary for the attorney for one party to obtain a court order regarding who signs what.When one spouse refuses to comply with a court order, the judge may hold that party “in contempt of court” and issue sanctions including fines and other penalties. In the most extreme cases, the court has the power to order the Court Clerk to sign on behalf of the recalcitrant party. A copy of the court order along with the Clerk’s signature, constitutes the required signatures to proceed with a sale.
B. One Party: If only one spouse’s signature is required (see section I-B above), do not attempt to get the other spouse to sign the required contract documents since they are not a part of the sale.
III. DISCLOSURES: All parties who remain on title must sign disclosure documents. Even if a court has ordered one spouse to handle the listing, marketing and sale, all owners of record must disclose what they know. If one spouse is refusing to complete required disclosure documents, advise your client and their attorney; an additional court order may be needed to secure the spouse’s cooperation with respect to the required disclosure forms.
Remember that disclosure obligations of Sellers cannot be delegated. If one spouse has asked someone else with a Power of Attorney to sign the disclosures or if a Court Order has been secured that purportedly eliminates one spouse’s disclosure obligations, be certain that you review those situations with your Broker or Manager immediately and they should seek the advice of their risk management counsel to properly document that the client is relying on advice from their attorney and not the Agent.
PRACTICE TIPS:
- Always remember who your client is since that is the person or persons to whom you owe fiduciary duties.
- If you represent both spouses:
A. Always treat both clients equally despite any personal feelings toward one or both of them.
B. Communicate fully with both spouses, in writing, such as an email, to create a record of your communications. Advise your clients at the outset that you have 3 Communication Ground Rules:
(1) you will be communicating equally with both of them at all times; (2) that you cannot keep anything confidential from one of the spouses (there are no secrets); and (3) that you can only proceed with mutually- consistent instructions. Reinforce these 3 Communication Ground Rules throughout your representation of both Sellers.
C. If you receive conflicting instructions, especially any which are in conflict with previous written agreements, you cannot proceed until you have mutually-consistent instructions. Both spouses need to be immediately advised that you are in receipt of conflicting instructions, especially if it controverts a previous agreement, and that the clients should consult with their respective divorce attorneys if they cannot work out a prompt resolution.
D. Do not sign any type of statement, declaration or affidavit for one spouse without the written consent of the other spouse. Such documents are usually prepared by the attorney for one side to the disadvantage of the other. Even though signing that document may be the very thing that you know is necessary to proceed with the sale, you cannot choose to favor one side over the other side.
E. If you receive a subpoena to testify (whether in a deposition or in court), you are required to comply with that subpoena but first alert your Manager or Broker who may want your Brokerage attorney to prepare you for the deposition or hearing. Keep your testimony factual and avoid characterizations or attempting to assign motive to either party. Remain as neutral and professional as possible in your responses.
F. It is not uncommon for one spouse to allege that the Listing Agent is favoring the other spouse. The moment you are made aware of such allegations, discuss the allegations with your Manager or Broker as this could be the precursor to a claim of breach of fiduciary duty and/or breach of the Listing Agreement. Your Broker or Manager may want to discuss the allegations with your Brokerage attorney. The best defense against this type of claim is to follow the practice steps above and frequently document your neutrality in your writings to both clients.
- If you represent one spouse but must obtain disclosures or other documents from the other spouse:
A. Remind the other party that you do not represent them and cannot give them any advice or counsel regarding the disclosures. They should be referred to their own attorney for advice.
B. If the non-client spouse needs certain forms (TDS, e.g.), you can forward those documents to them with a cover letter stating that you are forwarding the documents on behalf of your client; include a reminder that they are not your client and that all questions or concerns should be directed to their own attorney,
C. If the non-client spouse is not represented by another Broker, consider using the CAR Seller (or Landlord) Non-Agency Agreement (Form SNA) but several of the check box options are not truly applicable to this type of situation so use the form cautiously with advice from your Broker or Manager.
D. If the non-client spouse refuses to cooperate in any way, advise your client immediately to discuss the situation with the client’s own attorney for further action; there is nothing more you can do.
WEEKLY PRACTICE TIP: DO NOT FORWARD TO CLIENTS. This Weekly Practice Tip is for the exclusive use of clients of Broker Risk Management and their agents. It may not be reproduced or distributed without the express written consent of Broker Risk Management. The advice and recommendations contained herein are not necessarily indicative of standards of care in the industry, but rather are intended to suggest good risk management practices.
© Copyright Broker Risk Management 2020 09/18/20