Agency and Legal Description Notes for Real Estate Exam ( Wisconsin )

Legal Descriptions

• Definition: A legal description is a detailed way of describing a parcel of land on a document that will be accepted in a court of law. Descriptions are based on information from a survey, which measures boundaries and calculates dimensions and area to determine the exact location of land. Courts accept a description as legally sufficient if it allows a surveyor to locate the parcel.
• Real-world practice note: In Wisconsin, surveys are often not required for transfers (unlike Illinois). Surveys can be costly; contingency options exist in offers, but be aware of price and time.
• Public record recordings: Documents that are recorded include deeds, mortgages, and easements, all requiring a legal description.
• Types of legal descriptions used in the United States:
  • Meets and Bounds (oldest method):
  • Starts at the Point of Beginning (POB) which is both the starting and ending point.
  • Describes boundaries around the parcel using linear measurements, natural and artificial landmarks (monuments), and directions.
  • Always ends back at the POB to enclose the tract.
  • Example (from the text):
    • Beginning at the intersection of the east line of Jones Road and the south line of Skull Drive, then proceeding along lines and using centerlines of watercourses as limits.
    • Note: Boundaries often run “backwards” relative to ordinary reading; interpret from POB around the parcel.
  • Government Survey System (Rectangular Survey System):
  • Based on two sets of intersecting lines: principal meridians (north-south) and baselines (east-west).
  • Wisconsin example uses the fourth principal meridian; baseline is the Wisconsin-Illinois border.
  • Structures the land into tiers (township lines run east-west, six miles apart) and ranges (north-south, six miles wide).
  • Townships form 6-by-6 mile squares, further divided into 36 sections of 1 square mile each.
  • School section: Section 16 is usually central in the township.
  • Townships are described as Township # North/South of baseline and Range # East/West of the principal meridian.
  • Lot and Block (Recorded Plat) Method:
  • Uses lot and block numbers, referred to in a plat map filed in the public records of the county.
  • Common in subdivisions and urban areas.
  • Requires three things for a valid description: the lot number, the subdivision name, and the county/state.
  • Plat maps may show easements, rights-of-way, drainage, utilities, and sometimes elevations.
  • Example described: an eight-lot subdivision (Lot 2 width, Lot 4-5 drainage easements, etc.).
• Elevations and air rights (above-ground rights):
  • Air lots: The owner can subdivide air space above a parcel into air lots (not including subsurface rights or anything above a defined boundary).
  • Datum: A reference point for elevations (point, line, or surface from which elevations are measured).
  • USGS Datum: Defined as the mean sea level in New York Harbor, used as a standard reference.
  • Monuments and benchmarks:
  • Monuments mark surface measurements (concrete markers, steel rebar, metal pipes, wooden stakes).
  • Benchmarks are preferred by surveyors for permanent, accurate reference.
  • Benchmarks are often located at stable, non-movable points (e.g., road centers, official markers).
• Measurements and units:
  • Important test fact: How many square feet in an acre? $43{,}560$ square feet in one acre.
  • Practical tip: Memorize this value; it’s commonly tested.
• Water boundaries: The ownership boundaries often extend to the center line of water bodies (e.g., creeks), which can move over time and affect parcel size (hence “more or less” descriptions).
• Subdivisions and parcels: Rectangular survey produces townships which are often subdivided into ranges and tiers; block/lot subdivisions then break down further to parcels.
• Legal description usage in Wisconsin: Can combine description types (e.g., starting with rectangular “government survey” and then subdividing into a lot and block within a township).
• Practical example in the text: Figure 5.1 (meets and bounds around a parcel) and Figure 5.6/5.7 (rectangular survey example in Wisconsin).
• Why this matters: Understanding legal descriptions helps in determining parcel boundaries, recording documents, and recognizing how ownership can change with natural features, water boundaries, and subdivisions.

Elevations, Datum, and Air Space

• Datum: The reference point for elevations; for USGS, mean sea level in New York Harbor.
• Monuments and benchmarks: Critical for accuracy; monuments are subject to weather and vandalism; benchmarks provide more permanence.
• Air rights: Land includes air space; air lots can be created with boundaries above a parcel.

Measurements and Unit Conversions

• Key fact: $43{,}560$ square feet per acre.
• Why memorization helps: Test questions often hinge on this exact conversion.

Wisconsin-Specific Notes on Subdivision and Recording

• Subdivision defined (Wisconsin statutes): A subdivision is the division of land within five years into five or more parcels of one and a half acres or less each.
• Recording requirements: Subdividers must record plats before selling parcels; unrecorded plats can lead to fines or imprisonment for offering or conveying lots.
• Fines: Penalties exist for working with unrecorded plats (e.g., up to $500 fine, up to six months imprisonment, or both).
• Example anecdote: A subdivision sign advertised lots before plat recording, illustrating why recording is required.
• Adverse possession and tacking are discussed in the agency portion, but it’s useful in legal descriptions contexts:
  • Adverse possession standard period is often twenty years, potentially shortened to ten with certain liabilities or documents.
  • Tacking allows a current possessor to add possession time to a predecessor to reach the requisite period.

Agency: Core Concepts and Relationships

• What is agency?
  • A relationship created by documents (or by law) in which one party (the agent) is authorized to represent the interests of another (the principal) in dealing with a third party.
  • The firm (brokerage) acts as the agent of the principal; individual licensees work for the firm.
• Key roles:
  • Agent: The person authorized and consenting to represent the interest of the principal in dealings with a third party.
  • Principal: The person who hires the agent (buyer or seller or landlord/tenant as applicable).
  • Client: The principal in a real estate transaction; the party to whom the broker owes fiduciary duties.
  • Customer: A third party not represented by the broker who may receive limited services and is entitled to fair and honest dealing. In Wisconsin, confidentiality is owed to all parties, including customers.
• Fiduciary duties (to the principal, i.e., the client):
  • Care: Use skill and expertise; know facts about the property, financing, etc.
  • Obedience: Follow lawful instructions; not obligated to follow unlawful or unethical directives.
  • Loyalty: Put the principal’s interests above the agent’s own; avoid conflicts of interest.
  • Disclosure: Discover and disclose material facts; disclose what the agent knows or should know.
  • Confidentiality: Information about the principal is protected; in Wisconsin, confidentiality is owed to all parties (see notes on family relations and related disclosures).
  • Accounting: Proper handling and reporting of funds (earnest money, etc.); keep accurate records.
  • Reasonable care and presentation of offers: Market the property, present offers, and help evaluate terms.
• Client vs Customer in Wisconsin context:
  • Client: Someone who signs an agency agreement (listing contract for sellers, buyer agency agreement for buyers).
  • Customer: A party that does not sign an agency agreement; owed fair treatment and factual information; not entitled to advice or confidential information.
  • Confidentiality extends to customers, but customers do not have a right to advice or full fiduciary protections.
• Express vs Implied Agency:
  • Express Agency: Created by written (or sometimes explicit) agreement; in practice, listings and buyer representation contracts are written; Statute of Frauds requires contracts in writing for real estate transactions.
  • Implied Agency: Created by actions that imply an agency relationship; risky and generally discouraged; may lead to lack of enforceable compensation if no written agreement.
• Pre-agency: The phase before a formal agency relationship is established where a firm can provide services; can occur when meeting a client before an agency agreement is signed.
• Agency formation: Requires disclosure and written agreements; the firm (not the individual agents) is the party to the contract with the principal.
• Agency types in practice:
  • Universal Agent: Authorized to do anything the principal could do (e.g., power of attorney). Not typical for real estate.
  • General Agent: Represents a principal in a broad range of matters (e.g., property manager).
  • Special (Limited) Agent: Authorized to perform one specific act or transaction (typical for real estate licensees).
• Disclosure of agency: Wisconsin requires disclosures to buyers and sellers before negotiations begin. It is mandatory to inform parties of whom the broker represents.
• Types of agency relationships in practice:
  • Single Agency: One client per broker (one principal per transaction for the broker).
  • Multiple Representation (without designated agency): One firm has two clients in the same transaction; all parties must consent in writing; the broker and licensees must remain neutral and cannot favor one client.
  • Multiple Representation with Designated Agency (designated agency): The firm designates one licensee to represent the seller and another to represent the buyer; both clients get full service without compromising interests.
  • Undisclosed Dual Agency (risk): Occurs when dual agency (two sides) happens without proper disclosure; not intended in Wisconsin practice; must be disclosed to all parties.
• What is “designated agency”?
  • An arrangement where a single firm represents two clients in the same transaction, with separate designated licensees for each client.
• What is “sub-agency”?
  • An arrangement where a cooperating firm (sub-agent) helps the listing firm sell the property; sub-agents owe duties to the listing firm and its client but not directly to the seller’s buyer’s client.
• Negotiation and agency disclosures:
  • Negotiation triggers agency disclosure: Agency position must be disclosed before negotiations begin.
  • Seven duties owed to all parties (listed in the contract): Fair and honest treatment, reasonable skill and care, disclosure of material adverse facts, confidentiality, provision of accurate market information, accounting, objective presentation of offers.
• Handling of funds and records:
  • Earnest money must be deposited into escrow promptly; all funds must be accounted for; copies of all documents should be kept for the required period (often two years for records, per practice/firm policy).
  • Commingling (mixing client funds with general business funds) and conversion (unauthorized use of entrusted funds) are illegal and can lead to license suspension or revocation.
• Personal interest rules:
  • Licensees must disclose personal interests (e.g., related to the buyer or seller) in specific circumstances; pre-written consent is required when acting on behalf of a relative or entity in which the licensee has an interest.
  • If a licensee acts as an agent for a spouse, relative, or business associate, prior written consent from all parties is required to avoid breach of duty of loyalty.
• Conflicts and disclosure in agency:
  • Disclosure of known material defects (material adverse facts) to prospective buyers; seller’s representative must disclose known defects.
  • Buyer’s agent must disclose relevant information and financing terms that affect the buyer’s decision; if known, disclose how long the property has been on the market and why the owner is selling (note: disclosure about the owner’s reasons may be sensitive; some cases require written consent).
  • Confidential information restrictions apply to both clients and customers; confidential information should not be disclosed unless explicitly authorized.
• Statutory and board references:
  • Wisconsin Statutes Four Fifty Two (4-52) govern agency relationships and disclosure; administered by the Wisconsin Department of Safety and Professional Services (DSPS).
  • Wisconsin Administrative Code REB 24 requires signed acknowledgments of agency when transactions involve 1–4 dwelling units; includes mandatory disclosures.
• Designated and pre-agency nuances:
  • Pre-agency services may be provided without a formal agency relationship yet; firm and licensees owe seven duties to parties in these preliminary interactions.
  • Intra-firm relationships (firm as the client) and licensee as agents: the firm can be responsible for supervising agents and ensuring compliance with statutes.
• Practice implications and exam focus:
  • Agency is a frequent exam topic; the instructor emphasized that agency is central to the test (with a claim that many students struggle with agency questions).
  • Test tips: expect questions about agency forms (listing contracts, buyer representation agreements), the seven duties, and different representations (single/multiple with/without designation).
• Stigmatized properties (Chapter on stigmas):
  • Stigmas are societal concerns about properties; disclosure requirements depend on physical evidence of stigma; if no physical evidence exists, disclosure may not be required.
  • Historical examples in Wisconsin (e.g., properties with perceived crime or haunting status) illustrate how stigma can influence value and disclosure considerations.

Practical Examples and Key Takeaways

• When recording documents, always include a legal description; deeds, mortgages, and easements require legal descriptions.
• Always verify the appropriate legal description type for a given property (Meets and Bounds vs Rectangular Survey vs Lot/Block).
• Understand the difference between a client and a customer: clients have agency contracts and fiduciary duties; customers receive limited services and have different disclosure expectations.
• In Wisconsin, confidentiality extends to all parties; keep information confidential unless legally permitted or required.
• Understand the three agency types (universal, general, special) and why real estate practice relies on special (limited) agency.
• Grasp the concepts of single agency, multiple representation, and designated agency, including consent and disclosure requirements.
• Know the duties to all parties and the consequences of breaching duties (discipline by the Real Estate Examining Board or civil actions).
• Recognize the difference between commingling and conversion of funds and the importance of trust accounts.
• Remember the board and code references (DSPS, REB, and REB 24), as these appear on exams and govern licensing practices.
• Ethical considerations highlighted through anecdotes emphasize the importance of loyalty to clients, fair dealing, and avoiding conflicts of interest.

Quick Review (Key Formulas and Facts)

• Area conversion: $43{,}560$ square feet per acre.
• Common commission examples: standard brokerage practices discuss a total commission (e.g., 6%) and co-brokerage splits (e.g., 2.4 ext{ extbackslash%}).
• Adverse possession default period: typically twenty years (reduced to ten years in some circumstances with documents).
• Datum reference: mean sea level (USGS standard) as a baseline for elevations.
• Distinctions to memorize:
  • Meets and Bounds ends at the Point of Beginning.
  • Rectangular Survey uses township/range/meridian system.
  • Lot and Block relies on a recorded plat, with lot and block numbers and the subdivision name.
  • Subdivision definition and recording requirements in Wisconsin: five or more parcels of ≤ 1.5 acres in five years.

Preparation Tips for Next Class

• Review agency terms: express vs implied, single vs multiple vs designated agency, and the seven duties.
• Familiarize yourself with REB 24 and the role of the DSPS.
• Practice identifying the type of legal description from a given description (meets and bounds vs rectangular vs lot and block).
• Recall the difference between a client and a customer, and the implications for confidentiality and advice.
• Be ready to work through examples of co-brokerage and in-house sales to understand how commissions flow through the MLS and firms.