REAL ESTATE ASSISTANTS

					                            Broker Toolkit
                       Louisiana REALTORS®
                           P.O. Box 14780
                       Baton Rouge, LA 70898
                 Phone: 800-266-8538 or 225-923-2210
                          Fax: 225-926-5922
                    Email: LRA@LAREALTORS.ORG
                    Website: www.larealtors.org




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            LOUISIANA REALTORS® BROKER TOOLKIT
Dear Broker:

The Louisiana REALTORS® are pleased to provide you with a new edition of a broker
toolkit for your quick reference. This important tool contains background history,
websites and helpful hints on real estate related topics of interest. Also included with
this toolkit are the 2005, 2006 and a portion of the 2007 legal hotline summaries and
links to other important references.

The broker toolkit is intended to be used for informational purposes, and will give you a
guide to follow should these topics and issues present themselves within your firm.

We hope that you find this toolkit beneficial as you face these issues in your business.
It is another way that the Louisiana REALTORS® are working to be your partner in
success. Should you have any questions or comments, the Louisiana REALTORS®
are always open to new ideas and comments on all real estate issues.

Sincerely yours,

Malcolm Young, Jr., RCE, CAE
President
Louisiana REALTORS®

December ___, 2007




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                                   DISCLAIMER
This publication is intended to keep Louisiana REALTORS® members abreast of legal
issues and other developments affecting real estate brokerage and sales, and to
supplement educational programs of the Louisiana REALTORS®.

This publication is a source of general information for your exclusive use. The
association cannot warrant the accuracy of the information contained in this publication.

This publication is for information purposes only and the association members are
responsible for contacting their own attorneys or other professional advisors for advice
regarding legal accounting and tax issues.

The sample policies and forms contained herein are designed to give your company
guidance as to the policies and procedures required by state and federal laws, and
some suggestions as to policies and procedures used within the industry. These
sample policies should be adapted to fit your specific company‘s preferences and
needs.

These sample policies and forms should not take the place of legal advice. You should
tailor these sample policies and forms to your company‘s specific needs and then have
it reviewed by your legal counsel, accountant or other person with knowledge to insure
compliance in your area.

The Louisiana REALTORS® specifically DISCLAIM ANY WARRANTIES, PROMISES
OR GUARANTEES, EXPRESS OR IMPLIED, THAT THIS TOOLKIT OR THE SAMPLE
POLICIES OR FORMS CONFORMS TO ALL STATE AND FEDERAL LAWS AS MAY
BE REQUIRED FOR YOUR COMPANY.




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I.     TABLE OF CONTENTS
I.     Table Of Contents            ................................................................ 4
II.    Agency Relationships         ................................................................ 13
       A.    Background             ................................................................ 14
             1.      Overview of the Louisiana Agency Law ....................... 14
             2.      Required Forms for Agency Disclosure........................ 14
             3.      Timing for Disclosure ................................................... 14
             4.      Contracts      ................................................................ 14
       B.    Recommendations ................................................................ 15
             1.      Suggested Broker Policies ........................................... 15
             2.      General Office Policies on Agency ............................... 15
             3.      Recommended Policies Concerning Listings ............... 15
             4.      Representing Buyers.................................................... 16
             5.      Confidential Information ............................................... 17
             6.      Ministerial Acts ............................................................. 18
             7.      Escrow Deposits and Potential Disputes ...................... 19
       C.    Louisiana Real Estate Commission Rules and Regulations ... 20
       D.    Multiple Offers        ................................................................ 20
             1.      Introduction ................................................................ 20
             2.      Multiple Listing Handbook Policy on Multiple Offers..... 20
             3.      National Association of REALTORS® Standards
                     On Multiple Offers ........................................................ 21
             4.      Multiple Counteroffers .................................................. 23
             5.      Louisiana Law on Multiple Offers ................................. 24
             6.      Annotation of Offers ..................................................... 24
       E.    After the Fact Referral Fees.................................................... 26
             1.      Sample Letter to Relocation Company Requesting
                     After the Fact Referral .................................................. 28
III.   Purchase Agreement and Closing Issues .......................................... 30
       A.    Louisiana Residential Agreement to Buy or Sell ..................... 31
             1.      The Law Requiring the Statewide Purchase
                     Agreement Form .......................................................... 31
             2.      Louisiana Residential Agreement to Buy
                     Or Sell Form ................................................................ 31
             3.      Frequently Asked Questions ........................................ 32
             4.      Addenda        ................................................................ 35
       B.    Title Issues/Good Funds ......................................................... 35
             1.      The Necessity of Good Funds at Closing ..................... 35
       C.    Deposits               ................................................................ 37
             1.      Disbursement of Security Deposits .............................. 37
             2.      Disbursement of Security Deposits at Closing ............. 37
             3.      Disbursement of Security Deposits in
                     the Absence of Closing ................................................ 38
       D.    Check Kiting           ................................................................ 39

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              1.      What is Check Kiting? .................................................. 39
              2.      An Example of Check Kiting ......................................... 39
              3.      Check Kiting and Real Estate Transactions ................. 39
              4.      Signs of Check Kiting ................................................... 40
      E.      Pre-Approval Letters ............................................................... 40
              1.      Sample Pre-Approval Letter ......................................... 41
      F.      Immovable/Movable Descriptions in Purchase Agreement ..... 42
      G.      Title Insurance        ................................................................ 44
              1.      What is Title Insurance? ............................................... 45
              2.      Why Purchase Title Insurance? ................................... 45
              3.      How is Title Insurance Purchased? .............................. 45
IV.   Anti-trust                     ................................................................ 46
      A.      Background             ................................................................ 47
              1.      Federal Anti-trust Law .................................................. 47
      B.      Recommendations ................................................................ 48
              1.      Establishing The Commission Rate ............................. 48
              2.      Perception Versus Reality ............................................ 48
              3.      Establishing Other Listing Policies ............................... 50
              4.      Relations With Competitors And The Emergence
                      Of Limited Service Arrangements ................................ 50
              5.      Commission Splits........................................................ 51
              6.      Boycotts       ................................................................ 52
      C.      Sample Anti-trust Compliance Policy ...................................... 54
V.    Employment/Compliance ................................................................ 55
      A.      Independent Contractor .......................................................... 56
              1.      Case Law       ................................................................ 56
              2.      Legislation ................................................................ 58
              3.      Sample Independent Contractor Agreement ................ 60
      B.      Real Estate Assistants ............................................................ 66
VI.   Environmental Overview ................................................................ 68
      A.      Background             ................................................................ 69
      B.      Recommendations ................................................................ 70
              1.      Asbestos       ................................................................ 70
                      a.     What it is............................................................ 70
                      b.     What to look for ................................................. 71
                      c.     What to do if you believe asbestos is present ... 71
              2.      Formaldehyde Gas and UFFI ....................................... 71
                      a.     What it is............................................................ 71
                      b.     What to look for ................................................. 72
                      c.     What to do if you suspect the presence
                             of UFFI .............................................................. 72
              3.      Lead           ................................................................ 72
                      a.     What it is............................................................ 72
                      b.     What to look for ................................................. 72
                      c.     What to do if you observe a ―red flag‖ ............... 73
              4.      Radon Gas ................................................................ 73
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                 5.   Underground Storage Tanks ........................................ 74
                      a.      What they are .................................................... 74
                      b.      What to look for ................................................. 75
                      c.      What to do if you know or suspect there
                              is a problem ....................................................... 75
               6.     Ground Water Contamination ...................................... 76
                      a.      What it is............................................................ 76
                      b.      What to look for ................................................. 76
                      c.      What to do if you believe there may be a
                              ground water problem ....................................... 77
               7.     Electro-Magnetic Fields ................................................ 77
                      a.      What they are .................................................... 77
                      b.      What to look for ................................................ 77
                      c.      What to do if you suspect there is a problem..... 78
               8.     Waste Disposal Sites ................................................... 78
                      a.      What they are .................................................... 78
                      b.      What to look for ................................................ 79
                      c.      What to do if you believe there is a problem...... 79
        C.     Environmental Contacts .......................................................... 80
               1.     Environmental Site Assessments ................................. 81
               2.     Limitation on ESAs ....................................................... 82
               3.     Dry Cleaners ................................................................ 82
               4.     Underground Storage Tanks ........................................ 83
        D.     All Appropriate Inquiry Rule and Innocent Landowner
               Requirements           ................................................................ 84
        E.     Brownfields            ................................................................ 85
VII.    Alternative Dispute Resolution........................................................... 88
        A.     Arbitration            ................................................................ 89
               1.     Introduction ................................................................ 89
               2.     Frequently Asked Questions About Arbitration ............ 89
               3.     Louisiana REALTORS and National Association
                      of REALTORS Policies.............................................. 91
        B.     Mediation              ................................................................ 92
VIII.   Employment/Office Policies ............................................................... 93
        A.     Employment Laws ................................................................ 94
               1.     Title VII of the Civil Rights Act ...................................... 94
               2.     Louisiana‘s Anti-Discrimination and
                      Anti-Retaliation Statute ................................................ 94
               3.     Family Medical Leave Act ............................................ 95
               4.     Age Discrimination in Employment Act ........................ 95
               5.     Americans with Disabilities Act..................................... 96
               6.     Fair Labor Standards Act ............................................. 96
                      a.      Coverage ........................................................... 97
                      b.      Hours Worked ................................................... 97
                      c.      Regular Rate ..................................................... 97
                      d.      Calculating the Regular Rate............................. 98
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                    e.     Exemptions........................................................ 98
             7.     The Equal Pay Act ....................................................... 99
             8.     Uniformed Services Employment and
                    Reemployment Rights Act ............................................ 100
      B.     Harassment            ................................................................ 100
             1.     Sexual Harassment ...................................................... 101
             2.     Other Harassment ........................................................ 102
             3.     Effective Harassment Policy ........................................ 102
             4.     Investigation of Harassment Claims ............................. 103
             5.     Employer Liability and Defenses .................................. 103
      C.     The Hiring Process ................................................................ 104
             1.     Advertisements ............................................................ 104
             2.     Obtaining Information ................................................... 104
                    a.     Employment Application Forms ......................... 105
                    b.     Employment Interviews ..................................... 106
                    c.     Criminal Background, Credit and
                           Reference Checks ............................................. 107
             3.     Medical Exams ............................................................. 109
             4.     Drug Testing ................................................................ 109
             5.     Business Recordkeeping ............................................. 111
             6.     Required Posters ......................................................... 117
      D.     Miscellaneous State Statutes Regulating Employment
             Practices             ................................................................ 118
             1.     Accrued Wages and Benefits ....................................... 118
                    a.     Vacation Pay, Holiday Pay,
                           Sick Leave, Bonuses ......................................... 118
                    b.     Penalties............................................................ 119
             2.     Jury Service/Voter Protection ....................................... 120
             3.     Louisiana‘s Smoking Discrimination Statute ................ 120
             4.     Employee Payments .................................................... 120
             5.     Other Louisiana Statutes.............................................. 120
      E.     Privacy Issues        ................................................................ 122
             1.     Monitoring Employee Communications ........................ 122
                    a.     Telephone Monitoring ........................................ 123
                    b.     Electronic Communications ............................... 123
             2.     E-mail and Internet Usage Policy ................................. 123
                    a.     Sample E-mail and Internet Usage Policy ......... 125
      F.     Sample Personnel Policy Manual ........................................... 128
             1.     Employee Acknowledgment ......................................... 128
             2.     Purpose of Policy Manual ............................................ 129
             3.     Equal Employment Opportunity ................................... 129
             4.     Harassment Policy ....................................................... 130
                    a.     Scope ................................................................ 130
                    b.     Purpose ............................................................. 130
                    c.     General Policy ................................................... 130
                    d.     Definition of Sexual Harassment, Advances
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                           and Other Harassment ...................................... 130
                    e.     Other Prohibited Behaviors ............................... 131
                    f.     Procedure .......................................................... 131
                    g.     Responsibility for Administration ....................... 132
             5.     Disability Accommodation ............................................ 133
             6.     Immigration Compliance .............................................. 133
             7.     Employment ................................................................ 133
             8.     Independent Contractor ............................................... 134
             9.     Fair Housing Law ......................................................... 135
             10.    Security       ................................................................ 137
             11.    Weapons Prohibition .................................................... 137
             12.    Confidentiality............................................................... 137
             13.    Privacy Statement ........................................................ 138
             14.    Substance Abuse Policy Statement ............................. 139
                    a.     Purpose and Scope of Policy ............................ 139
                    b.     Definitions.......................................................... 139
                    c.     Prohibited Conduct ............................................ 139
                    d.     Disciplinary Action ............................................. 140
                    e.     Drug Assistance Program.................................. 140
                    f.     Testing............................................................... 140
                    g.     Right to Access Test Results
                           and Confidentiality ............................................. 140
                    h.     Searches ........................................................... 140
             15.    Smoking Policy............................................................. 141
             16.    No Solicitation Policy.................................................... 141
             17.    Employee Classifications ............................................. 141
             18.    Employee Status .......................................................... 142
             19.    Date of Hire ................................................................ 142
             20.    Office Hours ................................................................ 142
             21.    Outside Employment .................................................... 142
             22.    Voluntary Termination .................................................. 143
             23.    Involuntary Termination ................................................ 143
             24.    Discipline Policy ........................................................... 143
             25.    Workplace Violence ..................................................... 145
             26.    Date of Termination...................................................... 145
             27.    Employee Accident Reporting ...................................... 146
             28.    Behavior of Employees ................................................ 146
             29.    Dress Code ................................................................ 146
             30.    Employee Warnings ..................................................... 146
             31.    Parking        ................................................................ 147
             32.    Telephone Use ............................................................. 147
             33.    Computer Use .............................................................. 147
             34.    Sign Policy ................................................................ 150
             35.    Document Control ........................................................ 151
             36.    Threatened Lawsuits .................................................... 151
             37.    Jury Duty Leave ........................................................... 152
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              38.    Benefits        ................................................................ 152
              39.    Personal Leave ............................................................ 152
              40.    Incremental Personal Leave ........................................ 153
              41.    Holidays        ................................................................ 153
              42.    Workers‘ Compensation ............................................... 153
              43.    Payroll         ................................................................ 154
              44.    Overtime Pay for Non-Exempt Employees ................... 154
              45.    Administrative Pay Corrections .................................... 154
              46.    Exempt Employee Salary Deductions .......................... 155
              47.    Employee Expense Reporting ...................................... 155
              48.    Travel and Entertainment Expenses ............................ 156
IX.    Cell Phone Use and Employer Liability .............................................. 157
       A.     Employer Liability ................................................................ 158
       B.     Cellular Phone Use Policy ...................................................... 159
       C.     Sample Cellular Phone Use Policy ......................................... 159
              1.     Policy on Use of Mobile Telephones and
                     Related Devices ........................................................... 159
              2.     Definitions ................................................................ 159
              3.     Sample Cell Phone Policy ............................................ 160
              4.     Enforcement ................................................................ 161
       D.     Additional Factors to Consider in Reducing Liability ............... 162
       E.     Enforcement Policy ................................................................ 162
X.     Non-Compete Agreements ................................................................ 163
XI.    RESPA                         ................................................................ 166
       A.     Background             ................................................................ 167
       B.     RESPA Prohibitions ................................................................ 167
       C.     Sample Affiliated Business Arrangement Disclosure
              Statement Format; Notice ....................................................... 169
       D.     Frequently Asked Questions ................................................... 171
       E.     Regulation Z           ................................................................ 174
       F.     Leasing                ................................................................ 174
XII.   Property Condition Issues ................................................................ 178
       A.     Property Disclosure Law and Forms ....................................... 180
              1.     Property Disclosure Documents ................................... 180
                     a.      Who is Required to Make Disclosure ................ 180
                     b.      Disclosure Responsibilities of the Seller ............ 181
                     c.      Rights of Purchaser and Consequences
                             for Failure to Disclose ........................................ 181
                     d.      Duties and Real Estate Licensees and
                             Consequences for Failing to Fulfill
                             Such Details ...................................................... 181
                     e.      Warranty Implications ........................................ 181
              2.     Frequently Asked Questions
                     About Property Disclosure Forms ................................ 182
              3.     Sample Certificate Regarding Property Disclosure
                     Document for Residential Real Estate Form ................ 185
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      B.     Sewer/Septic Systems ........................................................... 186
      C.     Building Restrictions ............................................................... 186
      D.     Modular Homes        ................................................................ 187
      E.     Louisiana Home Inspectors Licensing Law ............................. 189
      F.     Mold Disclosure      ................................................................ 193
             1.     Frequently Asked Questions and Answers .................. 193
      G.     AIDS Disclosure      ................................................................ 195
             1.     Background ................................................................ 195
             2.     AIDS Disclosure ........................................................... 195
             3.     Other Stigmas .............................................................. 196
             4.     Recommendations ....................................................... 196
             5.     Conclusion ................................................................ 198
      H.     Megan‘s Law          ................................................................ 198
             1.     Frequently Asked Questions and Answers .................. 199
      I.     Meth Lab Disclosure ............................................................... 200
      J.     Lead-Based Paint ................................................................ 201
             1.     Background ................................................................ 201
             2.     Lead-Based Paint Recommendations .......................... 202
             3.     Frequently Asked Questions About the Regulations .... 203
             4.     HUD/EPA Lead-Based Paint Disclosure Regulations .. 206
             5.     Properties to Which the Requirements Apply ............... 207
             6.     Effective Date ............................................................... 207
             7.     Obligation of Sellers, Lessors and
                    Real Estate Agents ...................................................... 207
             8.     Who is an Agent ........................................................... 208
             9.     The Ten Day Testing Period ........................................ 209
             10.    State and Local Requirements ..................................... 209
             11.    Penalties     ................................................................ 209
             12.    Record Keeping Requirements .................................... 209
             13.    Supplement to Lead-Based Paint: A Guide to
                    Compliance ................................................................ 210
             14.    Resolved Issues ........................................................... 210
             15.    Unresolved Issues........................................................ 213
      K.     Wood Destroying Insect Disclosure ........................................ 214
             1.     Information and Conditions .......................................... 214
             2.     Terms and Definitions .................................................. 215
             3.     Species Which May Infest Wood.................................. 216
                    a.     Native Subterranean Termites........................... 216
                    b.     Formosan Subterranean Termites ..................... 216
                    c.     Drywood Termites ............................................. 216
                    d.     Powder Post Beetles ......................................... 217
                    e.     Old House Borer................................................ 217
                    f.     Carpenter Ants .................................................. 217
             4.     Wood Destroying Insect Report ................................... 218
             5.     Formosan Termites ...................................................... 219
      L.     New Home Warranty Act ........................................................ 219
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        M.    As/Is Redhibition     ................................................................ 220
        N.    Psychologically Impacted Property ......................................... 221
        O.    Homeowners‘ Insurance ......................................................... 222
              1.      Louisiana Citizen‘s Property Insurance Corporation .... 222
              2.      Comprehensive Loss Underwriting Exchange ............. 222
XIII. Property Taxes                ................................................................ 223
       A.     Frequently Asked Questions and Answers ............................. 224
       B.     Important Dates for Property Owners ..................................... 226
       C.     Websites for Some Parish Assessors ..................................... 227
       D.     Homestead Exemption............................................................ 227
              1.      Homestead Exemption ................................................. 227
              2.      Questions And Answers ............................................... 228
              3.      On-Line Database ........................................................ 229
XIV. Wetlands                       ................................................................ 231
       A.     Background on Wetlands ........................................................ 232
              1.      Wetland Functions ....................................................... 232
              2.      What is a Wetland? ...................................................... 233
              3.      Why is it Necessary to Consider Wetlands? ................ 233
       B.     Recommendations ................................................................ 234
              1.      Determining the Presence of Wetlands ........................ 234
              2.      Additional Wetland Regulation ..................................... 237
              3.      Permitting Process Overview ....................................... 237
                      a.     1972 SEC 404 Clean Water Act ........................ 237
                      b.     Permit Procedure in Louisiana .......................... 238
                      c.     Penalties............................................................ 239
                      d.     How the Permit is Processed ............................ 240
                      e.     Louisiana Coastal Use Certification................... 241
       C.     Sample Wetlands Disclosure .................................................. 243
       D.     Sample to Agreement to Purchase ......................................... 244
       E.     Sample Wetlands Determination Request Letter .................... 245
XV. Do Not Call                     ................................................................ 246
       A.     Federal Do Not Call ................................................................ 247
       B.     State Do No Call      ................................................................ 248
XVI. Do Not Fax                     ................................................................ 249
       A.     Old Rules             ................................................................ 250
       B.     New Rules             ................................................................ 250
       C.     Identification Requirements .................................................... 251
       D.     Recent Enforcement Actions .................................................. 251
       E.     Junk Fax Prevention ............................................................... 252
XVII. Anti-Spam Regulation          ................................................................ 253
       A.     State Anti-Spam Regulation ................................................... 254
       B.     Federal Anti-Spam Regulation ............................................... 255
XVIII. Fair Housing                 ................................................................ 256
XIX. Eminent Domain/Expropriation ......................................................... 264
XX. Electronic Filing               ................................................................ 268
XXI. Foreclosure                    ................................................................ 269
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XXII     Prescriptive Period on Contracts to Purchase and
         Sell Immovable Property ................................................................ 270
XXIII.   Mineral Rights/Use of Surface Rights ................................................ 271
XXIV     Condominium Association Liens........................................................ 272
XXV.     Trademark                  ................................................................ 274
XXVI.    Legal Action Fund          ................................................................ 275
         A.     Application Procedures ........................................................... 276
         B.     Forms               ................................................................ 280
                1.     National Association of REALTORS®
                       Legal Action Request Application................................. 278
                2.     Addendum to Application for Assistance
                       from the Legal Action Fund of the
                       Louisiana REALTORS® ............................................... 278
XXI.     Hotline Program            ................................................................ 282
         A.     Summaries of Hotline Questions Received in
                2005, 2006 through July, 2007 ............................................... 284
XXII.    Louisiana Case Law Update .............................................................. 425




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II.   AGENCY RELATIONSHIPS
Background
        Overview of the Louisiana Agency Law
        Required Forms for Agency Disclosure
        Timing for Disclosure
        Contracts
Recommendations
        Suggested Broker Policies
        General Office Policies on Agency
        Recommended Policies Concerning Listings
        Representing Buyers
        Confidential Information
        Ministerial Acts
        Escrow Deposits and Potential Disputes
Louisiana Real Estate Commission Rules and Regulations
Multiple Offers
        Introduction
        Multiple Listing Handbook Policy on Multiple Offers
        National Association of REALTORS® Standards on Multiple Offers
        Multiple Counteroffers
        Louisiana Law on Multiple Offers
        Annotation of Offers
After the Fact Referral Fees
        Sample Letter to Relocation Company Requesting After the Fact Referral




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A.    BACKGROUND
On March 1, 1998, the Louisiana Agency Law codified in LA R.S. 9:3891 et seq.
became effective. The agency law can also be found on the Louisiana Real Estate
Commission website at www.lrec.state.la.us.

1.    Overview of the Louisiana Agency Law
      a.     With the adoption of the Louisiana Agency Law, designated agency was
             created, which means the real estate agent works directly FOR the person
             they are working with in all types of real estate transactions.

      b.     Dual agency, where the same real estate agent represents both the buyer
             and the seller, is only allowed by informed written consent of all parties to
             the transaction.

      c.     Agency disclosure rules were simplified by requiring disclosure to be
             made in a form of a pamphlet prescribed by the Louisiana Real Estate
             Commission.

      d.     The Louisiana Agency Law allows a buyer‘s real estate agent work for and
             represent the interests of the buyer even if the seller pays the commission.

2.    Required Forms For Agency Disclosure
      a.     An Agency Disclosure Form.

      b.     An Agency Disclosure Informational Pamphlet.

      c.     A Disclosure and Consent to Dual Agent Designated Agency (when
             applicable).

These forms can be found on the Louisiana Real Estate Commission website at
www.lrec.state.la.us.

3.    Timing for Disclosure
All disclosure informational pamphlets must be given to all clients when a licensee
engages in activities that are not considered ministerial acts.

4.    Contracts
      a.     When a dual agency situation occurs, all parties, the buyer and the seller,
             must agree and sign an agency disclosure form before any transaction
             can occur.
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      b.     Each office needs to establish set guidelines and procedures to ensure
             adherence to the Louisiana Agency Law.

B.    RECOMMENDATIONS

1.    Suggested Broker Policies

Louisiana Agency Law requires listing agreements with the written consent of all owners
to sale the property.

Agents must provide an Agency Disclosure Pamphlet to each customer. The Pamphlet
is available on the Louisiana Real Estate Commission website at www.lrec.state.la.us.

2.    General Office Policies on Agency
The Broker may wish to devise a method to ―designate‖ an agent within the office to
work with each client.

The Broker may wish to consider adoption of the following two policies into their own
formal office policies:

      a.     A sales associate affiliated with the broker (__) may/(__) may not
             represent both the buyer and the seller as a disclosed dual agent in the
             same transaction.

      b.     It is the policy of this office that every licensee read the agency law and
             become familiar with it.

3.    Recommended Policies Concerning Listings
      a.     Inform the seller of the Broker‘s policy to provide a designated seller‘s
             agent who will exclusively represent the seller in regard to the sale of the
             property. Advise the seller of the designated agency relationship that will
             exist unless there is a written agreement providing for a different
             brokerage relationship.

      b.     Inform the seller that the sponsoring Broker may, when reasonably
             necessary, designate additional agents as legal agents for the seller.
             Inform the seller that in such event, the seller will receive written notice
             thereof.

      c.     Provide the seller with the Agency Disclosure Pamphlet and obtain
             appropriate signatures.

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      d.     Anyone from our office who attends an open house on behalf of a listing
             agent/seller (__) will / (__) will not be the additional designated agent of
             the seller.

      e.     Inform the seller of the Broker‘s policy to allow the seller‘s designated
             agent to represent both the seller and the buyer as a disclosed dual agent
             on the same transaction (Delete this paragraph if not allowing dual
             agency).

      f.     Advise the seller of the Broker‘s compensation and that Broker may share
             compensation with brokers who represent buyers.

      g.     Obtain from the seller an executed listing contract that designates the
             seller‘s agent. Provide seller with a Dual Agency Disclosure and obtain
             seller‘s informed written consent to be a dual agent.

      h.     Inform the seller that the sponsoring Broker is available to the seller for
             consultation and assistance. Inform seller that, a designated agent may
             disclose confidential information to the sponsoring Broker or other person
             specified by the sponsoring Broker for purposes of seeking assistance for
             the client‘s benefit. The sponsoring Broker or such other person shall
             keep the information confidential.

      i.     Inform seller that other sales associates within the Broker‘s office will not
             be acting as legal agents of the seller but may act as a legal agent of the
             buyer who may ultimately purchase seller‘s property.

      j.     If a dual agency situation does arise, remind seller of his previous
             permission for dual agency and disclose any conflicts of interest that may
             affect the transaction.

      k.     If the agent withdraws from dual agency, disclosure, in writing, of the
             existence of a referral fee must be given to both parties.

4.    Representing Buyers
      a.     A Broker may enter into a representation agreement with any buyer who
             wishes to be represented by a sales associate affiliated with Broker. The
             representation agreement may specify one or more sales associates
             affiliated with the broker as the buyer‘s designated agent for the purpose
             of assisting the buyer in the purchase of real estate.

      b.     Always provide buyer with the Agency Disclosure informational pamphlet
             and obtain appropriate signatures.


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      c.     Inform the buyer that the sponsoring Broker may, when reasonably
             necessary, designate additional agents as legal agents for the buyer.
             Inform the buyer that in such event, buyer will receive written notice
             thereof.
      d.     Explain to the buyer that other agents in the office may potentially
             represent the seller – or other buyers who are in competition for the same
             property – and for this reason the buyer does not want to disclose
             confidential information to agents other than his or her designated agent.

      e.     Inform buyer that the sponsoring Broker is available to them for
             consultation and assistance. Inform buyer that the designated agent may
             disclose confidential information to the sponsoring Broker or other persons
             specified by the sponsoring Broker for purposes of seeking assistance for
             the client‘s benefit. The sponsoring Broker or such other person shall
             keep the information confidential.

      f.     Inform the buyer of the Broker‘s policy to (__) allow / (__) not allow a
             designated agent for buyers and sellers in a same agent transaction to act
             as a disclosed dual agent and obtain buyer‘s signature on a Dual Agency
             Disclosure form, if dual agency is permitted by Broker.

      g.     Explain to the buyer that the law allows for agents to show the same
             property to two buyer clients and that it is the Broker‘s policy to do so.
             When two buyer clients are interested in the same property the buyer
             agent (__) may / (__) may not write and negotiate offers from both of the
             buyers.

5.    Confidential Information
      a.     Inform the client that his/her designated agent has a duty not to disclose
             confidential information relating to the client. Explain to the client that the
             duty not to disclose this information remains until the client authorizes its
             disclosure or until the information becomes public from another source or
             as long as law does not otherwise require the disclosure of the
             information.

      b.     When acting as a seller‘s designated agent, inform the seller that the law
             requires you to disclose to the buyer material information relating to the
             physical condition of the property that is not otherwise reasonably
             discoverable by a buyer.

      c.     A designated agent should refrain from disclosing, disseminating or
             otherwise allowing confidential information of a client to be known by
             those who do not represent his or her client.


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             i.     No discussion of seller‘s motives, pricing strategies, urgency or
                    other confidential information shall be discussed in office meetings
                    or at any other time in the office.

             ii.    No discussion of buyer‘s qualifications, motivation or urgency,
                    offers made or being negotiated shall be discussed in the office.

             iii.   Agents should inform their clients or other appropriate parties
                    (lenders, attorneys, etc.) not to FAX documents containing
                    confidential information unless they call the agent first and the
                    agent is available to retrieve the information in a manner sufficient
                    to safeguard the confidentiality of the information.

             iv.    When posting information for the benefit of the office, no sales
                    prices shall be used where that information is to be seen by others.

             v.     Our listing files (__) do / (__) do not contain confidential
                    information (CMA, prior offers, etc.) and therefore (__) do / (__) do
                    not need to be secured.

             vi.    All contract pending files should be secured; either by the
                    administrative staff, available only to the designated agent; or by
                    the designated agent themselves.

             vii.   Closed sales are public information as of the closing date and do
                    not need to be secured unless there is a confidentiality agreement
                    signed.

      d.     The designated agent or the sponsoring Broker or other person specified
             by the sponsoring Broker who learns confidential information relating to a
             client during the term of a brokerage agreement may not use such
             information for his or her own personal gain.

6.    Ministerial Acts
      a.     The law considers you to be the legal agent of the party for whom you are
             working. However, in some limited circumstances, the agency law allows
             a licensee to perform certain acts on behalf of a customer and not be
             considered the customer‘s agent.

      b.     The agent should provide the customer with the Agency Disclosure
             pamphlet and obtain appropriate signatures, evidencing consent.

      c.     If the circumstances are such that the customer either does not need,
             does not seek, or the licensee cannot give representation, then

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             determination should be made as to whether ministerial acts can be
             performed.

      d.     The agent must disclose to a customer that when performing ministerial
             acts the licensee is not acting as the agent of the customer, by providing
             the customer with written disclosure. This disclosure should be made at a
             time intended to prevent disclosure of confidential information from a
             customer to the licensee performing ministerial acts.

7.    Escrow Deposits and Potential Disputes
Real Estate Salespersons and brokers often find themselves in the position of escrow
agent, charged with the task of safeguarding the purchaser‘s deposit for that period of
time existing between execution of a purchase agreement and the closing of the act of
sale. A few important tips that all brokers or salespersons who act as an escrow agent
should keep in mind are:

      a.     Deposits should be held in separate trust accounts maintained by the
             broker and not commingled with any of the broker‘s personal funds.

      b.     Deposits should be withdrawn from the broker trust account only with the
             mutual consent of both the buyer and the seller.

      c.     If the broker acting as escrow agent becomes aware of a dispute as to the
             ownership of the funds constituting the deposit, and cannot reach an
             agreement amongst the buyer and seller as to how to disburse the
             deposit, the broker must do one of the following within ninety (90) days
             from the date of the scheduled closing or the date upon which the broker
             became aware of the dispute in question, which ever occurs first:

             i.     Disburse the funds in accordance with the broker‘s reasonable
                    interpretation of the contract allocating the deposit to broker as
                    escrow agent. (Broker shall not disburse until 10 days have passed
                    since broker provided notice of his/her intent to disburse such
                    funds.)

             ii.    Deposit the funds into the registry of a court of competent
                    jurisdiction and proper venue and invoke a concursus proceeding.

             iii.   Deposit the disputed funds with the Louisiana Real Estate
                    Commission and request that they make an escrow disbursement
                    order.

Options ii and iii above are highly recommended should there be any uncertainty in the
mind of the broker as to the proper disbursement of the deposit.

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The form is available on the Louisiana Real Estate Commission website at
www.lrec.state.la.us.

C.    LOUISIANA REAL ESTATE COMMISSION RULES AND
      REGULATIONS
The current Louisiana Real Estate Commission Rules and Regulations may be obtained
from the Louisiana Real Estate Commission Rules and Regulations website at
www.lrec.state.la.us. Changes to the Louisiana Real Estate Commission rules which
were effective in 2006 include the following:


      1)     LA R.S. 37:1446(h) was amended to provide the three prong test upon
             which real estate salespersons or associates of brokers are to be
             considered independent contractors and not employees of the broker.
             Further information regarding independent contractor is provided in
             Section V, A of this toolkit.

      2)     LA R.S. 37:1449.1 was amended to require that Louisiana real estate
             licensees use a uniform purchase agreement form to make offers for the
             purchase of real estate. Further information regarding this revision to the
             law is provided in Section III, A of this toolkit.

      3)     LA R.S. 37:1459(d) was amended relative to the Real Estate Commission
             to provide for return of fees collected by unlicensed persons engaging in
             real estate activities.

D.    MULTIPLE OFFERS
1.    Introduction
A REALTOR® may receive many offers on a single property. The Multiple Listing
Handbook, the Code of Ethics of the National Association of REALTORS® (―NAR‖) as
well as Louisiana law govern the disclosure and presentation of multiple offers to a
seller.

2.    Multiple Listing Handbook Policy on Multiple Offers
At the NAR convention held in October 2005, key policy changes were made to the
Multiple Listing Policy regarding presentation of multiple offers. Some of the sections
changed or adopted included the following:




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Section 2.9 of the Handbook of Multiple Listing Policy was adopted to read:

      Disclosure of Existing Offers: Listing brokers, in response to inquiries
      from buyers or cooperating brokers shall, with the seller‘s approval,
      disclose the existence of offers on the property. Where disclosure is
      authorized, REALTORS® shall also disclose whether offers were obtained
      by the listing licensee, another licensee in the listing firm or by cooperating
      broker. A Multiple Listing Service (―MLS‖) may add this disclosure policy
      to its terms if desired.

This is an optional change to the Handbook of Multiple Listing Policy and is also
included as Standard of Practice 1-5 in the Code of Ethics and Standards of Practice of
the NAR. This policy, if adopted by a MLS, means a listing broker, if the information is
requested, and with seller‘s consent shall disclose the existence of other offers on the
property.

Section 2.2. of the Handbook of Multiple Listing Policy was adopted to read:

      Submission of Written Offers and Counteroffers: The listing broker
      shall submit to the seller all written offers until closing unless precluded by
      law, government rule, regulation, or agreed otherwise in writing between
      the seller and the listing broker. Unless the subsequent offer is contingent
      upon the termination of an existing contract, the listing broker shall
      recommend that the seller obtain the advice of legal counsel prior to
      acceptance of the subsequent offer.

      Participants representing buyers or tenants shall submit to the buyer or
      tenant all offers and counteroffers until acceptance, and shall recommend
      that buyers and tenants obtain legal advice where there is a question
      about whether a pre-existing contract has been terminated.

This is a mandatory change to the MLS Policy. All offers for property must be submitted
to a seller until a closing occurs.

3.    National Association of REALTORS® Standards on Multiple
      Offers
The NAR standards provide a REALTOR® must present all offers to his or her client in
a timely manner unless the client has waived such right. The NAR Standard of Practice
1-6 provides:

      REALTORS® shall submit offers and counteroffers objectively and as quickly as
      possible. (emphasis supplied)



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What is considered ―objective‖ presentation is sometimes difficult to determine.
Comments made by a REALTOR® in presenting multiple offers should be essentially
without speculation and based on fact.

The NAR Case #1-29 refers to an interpretation of multiple offers to be presented
objectively.

In that case, Buyer Brent was ready to make an offer and REALTOR® Angie helped
Buyer Brent prepare an offer to Seller Sue. The same day REALTOR® Rick called
REALTOR® Angie and told him he was bringing a purchase offer to REALTOR®
Angie‘s office for REALTOR® Angie to present to Seller Sue. REALTOR® Angie
responded that she would present Buyer Mark‘s offer that evening. REALTOR® Angie
presented both offers to Seller Sue. Seller Sue noted that both offers were for the full
price and there seemed to be little difference between them. REALTOR® Angie
advised Seller Sue that she had carefully pre-qualified Buyer Brent and was unsure if
REALTOR® Rick had pre-qualified his client and also that things sometimes get
complicated when a buyer representative is involved that could cause possible delays.
―You don‘t want that, do you?‖ asked REALTOR® Angie. Seller Sue agreed and
accepted Buyer Brent‘s offer and closed the transaction. Buyer Mark was upset that his
offer hadn‘t been accepted and called Seller Sue to find out why his offer hadn‘t been
accepted. Seller Sue explained she was concerned about whether Buyer Mark would
be able to obtain financing and was concerned about delays in closing since a buyer
representative was involved in the transaction. Buyer Mark informed REALTOR® Rick
and REALTOR® Rick filed an ethics complaint alleging that REALTOR® Angie‘s
comments had intentionally cast Buyer Mark‘s offer in an unflattering light, that her
comments about buyer representatives hindering the closing process had been
inaccurate and unfounded, and that REALTOR® Angie‘s presentation of the offer had
been subjective and biased and in violation of Article 1 as interpreted by Standard of
Practice 1-6. A hearing was held and the Hearing Panel concluded that REALTOR®
Angie‘s comments and overall presentation had not been objective as required by
Standard of Practice 1-6 and found REALTOR® Angie in violation of Article 1. The
Panel felt that REALTOR® Angie‘s comments were speculative and were not based on
fact.

NAR provides the following suggestions when considering multiple offers and
counteroffers.

Remember that the decisions about how offers will be presented, how offers will be
negotiated, whether counteroffers will be made and ultimately which offer, if any, will be
accepted, are made by the seller – not by the listing broker.

Remember that decisions about how counteroffers will be presented, how counteroffers
will be negotiated, and whether counteroffers will be accepted, are made by the buyer –
not the buyer‘s broker.


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When taking listings, explain to the sellers that receiving multiple, competing offers is a
possibility. Explain the various ways they may be dealt with (e.g., acceptance of the
―best‖ offer, informing all potential purchasers that other offers are on the table and
inviting them to make their best offer; countering one offer while putting the others to the
side; countering one offer while rejecting the other offers, etc.).

Explain the pluses and minuses of each approach (patience may result in an even
better offer; inviting each offeror to make their ―best‖ offer may produce a better offer[s]
than what is currently on the table – or may discourage offerors and result in their
pursuing other properties.)

Explain that your advice is just that, advice, and that your past experience cannot
guarantee what a particular buyer may do.

Remember – and remind the seller or buyer – that the decisions are theirs to make –
not yours, and that you are bound by their lawful and ethical instructions.

When entering into buyer representation agreements, explain to the buyers that you or
your firm may represent more than one buyer-client, that more than one of your clients
or your firm‘s clients may be interested in purchasing the same property, and how offers
and counteroffers will be negotiated if that happens.

Explain the pluses and minuses of various negotiating strategies (that a ―low‖ initial offer
may result in the buyer purchasing the desired property at less than the listed price – or
in another, higher offer from another buyer being accepted; that a full price offer may
result in the buyer purchasing the desired property while paying more than the seller
might have taken for the property, etc.)

4.     Multiple Counteroffers
Issues arising as to how to effectively counter multiple offers are even more difficult to
address. A counteroffer is nothing more than a new offer proposed by the original
offeree to the original offeror. A seller who simultaneously makes multiple counteroffers
may therefore expose himself to liability for breach of contract, because if more than
one of the multiple counteroffers is accepted, the seller would be unable to fulfill his
obligations to at least one of the purchasers.

If a buyer or seller decides to transmit two or more counteroffers simultaneously, they
must insure that conditional language be included in the second, third, fourth, etc.,
counteroffers. This conditional language should clearly and unequivocally state that
such counteroffer is contingent upon the expiration or declination of another
counteroffer, which the seller has already submitted to another party. While there is no
magic language to be used in order to establish such second and third counteroffers as
a back-up offer, the conditional language used should clearly specify the outstanding
offer which must be rejected for the counteroffer to be effective.

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There are never easy answers to the complex situations created by multiple offers or
multiple counteroffers. The Code of Ethics requires a REALTOR® to protect and
promote the REALTOR‘S® clients interest. The Code of Ethics further requires the
REALTOR® to be honest with all parties. The requirements of Louisiana law as well
as the Code of Ethics should be considered when multiple offers or counteroffers are
received.

5.      Louisiana Law on Multiple Offers
Louisiana law further reiterates that a real estate broker has the duty to communicate to
his principal/client all offers received and may be liable for damages for his failure to do
so. See Leggio v. Realty Mart, Inc. 303 So. 2nd 920 (La. Ct. App. 1st Cir.1974), writ
denied, 307 So. 2nd 629 (La. 1975). La. R.S. 9§3893 (A)(2)(b) provides that one of the
duties of a licensee representing clients is to timely present all offers to and from the
client, unless the client has waived this duty.

Further, the Rules and Regulations of the Louisiana Real Estate Commission Chapter
39, section 3901 provides, all written offers and counteroffers for the purchase of real
estate shall be presented to all buyers and/or sellers for their consideration and decision
immediately, without delay. The licensee, who presents an offer or counteroffer in a
real estate transaction, shall insure that the time of day and date the offer or
counteroffer was signed by the offering party, are included in the document as well as
on any acceptance, rejection or counteroffer.

6.      Annotation of Offers
There are several regulations issued in connection with Louisiana‘s License Law for
Real Estate which provide guidance in the annotation of offers. Chapter 39 § 3901
provides:

     A. All written offers and counter offers for the purchase of real estate shall be
        presented to all buyers and/or sellers for their consideration and decision
        immediately, without delay.

     B. The licensee who prepares an offer or counter offer in a real estate
        transaction shall ensure that the time of day and date the offer or counter
        offer was signed by the offering party are included in the document.

     C. The licensee who presents an offer or counter offer in a real estate
        transaction shall ensure that the time of day and date the offer or counter
        offer was accepted, rejected or countered are included in the document.




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      Section 3907 provides:

   A. All written offers and counter offers presented to a seller and/or buyer and
      not accepted shall be clearly marked as rejected and signed by the seller
      and/or buyer. In any circumstance in which a seller and/or buyer refuses
      to sign a rejected offer or counter offer, the licensee making the
      presentation of the offer or counter offer shall annotate this fact indicating
      the time of day and date of the rejection of the offer or counter offer by the
      seller and/or buyer. A copy of the rejected offer or counter offer signed by
      the seller and/or buyer, or a copy of the rejected offer or counter offer
      bearing the annotation of the licensee, shall be provided to the buyer
      and/or seller, and the rejected offer or counter offer shall be returned to
      the prospective buyer and/or seller within five days after the signature or
      annotation is affixed to the document.

      Section 3909 provides:

      A. In the event the owner (seller) is not available and grants authority to
      the listing broker to reject an offer or counter offer, the listing broker or a
      licensee designated by the listing broker shall mark the offer or counter
      offer as rejected and sign the offer or counter offer as such in lieu of the
      owner (seller), but the listing broker or licensee designated by the listing
      broker shall nevertheless forward a copy of the rejected written offer or
      counter offer to the owner (seller) for his signature acknowledging the
      rejection of the offer or counter offer. The copy of the rejected offer or
      counter offer signed by the owner (seller) shall be retained in the files of
      the listing broker. In the case of a cooperative transaction, the cooperating
      listing broker shall provide a copy of the rejected offer or counter offer
      bearing the signature of the owner to the cooperating selling broker within
      five days after the signed rejection is received from the owner.

These regulations provide that the licensee has certain duties to present offers or
counteroffers immediately and to provide the annotation on the offers as set forth in the
statute.

          Offer Predicated Upon Failure or Expiration of Existing Offer:
          Seller hereby offers to sell the property described herein
          pursuant to the terms and conditions of this Purchase
          Agreement in the event that the Purchase Agreement for the
          property described herein submitted by the seller to
          ____________ as purchaser thereunder, dated ___________, (the
          “Original Offer”) expires without having been accepted, or
          otherwise becomes null and void for any reason. The above
          described Original Offer expires on the ____ day of
          _________________ at ____ p.m./a.m.

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E.     AFTER THE FACT REFERRAL FEES
Some REALTORS® have received requests for referral fees from relocation companies
after the listing of a property.

Section 1447 of the Louisiana Real Estate License Law states that ―it is unlawful for any
person including but not limited to a relocation company, to directly or indirectly solicit or
request a referral fee or similar payment for the referral of a buyer or seller unless the
person seeking the referral fee has reasonable cause‖. Reasonable cause is defined as
the following:

       a)     the person seeking the referral fee introduced the client to the licensee or
              registrant from whom the referral fee is being sought; or
       b)     the person seeking the referral fee has a written contractual relationship
              with the licensee or registrant for a referral fee or similar payment; and
       c)     the licensee or registrant has received the client referral prior to the client
              contracting to buy or list real estate with the licensee or registrant.

Section 1447 furthermore declares that it is unlawful to demand a referral fee from a
licensee or registrant when reasonable cause, as defined above, does not exist. The
demand for a referral fee when reasonable cause does not exist constitutes interference
with a real estate brokerage relationship, and a threat to reduce relocation benefits in
order to generate a referral fee from the licensee when reasonable cause does not exist
is specifically prohibited.

Any party seeking damages for a violation of Section 1447 may be awarded actual
damages plus attorneys‘ fees if they prevail.

Additionally, even if a referral fee is warranted under the circumstances, several
applicable rules and regulations of the Louisiana Real Estate Commission may apply.

Under § 6303 of the Rules and Regulations of the Louisiana Real Estate Commission, a
licensed Louisiana broker can divide or share a real estate commission with a broker
licensed in another jurisdiction whenever the broker licensed in the other jurisdiction
acts only as a referral agent who is not involved in actual negotiations, execution of
documents, collections of rent, management of property, or other real estate activity
unless the activity involves more than the mere referral of a client or customer to a
licensed Louisiana broker.

§ 5102 of the Rules and Regulations of the Louisiana Real Estate Commission
addresses circumstances under which a Louisiana broker may cooperate with a
licensed broker of another state in the sale, lease, management, or auction or real
property located in Louisiana. Some of the conditions include: that the sale be handled
under the direct supervision and control of the Louisiana broker, monies collected be
held in the Louisiana broker‘s sales account, a copy of the cooperating agreement must

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be filed with the real estate commission prior to any activity with respect thereto and all
fees and commissions received from the cooperative transaction must be paid to the
Louisiana broker who in turn compensates the out of state broker. § 6302 provides that
percentage of fees or commissions to be received by the Louisiana broker and the out
of state broker shall be negotiated between the two parties and shall be agreed up on in
writing by the parties in their cooperative agreement.




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       1.     Sample Letter to Relocation Company Requesting
              After the Fact Referral
                                 [Date]_______________

[Name]________________
[Address]______________
[City, State, Zip]_________

       Re:    Request for Referral Fee

To Whom It May Concern:

You have requested that we provide you with a referral fee in connection with our
handling of the following real estate transaction: [Describe real estate transaction and
representation].

The Louisiana Real Estate License Law LSA R.S. 37:1430, et seq (the ―License Law‖)
strictly governs when the sharing or delivery of a referral fee is permissible in Louisiana.

Section 1447 of the Louisiana Real Estate License Law states that ―it is unlawful for any
person including but not limited to a relocation company, to directly or indirectly solicit or
request a referral fee or similar payment for the referral of a buyer or seller unless the
person seeking the referral fee has reasonable cause‖. Reasonable cause is defined as
the following:

(a)    the person seeking the referral fee introduced the client to the licensee or
       registrant from whom the referral fee is being sought; or
(b)    the person seeking the referral fee has a written contractual relationship with the
       licensee or registrant for a referral fee or similar payment; and
(c)    the licensee or registrant has received the client referral prior to the client
       contracting to buy or list real estate with the licensee or registrant.

Section 1447 furthermore declares that it is unlawful to demand a referral fee from a
licensee or registrant when reasonable cause, as defined above, does not exist. The
demand for a referral fee when reasonable cause does not exist constitutes interference
with a real estate brokerage relationship. In the cases of relocation companies, even
the mere threat to reduce relocation benefits in order to generate a referral fee from the
licensee when reasonable cause does not exist is prohibited and specifically constitutes
interference with a real estate brokerage relationship under the License Law.

Any party seeking damages for a violation of Section 1447 may be awarded actual
damages plus attorneys‘ fees if they prevail.



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It should further be noted that Art. 16 of the Realtor‘s Code of Ethics provides that
REALTORS® should not engage in the practice of, or take any action which is
inconsistent with the agency or other exclusive relationship recognized by law that other
REALTOR® have with clients.

[Add the following three paragraphs only if party requesting referral is from out of state.]
Additionally, even if a referral fee is warranted, please note due to your non-Louisiana
status, that several applicable rules and regulations of the Louisiana Real Estate
Commission must be considered when a referral fee is to be shared between a
Louisiana broker and a broker of another state.

Section 5101 of the Rules and Regulations of the Louisiana Real Estate Commission
addresses circumstances under which a Louisiana broker may cooperate with a
licensed broker of another state in the sale, lease, management, or auction of real
property located in Louisiana. Some of the conditions include that: The sale be
handled under the direct supervision and control of the Louisiana broker, monies
collected be held in the Louisiana broker‘s sales account, a copy of the cooperating
agreement must be filed with the real estate commission prior to any activity with
respect thereto and all fees and commissions received from the cooperative transaction
must be paid to the Louisiana broker who in turn compensates the out of state broker.
The percentage of fees or commissions to be received the Louisiana broker and the out
of state broker shall be negotiated between the two parties and shall be agreed upon in
writing by the parties in the cooperative agreement.

Section 5103 of the Rules and Regulations of the Louisiana Real Estate Commission,
confirms that a licensed Louisiana broker can divide or share a real estate commission
with a broker licensed in another jurisdiction even when the broker licensed in the other
jurisdiction acts only as a referral agent who is not involved in actual negotiations,
execution of documents, collections of rent, management of property, or other real
estate activity. In such cases, the cooperative agreement described in Section 5101
above, would not be necessary.

In the present instance, we do not believe there is reasonable cause for the payment of
a referral fee. You have neither introduced us to the client, nor do we have a written
contract with you for the sharing of such a fee. Should you have any questions
concerning the foregoing, or believe that we are incorrect in this understanding, we
invite you to respond.

Very truly yours,

[Broker‘s Signature]________________
[Broker‘s Name]___________________




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III.   PURCHASE AGREEMENT AND CLOSING ISSUES
Louisiana Residential Agreement to Buy or Sell
        The Law Requiring the Statewide Purchase Agreement Form
        Louisiana Residential Agreement to Buy or Sell Form
        Frequently Asked Questions
        Addenda
Title Issues/Good Funds
        The Necessity of Good Funds at Closing
Deposits
        Disbursement of Security Deposits
        Disbursement of Security Deposits at Closing
        Disbursement of Security Deposits in the Absence of Closing
Check Kiting
        What is Check Kiting?
        An Example of Check Kiting
        Check Kiting and Real Estate Transactions
        Signs of Check Kiting
Pre-approval Letters
        Sample Pre-approval Letter
Immovable/Movable Descriptions in Purchase Agreement
Title Insurance
        What is Title Insurance?
        Why Purchase Title Insurance?
        How is Title Insurance Purchased?




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A.    LOUISIANA RESIDENTIAL AGREEMENT TO BUY OR
      SELL
1.    The Law requiring the Louisiana Residential Agreement to Buy
      or Sell Form
In 2006, the Legislature passed Act 333 which provides that real estate licensees in the
State of Louisiana shall use the Louisiana Residential Agreement to Buy or Sell form
(the ―Statewide Purchase Agreement Form‖) prescribed by the Louisiana Real Estate
Commission (―LREC‖) in making their offer to purchase or sell residential real property.
The statute provides:

             A. A licensee representing either the buyer or seller of residential
             real property shall complete the Purchase Agreement Form
             prescribed by the Louisiana Real Estate Commission in making an
             offer to purchase or sell residential real property. No person shall
             alter the Purchase Agreement Form; however, addendums or
             amendments to the Purchase Agreement Form may be utilized.

             B. The promulgation of this form shall be conducted in accordance
             with the Administrative Procedure Act no later than July 1, 2007.

             C.     (1)    As used in this Section, the term "Purchase
             Agreement Form" shall mean a document in a form prescribed by
             the Louisiana Real Estate Commission as a written agreement for
             the sale or purchase of residential real property.

                    (2) As used in this Section, the term "residential real
             property" means real property consisting of one or not more than
             four residential dwelling units, which are buildings or structures
             each of which are occupied or intended for occupancy as single
             family residences.

The purpose of the law was to assist real estate licensees, many of whom now have
clientele statewide, with a uniform starting contract to begin their negotiations. The
Statewide Purchase Agreement Form is not intended to mandate the terms of sale but
to assist licensees with a central beginning contract.

2.    Louisiana Residential Agreement to Buy or Sell Form
      The LREC Statewide Purchase Agreement Form can be found on LREC website
      at www.lrec.state.la.us. Licensee‘s may choose a letter or legal size form.



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3.    Frequently Asked Questions
Who is required to use the Statewide Purchase Agreement Form?

All licensees representing either the Buyer or Seller of residential real property shall
complete the Statewide Purchase Agreement Form prescribed by the LREC in making
an offer to purchase or sell residential real property.

When do real estate licensees need to start using the Statewide Purchase
Agreement Form?

The Statewide Purchase Agreement Form shall be used by licensees on all sales of
residential real property on or after January 1, 2008.

What is the definition of “residential real property”?

―Residential real property‖ for purposes of this law means real property consisting of
one or not more than four residential dwelling units which are buildings or structures
each of which are occupied or intended for occupancy as single family residences.

Do all Buyers and Sellers have to use the new Statewide Purchase Agreement
Form?

Buyers and Sellers who do not use the licensed real estate agents or brokers are not
required to use the Statewide Purchase Agreement Form.

Where can I obtain a copy of the Statewide Purchase Agreement Form?

The form is available on the LREC website at www.lrec.state.la.us.         Further, the
Louisiana REALTORS® has copies of the form available on                    its website
www.lrec.state.la.us.

Do I need to use this Statewide Purchase Agreement Form for undeveloped land?

No. This Statewide Purchase Agreement Form only needs to be used for residential
real property and not undeveloped nonresidential land.

Do I need to use this Statewide Purchase Agreement Form for commercial
property?

No. This Statewide Purchase Agreement Form only needs to be used for residential
real property.




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Do I need to use this Statewide Purchase Agreement Form for condominiums?

Yes. Condominiums are generally included in the definition of residential real property.

Do I need to use this Statewide Purchase Agreement Form for new construction
of homes?

Yes. Residential real property generally includes new homes.

What type of addendum can I attach to the Statewide Purchase Agreement Form?

Any addendum desired by the Buyer or Seller making their offer or counteroffer can be
attached to the Statewide Purchase Agreement Form. The LREC has plans to have
certain addenda as samples available on its website. These addenda shall not be
mandated, but are just forms for use if desired by licensees.

Is there a limit on what I can include on an addendum to the Statewide Purchase
Agreement Form?

No. The legislation mandating the form did not include a limit on addenda. Any term of
an offer or counteroffer may be included on an addendum.

Can the Statewide Purchase Agreement Form be altered?

No. The pre-printed portions of the Statewide Purchase Agreement Form itself cannot
be altered. No strike-through of the pre-existing portions of the Statewide Purchase
Agreement Form is allowed and no handwritten or typed additions to the pre-printed
form itself such as in margins is allowed. There are blank lines in the Statewide
Purchase Agreement Form for handwritten or typed additional terms. Lines 288 through
297 of the Statewide Purchase Agreement Form also provide blank lines for adding
additional terms. All other revisions to the Statewide Purchase Agreement Form shall
be made in the form of addenda or amendments to the Statewide Purchase Agreement
Form.

Is there a possible sanction if a licensee fails to use the Statewide Purchase
Agreement Form?

Yes, as with any other provision of the license law, potentially the failure of a licensee to
comply with the statute can result in a licensee being sanctioned or other penalty.

Does the Statewide Purchase Agreement Form count deadlines by calendar or
business days?

The Statewide Purchase Agreement Form uses calendar days throughout the
agreement. This means all days count. There are no days that are not counted such
as holidays or weekends. A calendar day ends at 12:00 midnight in Louisiana.
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Is the Statewide Purchase Agreement Form on letter or legal size paper?

The Statewide Purchase Agreement Form will print on letter size paper from the LREC
website. There is no Louisiana Real Estate Commission rule requiring a specific page
size.

What about font size for the Statewide Purchase Agreement Form?

The font size should be at least 12 type per LREC rule.

The Statewide Purchase Agreement Form provides circumstances when the
deposit will be returned to the Buyer, by the Seller. Does this mean licensees can
return the deposit without complying with the Louisiana Real Estate Commission
rules?

No, the LREC rules on deposit still apply. See LREC Rules Chapter 29.

Do I need to wait until after January 1, 2008 to begin using the Statewide
Purchase Agreement Form?

No. You can start using the form now if you want to use it.

What happens if the Statewide Purchase Agreement Form is electronically
transmitted (faxed) and through the transmission process the font is reduced
below 12pt type as required by the Louisiana Real Estate Commission? Is this
still a valid purchase agreement?

The LREC rule is that the Louisiana Statewide Purchase Agreement form shall be in 12
pt font or greater. The intent of the rule from the discussion of the LREC on the date
the rule was enacted was to address the initial font size of the contract. We do not
believe that the LREC addressed the reducing type size through the transmission
process. Further, the mandate of a statewide contract does not change the general
obligations laws of the Louisiana Civil Code and therefore it is very unlikely a Court
would rule that a contract was unenforceable merely because upon the transmission of
the document the font size was reduced from 12 pt font.

Does the Statewide Purchase Agreement Form use Central Standard Time or
Daylight Savings Time?

The Statewide Purchase Agreement Form uses ―Louisiana time.‖ The time it is in
Louisiana, whether Central Standard Time or Daylight Savings Time, prevails.




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4.    Addenda
Licensees may add any addenda they wish to the mandated form in order to provide the
terms of their deal with their client. Some sample addenda are included on Louisiana
REALTORS® website:

      www.larealtors.org/members/resources/respruchaseagmt.asp

These include:

      1)     Condominium Addendum;
      2)     Contingency Addendum;
      3)     Extension of Offer Addendum;
      4)     General Addendum;
      5)     Counter Offer Addendum;
      6)     Addendum on Wood Destroying Insects; and
      7)     Addendum on Early Occupancy Agreement.

B.    TITLE ISSUES/GOOD FUNDS
1.    The Necessity of Good Funds at Closing
Louisiana requires ―good funds‖ be in hand prior to closing. The Louisiana statutes
governing title insurance is located at Louisiana Revised Statute 22:2092.11.
Technically, a closing attorney or settlement agent is required to comply with the
requirements of the aforementioned statute only if such closing attorney or settlement
agent is also a title insurer or title insurance agent. Many closing attorneys and
settlement agents are also title insurers or title insurance agents as well. Regardless of
whether the closing attorney or agent is also a title insurance agent, the requirements
implemented by this statute have become common place within the real estate industry
to the extent that the requirement of ―good funds‖ has become customary and is often
considered to be standard practice.

In accordance with Louisiana Revised Statute 22: 2092.11 ―good funds‖ constitute the
following:

             a) Cash.

            (b) Wire transfers unconditionally received by the title insurer or the title
      insurance agent or the depository of the insurer or agent.

              (c) A depository check, including a certified check, cashier's check, or
      teller's check as defined by the Expedited Funds Availability Act, 12 U.S.C. 4001
      et seq.

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               (d) A personal check or other item which has been presented for payment
      and for which funds have been unconditionally collected by the title insurer or the
      title insurance agent.

              (e) Credit transfers through the Automated Clearing House which have
      been deemed available by the depository institution receiving the credit. The
      credit shall conform to the operating rules established by the National Automated
      Clearing House Association.

             (f) Checks unconditionally issued by mortgage lenders which are subject
      to periodic audit by the Department of Housing and Urban Development or the
      secretary of Veterans Affairs, and which are drawn on financial institutions
      insured by the Federal Deposit Insurance Corporation.

             (g) A check or checks, drawn on the trust account or sales escrow account
      of the real estate broker licensed under R.S. 37:1430 et seq., in an amount up to
      the amount of the then current guarantee provided by the Real Estate Recovery
      Fund as established in R.S. 37:1463.

            (h) A personal or commercial check or checks in an aggregate amount not
      exceeding two thousand five hundred dollars per closing if the settlement agent
      making the deposit has reasonable and prudent grounds to believe that the
      deposit will be irrevocably credited to the settlement agent's trust or escrow
      account.

             (i) Checks unconditionally issued by credit unions chartered by applicable
      state or federal statute.

             (j) Checks unconditionally issued by municipalities or political subdivisions
      of the state of Louisiana.

             (k) Checks drawn on the escrow accounts of title insurers or title insurance
      agents when the title insurance agent issuing the check shall have certified by
      affidavit the following:

                    (i) That funds drawn at the time of the real estate closing
                    and settlement are from an escrow account as defined by
                    R.S. 22:2092.2(6).

                    (ii) That the funds disbursed are from those funds received
                    by the title insurance agent at the time of the real estate
                    closing and settlement and were in one of the forms
                    enumerated in Paragraph B(3) of this Subsection.

―Good funds‖ will generally be in the form of cash, wire transfers, certified or cashier
checks, or personal checks not exceeding the $2,500.00 limit prescribed by Louisiana
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Revised Statute 22:2092.11 (B)(3)(h). Since most real estate transactions will require
the purchaser to provide funds at closing, REALTORS representing such purchasers
may wish to notify their purchasers of the requirement to present ―good funds‖ at
closing, in order to avoid unnecessary delay of the closing.

C.    DEPOSITS
1.    Disbursement of Security Deposits

In many real estate transactions, REALTORS are responsible for holding security
deposits, deposited with them by the prospective purchaser of the real estate. These
deposits are often disbursed by the REALTORS at the time of closing. In the event
that the real estate transaction closing does not occur, REALTORS are often faced
with the dilemma of what to do with the security deposit.

2.    Disbursement of Security Deposits at Closing
Brokers are permitted to disburse deposits from their escrow accounts as permitted by
Section 2715 of the Louisiana Real Estate Commission Rules and Regulations. Section
2715 provides that such deposit shall not be withdrawn except under the following
circumstances:

      1.     upon mutual written consent of all parties having an interest in the funds;
      2.     upon Commission order;
      3.     upon court order;
      4.     to deposit funds into the registry of the court in a concursus proceeding;
      5.     for the purpose of depositing the funds with the Commission pursuant to
             Chapter 29;
      6.     to disburse funds from a sales escrow checking account to the appropriate
             party upon a reasonable interpretation of a contract for the sale of real
             estate;
      7.     for the purpose of returning the funds to a buyer at the time of closing:
      8.     to cover the payment of service charges on sales escrow checking
             accounts, rental trust checking accounts, and security deposit trust
             checking accounts with such payment being made from funds deposited
             into the accounts by the broker;
      9.     upon approval by the Commission in connection with the sale or
             acquisition of a licensed entity; and
      10.    to comply with the provisions of LA R.S. 9:3251 or any other state or
             federal statute governing the transfer of rents, security deposits or other
             escrow funds.

In accordance with this rule, a broker is permitted to make disbursement of a deposit at
closing directly to a title company or closing agent, only if he or she has received the
written consent of the buyer and seller. Due to the fact that many title companies or
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closing agents often structure their closing in such a way that they themselves collect
the security deposit directly from the purchaser‘s agent, such agents should be
particularly careful to make sure that the parties have agreed by written consent to a
disbursement of the security deposit in this manner. In many instances, this written
consent may be interpreted through a reading of the terms of the purchase agreement
itself or some other written agreement between the parties. A provision that the
deposit will be disbursed to the seller at closing and credited as a credit toward the
purchase price of the purchaser is fairly common. However, unless there is written
agreement providing for the disbursement of the deposit, the deposit should be
returned to the buyer upon the occurrence of a closing in accordance with
subparagraph 7.

3.    Disbursement of Security Deposits in the Absence of Closing
In the absence of a dispute as to the proper disbursement of the deposit, the broker
should disburse the deposit in accordance with the written instructions of the parties.
However, when a real estate transaction fails to close, the parties may dispute the
cause of the failure, and thereafter, to whom the deposit should be delivered.

If the broker acting as escrow agent becomes aware of a dispute as to the ownership of
the funds constituting the deposit, and an agreement cannot be reached between the
buyer and seller as to how to disburse the deposit, in accordance with Section 2901 of
the rules and regulations of the Louisiana Real Estate Commission, the broker must do
one of the following within ninety (90) days from the date of the scheduled closing or the
date upon which the broker became aware of the dispute in question, which ever occurs
first:

          i) Disburse the funds upon the written and mutual consent of all of the
               parties involved;
          ii) Disburse the funds upon a reasonable interpretation of the contract that
               authorizes the broker to hold the funds. Disbursement may not occur until
               10 days after the broker has sent written notice to all parties and
               licensees;
          iii) Place the funds into the registry of any court of competent jurisdiction and
               proper venue through a concursus proceeding;
          *iv) Place the funds, including original promissory notes, with the Louisiana
               Real Estate Commission, with a request for an escrow disbursement
               order. This request shall include the names and last known address of the
               parties to the transaction, a copy of the purchase agreement, all forms
               required by the commission, and copies of any other documents relative to
               the dispute. The licensees and sponsoring brokers involved in the
               transaction shall appear when the dispute is brought before the
               commission (*This may no longer be an option.);
          v) Disburse the funds upon the order of a court of competent jurisdiction.


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Options ii) and iii) above are recommended should there be any uncertainty in the mind
of the broker as to the proper disbursement of the deposit.

D.    CHECK KITING
1.    What is Check Kiting?
Check kiting is a form of bank fraud which occurs when the kiter (―the individual
committing the fraud) opens accounts at two or more financial institutions and proceeds
to write checks on the accounts, for which there are insufficient funds within the
accounts to cover the amounts of such checks. The scheme is often, at least
temporarily successful because the kiter attempts to cover any insufficiencies by taking
advantage of the ―float‖. The float is the common term for the time in which the
depository bank credits the kiter‘s deposit but prior to the time in which it presents the
deposited check to the drawee bank for payment. The kiter often keeps the scheme
going by depositing another check in the overdrawn account written on an account at
another bank, which also holds insufficient funds.

2.    An Example of Check Kiting
A check kiter might open an account at two separate banks named Bank A and Bank B.
The kiter opens each such account by depositing $200.00 in each account. The kiter
often may choose to use banks which are geographically separated by some distance,
in order to gain additional time between the deposit of a fraudulent check and its
presentment to the bank upon which it is drawn. The kiter might then deposit at Bank A
a check drawn on funds from the account at Bank B, in an amount of $1,000.00. (Of
course the account at Bank B contains only $200.00 and thus is insufficient to cover a
deposit made at Bank A for $1000.00.) Bank A, believing the check deposited in its
account to be valid, credits the kiter with a $1,000.00 deposit and the kiter later
withdraws $1,000.00 from his or her account at Bank A. Meanwhile, in the time
between the kiter‘s deposit of its $1,000.00 check at Bank A and the time in which Bank
A submits such check to Bank B for payment, the check kiter returns to Bank B and
deposits a check in the amount of $1,000.00 or greater, drawn on his or her account at
Bank A (or some other Bank, if the scheme involves multiple banks). Once again Bank
B credits the kiter‘s account at Bank B with such amount and in due time forwards the
kiter‘s check to Bank A for payment. This fraud may go on and on in a circular fashion
until such time as one of the Bank‘s involved in the scheme wises up to the check kiter‘s
fraudulent behavior. One can imagine how difficult it might be to spot a check kiting
scheme when such scheme might involve numerous banks and not just two small
checking accounts as described in the example above.

3.    Check Kiting and Real Estate Transactions
REALTORS and closing attorneys are often asked to handle or safeguard their client‘s
money. For those working in the real estate industry, it is very important to understand

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how check kiting works so that when a broker or real estate attorney is presented with a
fraudulent check they may be able to discover the fraud prior to disbursing any funds
which the REALTOR® or closing attorney may be holding in connection with the
proposed real estate transaction.

One method of combating possible check kiting is to wait the requisite amount of time
between the deposit of the check in question and the time needed for the bank to
present such check to the bank upon which it is drawn and receive an official notice as
to whether or not the check represents good funds. Other measures of protection may
include requiring that such funds be wired or else delivered by certified or cashier‘s
check to the REALTOR® or closing attorney. This method of insuring good funds is
often utilized and highly recommended, particularly in instances where the REALTOR®
or closing attorney is unfamiliar with the individual presenting him or her with such
funds.

4.    Signs of Check Kiting
While many of the signs of check kiting may not be available to REALTORS or closing
attorneys (many of the normal signs involved in check kiting are available only to those
with access to the check kiter‘s account records, such as banks, who often implement
check kiting reviews and/or the use of check kiting preventive software in order to
prevent such fraud), there are some signs that a check kiting scheme is in effect, that
REALTOR® and closing attorneys should be aware of. Such signs may include: 1) a
relatively low check number indicating that the checking account upon which the check
is drawn is a relatively new account; and 2) the check is drawn on a non-local bank or
other bank of considerable distance to the location where the real estate transaction is
to take place. REALTORS® or closing attorneys who suspect a check kiting scheme
may be in effect should take extra precautions to insure that the checks they hold
represent valid funds.

E.    PRE-APPROVAL LETTERS
Substantial work has been completed by a committee of the Louisiana Mortgage
Lenders Association, the Louisiana REALTORS Association and the State of
Louisiana, Office of Financial Institutions to provide a form that lenders can use to be
used in real estate transactions showing the pre-approval of a potential buyer for
purchase of residential property. Attached is the latest draft of the pre-approval letter
which is still subject to review of the Office of Financial Institutions.




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1.      Sample Pre-approval Letter
January 1, 2005

John and Mary Homeowner
123 Rental Ave.
Anywhere, LA 70000

RE:     Type of Loan: ___Conv ___FHA ___VA ___RD ___Non-Prime ___Other
        Loan Amount: $_________
        Sales Price:    $_________
        Loan Term: ___30 Yr. Fix ____15 Yr. Fix ____ ARM ___ Balloon ___Other
        Max LTV Ratio: ____%
        Other Loan Characteristics: _________________________________________________

        ________________________________________________________________________

        ________________________________________________________________________

John & Mary,

I would like to thank you for the opportunity to assist you with your mortgage loan. This letter is to confirm that
you have provided __________________(COMPANY NAME) ____ verbally _____ in writing (CHECK
ONE)with information about your income, available cash for a down payment and payment of closing costs/pre-
paids, debts and other assets. _________________ (COMPANY NAME) _____ has _____ has not (CHECK
ONE) reviewed your credit report and credit score. _________________ (COMPANY NAME) ____has
_____has not (CHECK ONE) submitted your application through an automated underwriting system. In
addition _________________ (COMPANY NAME) _____ has _____ has not (CHECK ONE) reviewed
documentation in support of information provided on your application.

Based on the information that you have provided and has been reviewed by _________________ (COMPANY
NAME), as described above, _________________ (COMPANY NAME) has determined that you are eligible
and qualified to meet the financial requirements of the above described loan.

This is a Pre-Approval Only. This does not constitute a Final Loan Approval. Final Loan Approval of the
loan requires: (1) _________________ (COMPANY NAME) to verify the information you provided; (2) your
financial status and credit report to remain substantially the same until the loan closes; (3) the collateral for the
loan to satisfy the lender‘s requirements, including appraisal, title, survey, condition, and insurance; (4) the
described loan to remain available in the market; (5) your execution of loan documents as the lender requires;
and (6) the following additional items:

        (a). Additional item number one.
        (b). Additional item number two.
        (c). Additional item number three.

This letter is an approved format by the Louisiana Mortgage Lenders Association and has also been endorsed
by the Louisiana REALTORS® Association and the State of Louisiana, Office of Financial Institutions. The
Members of the Louisiana Mortgage Lenders Association using this letter strictly adhere to the code of ethics of
LMLA which can be viewed at www.lmla.com

Sincerely,

John Doe
ABC Mortgage Company, LLC
LA License #_______ or ____Exempt



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F.    IMMOVABLE/MOVABLE DESCRIPTIONS IN PURCHASE
      AGREEMENT
The Louisiana Supreme Court issued a ruling in the case of ―Willis-Knighton Medical
Center vs. Caddo Shreveport Sales and Use Tax Commission‖ 2005 WL737481(La.
2005) on April 1, 2005. This case substantially changes the test for the determination of
whether an item in a property is considered a component part of the house or building
or is considered a movable that the seller may take with him when he leaves. For
example, is the carpet in the living room of the house part of the house (an immovable)
or removable by the seller (a movable)?

Facts of the Willis –Knighton case: Willis-Knighton Medical Center brought a suit
against its local sales and use tax commission demanding a refund of taxes it believed it
overpaid based on the premise that various medical equipment owned by it were
component parts of the hospital building and thus exempt from sales and use taxes due
to such medical equipment‘s classification as immovable property. The local tax
commission denied Willis-Knighton‘s claim arguing that such medical equipment, while
physically attached to the structure of the hospital building, remained movable property
and thus subject to sales and use taxes.

Louisiana Supreme Court Holding and Analysis: The Louisiana Supreme Court
held that Louisiana Civil Code Article 466 was the applicable provision to determine
whether or not the medical equipment was attached to the building and therefore were
indeed immovable property.

Louisiana Civil Code Article 466 provides as follows:

Art. 466. Component parts of buildings or other constructions

Things permanently attached to a building or other construction, such as plumbing,
heating, cooling, electrical or other installations, are its components.

Things are considered permanently attached if they cannot be removed without
substantial damage to themselves or to the immovable to which they are attached.

The Louisiana Supreme Court relied upon a ―strict‖ reading of article 466 and a strong
adherence to the concept established by Louisiana Code Article 9, (―when a law is clear
and unambiguous and its application does not lead to absurd consequences, the law
shall be applied as written and no further interpretation may be made in search of the
intent of the legislature‖). The Supreme Court held the ―societal expectations‖ test
previously applied by some courts to be an improper method of determining the status
of property as immovable or movable. The Court found the second paragraph of Article
466 was applicable and that the medical equipment could be removed without
substantial damage to the medical equipment or to the immovable to which it was
attached. Therefore the medical equipment was not a component part of the building.
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Louisiana Supreme Court Rehearing and Analysis: In a rehearing of the Willis-
Knighton case for the sole purpose of considering the retroactivity of its decision, the
Louisiana Supreme Court concluded that while its decision in Willis-Knighton did not
represent a new principle of law and thus would normally be permitted retroactive
application, the frequency with which the Louisiana Appellate Courts applied the
―societal expectations‖ test had created sufficient uncertainty as to the definition of a
component part of an immovable, and thus to apply the Louisiana Supreme Court‘s
ruling in Willis-Knighton retroactively, would undoubtedly result in inequity and
potentially invite undesired litigation subjecting previously consummated transactions to
unnecessary attack.

Problematic Issues considering the Willis-Knighton Decision: The Court‘s holding
that for movable property to become a component part of an immovable, it must be
permanently attached to the immovables such that it can not be removed without
substantial damage to either itself or the immovable, created much discussion in the
state legislature. Formerly, the ―societal expectations‖ test allowed numerous items
such as doors, light fixtures, windows, sinks, toilets, flooring, carpeting, etc. to be
properly classified as component parts of an immovable whether or not there would be
substantial damage to immovable or the item if removed. Thus, an act of sale or
mortgage covering immovable property described therein also covered those items
formerly classified as its component parts (example doors in the building). However,
today, in light of the Willis-Knighton holding, such items would not be classified as part
of the immovable property being sold or mortgaged and thus a bill of sale properly
conveying such items and/or granting a security interest therein would be necessary in
order to effectuate those transactions which were previously completed through the
execution of a single act of sale or mortgage.

Solutions: In the 2005 legislative session, several bills were proposed designed to
address the problems raised by the Willis-Knighton decision. The following Act No. 301
of the 2005 Regular Legislative Session was passed and signed into law by the
Governor on June 29, 2005, becoming effective immediately. Act 301 provides in part:

Section 1. Civil Code Article 466 is hereby amended and reenacted to read as follows:

Art. 466. Component parts of buildings or other constructions an immovable

Things permanently attached to a building or other construction, such as plumbing,
heating, cooling, electrical or other installations, an immovable are its component parts.

             Things are considered permanently attached if they cannot be removed
without substantial damage to themselves or to the immovable to which they are
attached:    Things, such as plumbing, heating, cooling, electrical or other
installations, are component parts of an immovable as a matter of law.


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     Other things are considered to be permanently attached to an immovable if
they cannot be removed without substantial damage to themselves or to the
immovable or if, according to prevailing notions in society, they are considered to
be component parts of an immovable.

However, it is likely more litigation will follow regarding the issue of what is ―prevailing
notions in society‖ as set forth in the statute. We therefore recommend REALTORS
consider including in any purchase agreement language that all installed movable
property located in the property shall be sold to the buyer and not removed by the seller.
Depending on the terms of the sale, sample language for this clause could state after
the legal description of the property to be sold:

       …… including all buildings, structures, component parts, and all installed,
       built-in, permanently attached improvements, together with all fences,
       security systems, all installed speakers or sound systems, all landscaping,
       all outside TV antennas, all satellite dishes, all installed and/or built-in
       appliances, all ceiling fans, all air conditioning or heating systems
       including window units, all bathroom mirrors, all window coverings, blinds
       and associated hardware, all shutters, all flooring, all carpeting, all cabinet
       tops, all cabinet knobs or handles, all doors, all door knobs or handles, all
       windows, all roofing, all electrical systems, and all installed lighting
       fixtures, chandeliers and associated hardware, other constructions
       permanently attached to the ground. All items listed herein are included in
       the property sold no matter how they are attached or installed.

The wording of this paragraph will vary depending on the exact items in the house or
building to be conveyed by the seller to the buyer. If specific items in the property are to
be excluded and not sold, these items should also be specifically listed as excluded
items.

G.     TITLE INSURANCE

The purchase of real estate is often times one of the most important investments an
individual will make during his lifetime. The purchaser should consider protecting his or
her investment with title insurance. Just as any property owner might seek to protect
his or her property from physical damage by procuring policies of insurance which
protect against general hazards such as wind, rain, fire or floods, any purchaser of real
estate should consider purchasing title insurance to protect against losses which might
occur if some one else ever raises an adverse claim to ownership of the property. Title
insurance seeks to protect property owners against such claims.




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1.      What is title insurance?
Title insurance protects property owners from losses occurring due an adverse claim of
ownership of the property. Title insurance also often covers any losses incurred by
lenders who may provide purchasers with the mortgage loans necessary to purchase
such property. Generally, lenders require that a lender‘s title insurance policy be issued
prior to making a mortgage loan. However, a lender‘s title insurance policy, despite
usually being paid for by the borrower/ purchaser, does not offer any protection to the
property owner and covers only losses incurred directly by the lender. It is, therefore,
very important that any property owner consider purchasing his or her own owner‘s title
insurance policy at closing.

Title insurance is not paid like other forms of insurance policies. The property owner
pays a one time premium, which is paid in full at the time the title insurance policy is
procured. Additionally, while other forms of insurance protect against events which may
or may not happen in the future (storms, flood, fires, etc.), title insurance protects
lenders and property owners against events have already occurred. For instance, title
insurance might protect home owners against the reappearance of a missing heir of a
former owner of property. The rights of such an heir were established long before the
issuance of title insurance policy, but if such heir reappear and assert such rights or
claims to the property which was divested from him without his or her consent title
insurance may be available to protect the present owners from such a claim.

2.     Why purchase title insurance?
It is often impossible even with the most through examinations of the public real
property records to be certain that there are no defects or clouds on the title to a
particular piece of property. It is often difficult or even impossible for a title examiner to
discover the existence of fraud or forgery through a simple examination of the public
records. Additionally, title examiners may miss or fail to discover outstanding ownership
rights in any number of individuals, including missing heirs, divorced spouses, adopted
or illegitimate children. These relationships might make the title examiner‘s job more
difficult in determining the rights and transfer of ownership throughout the chain of title.

3.     How is title insurance purchased?
When owner‘s title insurance policies are purchased in connection with a lender‘s title
insurance policy, (which as stated above, is required in almost every real estate
transaction in which a lender is making a loan to assist the purchaser in acquiring the
property), the cost of procuring owner‘s title insurance policy is generally minimal.
Generally the closing attorney or settlement agent handling the closing of the real estate
transaction will also be a title insurance agent capable of preparing and issuing a title
insurance policy. A request may be made of that agent to perform a title examination
upon which such title insurance policy will be based.


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IV. ANTI-TRUST
Background
      Federal Anti-trust Law
Recommendations
      Establishing the Commission Rate
      Perception Versus Reality
      Establishing Other Listing Policies
      Relations With Competitors and the Emergence of Limited Service
             Arrangements
      Commission Splits
      Boycotts
Sample Anti-trust Compliance Policy




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A.     BACKGROUND
The purpose of the anti-trust laws is to protect competition and prevent monopolies.
Real estate brokers vigorously compete to secure an inventory of listings to offer for
sale. Once the contest for the listing is settled, brokers regularly cooperate with one
another to identify a ready, willing and able buyer. This dual tradition of competition and
cooperation, unique to the real estate profession, presents frequent opportunities for
anti-trust misconduct. The real estate brokerage business is under constant scrutiny,
and any anticompetitive conduct is likely to be detected and prosecuted. In today‘s
business environment, anti-trust sensitivity is a prerequisite for survival. The following is
a general overview of anti-trust law. Additional information on anti-trust is also available
on the National Association of REALTORS website at www.realtor.org

1.     Federal Anti-trust Law
The Sherman Act is the foundation of federal anti-trust law. It is the statute upon which
most federal anti-trust litigation is based. Section 1 of the Sherman Act simply states
that:

Every contract, combination in the form of trust or otherwise, or conspiracy, in restraint
of trade... is hereby declared illegal.

The literal language of the Sherman Act sets forth two basic elements of any Section 1
violation. For a violation, there must be:

       (1)    a contract, combination or conspiracy
       (2)    that restrains trade

A contract, combination or conspiracy element is satisfied whenever two or more
individuals or entities carry out a common scheme or plan. If adherence to a common
scheme or plan can be shown, the only remaining issue is whether or not the effect of
the scheme or plan is to restrain trade.

The Supreme Court held shortly after the Sherman Act was passed, the Act did not
literally prohibit every contact that restrained participants in the marketplace, since such
a result would have outlawed all commercial contracts. Instead, the Sherman Act only
prohibits those contracts or combinations that unreasonably restrain trade.

The Supreme Court eventually identified certain types of restraints as so inherently
anticompetitive that adverse effects on trade are presumed without a need for the
plaintiff to introduce any evidence of the restraint‘s impact on the market. Such
restraints are called per se offenses because its unreasonableness is presumed.
Accordingly, in a per se case, the only issue which determines whether a defendant
violated the Sherman Act is if he actually participated in the conspiracy.

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There are two per se restraints that are of vital concern to real estate brokers:

             Conspiracies to fix prices; such as real estate commissions; and
             Group boycotts

These restraints may arise in several areas: in relations with customers and clients;
relations with competitors; and relations with other service providers.

B.     RECOMMENDATIONS
The primary areas of anti-trust concern when dealing with customers and clients are
commission rates and other listing policies.

1.     Establishing The Commission Rate
One of the most fundamental decisions any business must make is establishing the
price it will charge for products or services. Real estate brokerage firms are no
different. Each firm must establish the fee it will charge for professional services
rendered when helping a client to arrange a successful real estate transaction. In most
cases, this fee is in the form of a commission. A commission is the charge to a seller
for successfully procuring a ready, willing and able buyer for the seller‘s property on
terms set forth in a listing agreement, or other such terms as the seller is willing to
accept. Another form of commission is the charge to the buyer by the buyer‘s agent for
assisting the buyer in locating and acquiring suitable property.

The anti-trust concern relating to the determination of commissions is a conspiracy to fix
prices. As was mentioned earlier, price-fixing is one of the two primary per se offenses
with which real estate brokers must be concerned. A broker must take care to avoid
even implying that he has discussed and/or reached agreement on fees with other
brokers. Salespeople must exercise similar caution to avoid implications that their firm
is part of price-fixing conspiracy.

2.     Perception Versus Reality
Real estate brokers must constantly remind themselves that the outcome of courtroom
trials in general, and anti-trust trials in particular, do not necessarily depend upon what
actually happened at the time an alleged violation occurred. Rather, the outcome of
trials depends entirely upon what the judge or jury believes happened during the
relevant time period. Moreover, price fixing or other anti-trust conspiracies are rarely
put into effect or proven by direct evidence of an agreement, such as a document
signed by all parties to the conspiracy. Rather, they are more often proven by
inferences drawn from the action of competitors, such as private discussions about
prices and subsequent uniformity of prices charged by the participants in those
discussions. As a result, anti-trust compliance programs are concerned, as much with

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avoiding conduct that created the appearance of conspiracy as with conduct which
actually constitutes such a conspiracy.

The keys to avoiding anti-trust vulnerability based upon the fees a broker firm charges
for professional services rendered to a client are to:

            Establish the fees unilaterally without consultation or discussion with
             persons affiliated with any other competing firm;

            Insure that when the company‘s brokers or salespeople discuss fees with
             actual or potential clients they use words that indicate to the listener that
             the services were priced independently and judiciously avoid words
             suggesting otherwise.

When a firm is determining its commission or fee structure, it must understand that anti-
trust conspiracies have been found without any evidence that alleged conspirators
actually consulted with each other before making a competitive business decision, such
as establishing a fee structure. It has been held to be sufficient for one competitor to
announce to one or more other competitors his intention to take a particular action when
the competitors then adopted the same course of action within a short period of time.
The announcement can be construed as an invitation to conspire, and the subsequent
action by the other competitors can be construed as an acceptance of this invitation. An
inference of conspiracy can be drawn even if the other competitors had each already
decided independently to implement the particular policy, but had not already actually
done so.

It is therefore imperative that brokers never discuss, or even reveal, their intentions
concerning fees, or other competitive business activities, with or to competitors. Such
actions will ―taint,‖ not only the subsequent decisions made by the broker who raised the
subject, but also the decisions of all other competitors to whom the discussions or
announcements were directed. Not only must brokers avoid any discussions that could
imply that commissions or commission splits are the result of collusion, but they should
also take positive steps to establish that their commission rates and splits are
determined unilaterally. Such supporting documentation might include:

            Spread sheets to show business reasons for an increase;
            Memo to licensees explaining reasons for increase;
            Discussions with attorney prior to increase; and
            Maintenance of correspondence and appointment logs that show that
             other firms were not consulted.

Once pricing decisions are made, the firm‘s salespeople must present them to clients in
a manner that confirms that the fees were established independently. This means
never responding to a question about fees by referring to the pricing policies of other


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competitors, or to a policy of a local association of REALTORS® that supposedly
prohibits or discourages price competition. Licensees should never use statements like:

       ―This is the rate every firm charges.‖

       ―I‘d like to lower my commission, but no one else in the MLS will show your
       house unless the commission is __%.‖

       ―Commission rates are pretty standard.‖

Salespeople who make these statements put themselves and their firm in jeopardy.
Brokers and salespersons must learn to explain and, if necessary defend their firm‘s
prices and other competitive business decisions in terms that are consistent with
competition, not conspiracy. If the firm cannot or will not reduce its commission upon a
client‘s request, salespeople should point out the value of the services the client will
receive for the fee charged, and how these services will most likely lead to a transaction
at a fair price within the shortest period of time. A fast and efficient transaction can
often save a client much more than the commission expense.

3.     Establishing Other Listing Policies
Commission rates are not the only ―prices‖ that can be fixed by competing real estate
brokers. The term ―price fixing‖ covers agreements to fix any economic terms of a
listing agreement such as the length of a listing, the type of listing accepted, or the
formula upon which compensation will be based.

When a firm has established listing policies, care must be taken to avoid implying that
they were not established unilaterally. Under no circumstances should a client be told
that the firm‘s terms must be accepted because ―this is what all brokers do,‖ or ―no one
else will cooperate unless you accept the listing on these terms,‖ or ―I‘d like to shorten
the listing term, but if I do the MLS won‘t accept the listing.‖

Firms with company listing policies must make sure that salespeople are prepared to
explain the policies to clients in terms of how these policies will help the client achieve
his real estate goals. If a firm‘s policies cannot be explained in these terms, competitive
forces will ultimately compel the firm to modify its policies, or alternately, drive it out of
business. The purpose of anti-trust laws is to preserve the efficient operation of these
competitive market forces, for the ultimate benefit of the consumer.

4.     Relations With Competitors And The Emergence Of Limited
       Service Arrangements
Anti-trust is also an issue in a broker‘s relationship with his competitors. In recent
years, much of the anti-trust activity affecting the real estate industry, has increasingly
been the result of the emergence of limited service arrangements. These so called
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―limited service arrangements‖ offer homeowners seeking to sell their homes, a middle
ground between the full scale representation offered by many of today‘s traditional real
estate brokerages, and the option of handling the sale of their home on their own. Often
times the limited service arrangements allows the homeowner to place his or her home
on the Multiple Listing Service database while retaining many of the other
responsibilities commonly undertaken by real estate agents. This arrangement is
usually made available to homeowners at a reduced rate, whether by commission or a
flat fee.

Many real estate brokerages have seen the emergence of limited service arrangements
entice homeowners away from the traditional brokerage agreements which have been
common place in the market for many years. Traditional brokers have felt such
arrangements cut into their bottom line and have viewed such arrangements with
dislike. In some instances, they have sought to get back at those brokers who provide
their clients with the choice of such a limited service arrangement. Two areas where
brokers have attempted to extract some sort of revenge upon their limited service
offering competitors, and thus evoked anti-trust concern amongst federal authorities are
1) commission splits and 2) boycotts.

5.    Commission Splits
A per se illegal price fixing conspiracy can involve not only the prices a firm charges
customers or clients, but also the prices it may be willing to pay for goods and services.
More specifically, listing brokers traditionally compensate the cooperative efforts of
other brokers by paying the successful cooperating broker a portion of the commission
received from the seller, often called a commission ―split.‖

Conspiracies among competitors to fix the compensation paid for the cooperative efforts
of other brokers are also per se illegal. For this reason, brokers must determine their
cooperative compensation policies in the same unilateral and independent manner that
they establish the commission or fees charged to clients. Listing and cooperating
brokers may, of course, frequently have occasion to discuss or negotiate the
compensation they will pay to each other. These negotiations, however, should take
place before an offer to purchase has been procured by the cooperating office and
should never include representatives of a third office.

If a licensee is asked to compare his firm‘s commission split policies with those of other
firms, the licensee should indicate that the amount of cooperative compensation is
designed to maximize the incentive of cooperating offices to sell the listing. On the
other hand, a licensee who works for a firm which offers a lesser amount to cooperating
firms than may be ―typical‖ for that market must be prepared to explain why this
difference will not detract from the objective of attracting the efforts of cooperating
brokers and securing a satisfactory transaction in the shortest amount of time.



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A reduction in the amount of a commission split owed to a cooperating broker who
participates in a limited service arrangement may not be an anti-trust violation per se.
However, all brokers should be careful not to enter into any type of cooperative
endeavor or conspiracy to deprive certain other brokers of commission splits to which
they are rightfully entitled. The amount of a commission split to which a cooperating
broker is entitled should at all times be negotiated between the listing broker and the
cooperating broker alone, and should be based on the amount and types of work each
is likely to undertake in completing the real estate transaction. The basis for the
commission split should never be based upon an incentive of driving a particular broker
or a particular brokerage practice, out of business.

6.     Boycotts
A practice which is in a sense directly at odds with cooperation is boycotting. Along with
price-fixing, boycotting is often deemed a per se offense of a particular party. Group
boycotts occur when two or more businesses agree to refuse to deal with another
competitor in order to force a change in the competitor‘s behavior, or to drive the
competitor out of business. When addressed as a per se violation of the anti-trust laws,
an alleged conspirator has no opportunity to offer pro-competitive or other justifications
for the conduct.

The typical boycott allegation in the real estate brokerage business is that two or more
firms have agreed to refuse to cooperate, or to cooperate on less favorable terms, with
a third firm, usually a discount, alternative or a buyer‘s broker. The purpose of the
boycott, either explicitly or implicitly, is to eliminate the firm as competitor in the market,
or cause them to abandon their discount or alternative marketing strategies. The anti-
trust laws are clear in stating that boycotts such as these are per se illegal.

As with price fixing conspiracies, real estate brokers or salespeople who act as if there
is a conspiracy among competitors not to cooperate with another competitor, or to deal
with them only on terms established by the conspirators, are just as vulnerable to an
anti-trust lawsuit as those who actually do conspire. Salesperson comments that create
inferences of boycott conspiracies include:

       ―Before you list with XYZ Realty, you should know that nobody works on their
       listings‖.

       ―The MLS will not accept their listings because they charge a flat fee.‖

       ―If they were truly professional, they would not allow part-timers to work for
       them.‖

       ―I bet they‘d drop their ‗discount‘ program if we told them they couldn‘t market our
       listings.‖


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Brokers whose salespeople make comments such as these to buyers, sellers or
persons affiliated with other firms, will find their ability to adjust the terms and conditions
upon which they cooperate with other firms severely restricted. While a broker is free to
unilaterally choose to lower the compensation offered to a discount or alternative firm, if
he does so only after discussing the ―problem,‖ even casually, with other firms, the
inference can be drawn that this action was pursuant to a conspiracy to boycott the
other firms. This is especially true if, as is often the case, other firms in the market
make similar contemporaneous decisions to lower their compensation offers to the
same firm.




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C.     SAMPLE
       ANTI-TRUST COMPLIANCE POLICY
1. The commission rates of our firm are based upon the cost of the services we
provide, the value of these services to our clients and competitive market conditions.

2. Salespersons affiliated with this firm shall not participate in any discussion with any
person affiliated with or employed by another real estate firm concerning the
commission rates charged by this firm, or any other real estate firm in our community.

3. When soliciting a listing, or negotiating a listing agreement, no salesperson affiliated
with this firm shall make any reference to a ―prevailing‖ commission level in the
community, the ―going rate,‖ or any other words or phrases that suggest that
commission rates are uniform or ―standard‖ within our marketing area.

4. The amount of subagency compensation, or ―commission split,‖ offered by this firm
to cooperating brokers is determined by the level of service we can expect a
cooperating office to perform, and the amount of compensation necessary to induce
cooperation under prevailing market conditions.             Subagency compensation, or
commission splits, are not intended, and may not be used, to induce or compel any
other real estate firm in our marketing area to raise or lower the commission they
charge to their client, or to engage or disengage in any legally permitted real estate
brokerage activities, including the offering of limited service arrangements, or otherwise.

5. When soliciting or negotiating a listing agreement, no salesperson affiliated with this
office shall disparage the business practices of any other real estate firm, nor suggest
that this office, or any other office, will not cooperate with any other real estate firm.
Listing presentations shall focus exclusively upon the level of service and
professionalism provided by this office, the results we have achieved for other clients,
and the value the client can expect to receive for the fees we charge. Potential clients
should be invited, and encouraged, to compare the value of our services to those of any
other real estate firm in our marketing area. Likewise, any salesperson who is invited
by a potential client to compare our services with those of any other real estate firm
should do so by emphasizing the nature and quality of the services we provide.

6. Whenever a salesperson is unsure about the proper way to respond to the concerns
of an actual or potential client or customer, or whenever a salesperson has been
present during an unauthorized discussion of fees or commissions, he should contact
his principal broker or sales manager immediately. If necessary, the broker manager
will consult our firm‘s attorney.

I have read, understand, and agree to abide by, the policies and procedures set forth
above.
_______________________________                            Dated: _______________
(Name of Salesperson)
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V.    EMPLOYMENT/COMPLIANCE
Independent Contractor
      Case Law
      Legislation
      Sample Independent Contractor Agreement
Real Estate Assistants




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A.    INDEPENDENT CONTRACTOR
General employment law provides that an employer is liable for the actions of an
employee. Pursuant to Louisiana Civil Code Article 2320 the employer is liable for the
actions of the employees if, (1) a master servant relationship existed between the
employee and the employer and (2) the act causing the liability of the employee was
committed within the scope and during the course of the employment with the employer.
See Brumfield v. Gafford, 99-1712, P.7 (La.App. 1st Cir. 9/22/00), 768 So.2d 223. Once
it is determined that an employment contract exists for the purposes of employers
vicarious liability, it is necessary to determine what type of employment contract exists,
whether the employee is a direct employee or an independent contractor. The
distinction between employee and independent contractor is a factual determination
decided on a case by case basis. See Tower Credit, Inc. v. Carpenter, 201-2875, P.6
(La.App. 9/4/02) 825 So.2d 1125, 1129.

The Louisiana License Law specifies the three necessary actions before a real estate
licensee shall be considered to be independent contractor of the broker with whom they
work. LA R.S. 37 § 1446(H) provides as follows:

            H. A real estate salesperson or associate broker shall be an independent
      contractor of the broker with whom he is affiliated for all purposes and shall not
      be an employee of the broker if all of the following conditions are met:

             (1) The real estate salesperson or associate broker is a licensee.

             (2) Substantially, all of the real estate salesperson's or associate broker's
      remuneration for the services performed are directly related to sales or other
      output rather than the number of hours worked.

            (3) There is a written agreement between the real estate salesperson or
      associate broker and the broker that specifies that the real estate salesperson or
      associate broker will not be treated as an employee.

This statute was amended in 2006 to clarify the law was intended for all purposes and
not just for tax purposes. This statute has yet to be tested in a Louisiana court.

1.    Case Law
Several recent cases have called into question whether independent contractor
relationship exist between a broker and a real estate sales person.

Hughes v. Goodreau, 836 So.2d 649 (La.App. 1 Cir. 12/31/02).

Facts: Two agents worked for the same broker as independent contractors. One agent
represented the seller and the other agent represented the buyer in the sale of a
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residential home. The property at issue had flooded on a prior occasion, which was
noted on the property disclosure and referenced as an attachment for further
explanation. The attachment prepared by the seller‘s agent contained six separate
pages. The attachment that the buyer received contained only two of those pages. The
buyer claimed that if he had seen all of the pages he would have been aware that the
prior flood was not an isolated incident and would not have purchased the property.

The buyer sued the seller. The seller filed a third-party demand against the broker and
its insurer. The buyer and seller reached a settlement agreement. Thus, at the time of
trial, the only issue was whether the broker could be held liable to the seller based on
the actions of its agents.

Holding: The court concluded that the broker could be held vicariously liable because
the agents were employees of the broker, not independent contractors. Therefore, the
broker was vicariously liable to third persons for the failure of the agents to disclose
material defects regarding the condition of property that was the subject of the sale at
issue.

Reasoning: In reaching its conclusion, the court relied on the following factors set forth
by the Louisiana Supreme Court for determining whether an independent contractor
relationship exists:

      1.     There is a valid contract between the parties;
      2.     The work being done is of an independent nature such that the contractor
             may employ non-exclusive means in accomplishing it;
      3.     The contract calls for specific piecework as a unit to be done according to
             the independent contractor‘s own methods, without being subject to the
             control and direction of the principal (except as to the result of the services
             to be rendered);
      4.     There is a specific price for the overall undertaking agreed upon; and
      5.     The duration of the work is for a specific time and not subject to
             termination or discontinuance at the will of either side without
             corresponding liability for its breach.

The court emphasized the last factor noting that the agreement between the broker and
the agents allowed either party to terminate the relationship upon written notice without
incurring any breach, and furthermore, the broker also retained the right to immediately
terminate an agent for breach of contract. The court also noted that: (1) the agents
worked exclusively for the broker; (2) the agents were not free to carry out their work
using their own methods because their written employment agreement required them to
comply with the ―Policy and Procedure Manual‖ prepared by the broker; (3) the agents
were required to attend an introductory orientation on the brokers policies and
procedures; and (4) the agents‘ referrals were considered property of the broker. The
court did recognize the following facts that indicated independent contractor status,
although the Court found they were not enough in this case to find an independent
agent: (1) the agents worked for commissions, thus the specific price for the
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undertaking was agreed to; and (2) the broker did not dictate the number of hours the
agents had to work, nor the properties for which they were responsible.

After the court concluded that the agents were not independent contractors, the court
found the broker liable for damages to the seller on the basis of the broker‘s breach of
its fiduciary duty. The court noted that when a real estate agent violates a duty to
disclose known material defects regarding the condition of property that real estate
agent breaches his fiduciary duty to his client and an award of damages under general
tort law is proper.

Gordon v. Century 21, 888 So.2d 385 (La. App. 3 Cir. 2004).

Facts: John Gordon is the owner of Lots 51 and 52 in Nantachie Acres subdivision.
Manual A. Lopez and his wife listed Lots 54 and 55 in Nantachie Acres for sale with
Century 21. It is alleged, the Century 21 agent handling the sale of the lots, Mr. Carley,
inadvertently placed a ―For Sale‖ sign on Lots 51 and 52, lots owned by Mr. Gordon. On
November 16, 2001, Gunmar and Tamala Agersten purchased Lots 54 and 55 in
Nantachie Acres from Manual A. Lopez and his wife for the sum of $7,250.00. However,
the ―For Sale‖ sign remained on Mr. Gordon's lots and the Agerstens mistakenly
believed they were the owners of Lots 51 and 52. The Agerstens hired an individual to
bush hog Mr. Gordon's property and remove a number of trees. In November 2001, the
Gordons visited their property and saw several trees had been removed. It was then the
error was discovered. The Century 21 ―For Sale‖ sign with Mr. Carley's name, as agent,
was still on the property.

Mr. Gordon filed suit against Century 21 Millennium and Paige Walker, as owner and
broker, for negligence in placing the sign on the wrong lot and causing the removal of
their trees.

Holding: One issue before the Court was whether a real estate agent is an employee
of the company or an independent contractor. The Appellate Court remanded the case
back to the trial court to determine if Mr. Carney was an employee of Century 21 and
therefore, Mr. Gordon could maintain a cause of action against Century 21 through
vicarious liability.

Reasoning: The Court of Appeals noted the broker testified the agent was an
independent contractor and not an employee of Century 21. The broker also testified
that there could be only one broker‘s license in an organization. The factors the trial
court must consider according to the Court of Appeal are those factors set forth in
Hughes v. Goodreau.

2.    Legislation
Act No. 332 (House Bill 110) was passed by the Louisiana Legislature during the 2006
Legislative Session. This Bill was intended to further clarify independent contract

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relationship for real estate agents with brokers after the Hughes v. Goodreau case
(Court of Appeal of Louisiana, First Circuit, Suit No. 2001 CA 2107). LA R.S.
37:1446(h) tracks federal tax law and sets forth the following criteria that must be met in
order for an independent contractor relationship to exist:

       (1)    The real estate salesperson or associate broker is a licensee.
       (2)    Substantially all of the real estate salesperson's or associate broker's
              remuneration for the services performed is directly related to sales or
              other output rather than the number of hours worked.
       (3)    There is a written agreement between the real estate salesperson or
              associate broker and the broker that specifies that the real estate
              salesperson or associate broker will not be treated as an employee.

The change to the statute clearly states that this three prong test is to be applied for all
purposes under Louisiana law and not just for tax reasons. The effective date of Act
No. 332 was July 1, 2006. There has been no judicial test of this statute.




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3.     Sample Independent Contractor Agreement
Employment Agreement

     This Employment Agreement (the ―Agreement‖) is entered into this day of
            20         , by and between                        (―Broker‖)               and
_______________________ (―Salesperson‖).

        Broker is engaged in business as a general real estate broker in
        , among other places, and is qualified to and does operate a general real estate
business and is qualified to and does procure the listings of real estate for sale, lease or
rental, and prospective purchaser, lessees and renters thereof and has and does enjoy
the good will of, and a reputation for fair dealing with the public; and

      Broker maintains an office in                        , State of Louisiana,
properly equipped with furnishings and other equipment necessary and incidental to the
proper operation of its business; and

       Salesperson is engaged in business as a licensed real estate salesperson in the
State of Louisiana; and

       Now therefore, in consideration of the mutual promises and covenants contained
herein:

It Is Agreed:

        1.     Listings and Cooperation. Broker shall make available to Salesperson all
current listings of the office, except such as Broker for valid and usual business reasons
may place exclusively in the temporary possession of some other salesperson. Broker
may, upon request, assist Salesperson in his or her work by advice and instruction.
Broker shall provide to Salesperson full cooperation in every way possible. Nothing
herein shall be construed to require that Salesperson accept or service any particular
listing or prospective listing offered by Broker; nor shall Broker have any right or
authority to direct that Salesperson accept or service any Broker have any right or
authority to direct that Salesperson accept or service particular parties, or restrict
Salesperson‘s activities to particular areas. Broker shall have no right, except to the
extent required by law, to direct or limit Salesperson‘s activities as to hours, leads, open
houses, opportunity or floor time, production, prospects, reports, sales, sales meetings,
schedules, services, inventory, time off, training, vacation, or other similar activities.

         2.     Use of Facilities. Salesperson may share with other salespeople all the
facilities of the office now located at                     , in
, Louisiana.



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       3.      Efforts by Salesperson. Salesperson shall work diligently and with his or
her best efforts to sell, lease or rent any and all real estate listed with Broker, to solicit
additional listings and customers for Broker, and otherwise promote the business of
serving the public in real estate transactions to the end that each of the parties to this
agreement may derive the greatest profit possible. Broker agrees that thereby Broker
obtains no authority or right to direct or control Salesperson‘s activities, except as may
be required by the statute of the State of Louisiana and the rules and regulations of the
Louisiana Real Estate Commission, and Salesperson assumes and retains discretion
for methods, techniques and procedures in soliciting and obtaining listings and sales,
rentals or leases of listed property.

       4.    Conduct of Business. Salesperson shall conduct his or her business in
such a manner so as to maintain and to increase the good will and reputation of Broker
and Salesperson and shall conform to and shall abide by all laws, rules and regulations
and codes of ethics that are binding upon or applicable to real estate brokers and real
estate salespeople.

         5.     Authority, Liability, Costs and Expenses. Salesperson shall have no
authority to bind Broker by and promise or representation except by operation of law or
when specifically authorized by Broker. Other than as provided in this Agreement,
Salesperson shall bear all costs and expenses necessary to obtain the results specified
in this Agreement including, but not limited to, all business license fees, professional
dues and license fees, insurance, business cards, taxes and similar expenses. All
advertising of any kind, including on-line communications, shall be consistent with
Broker‘s Office Manual advertising policy. Salesperson shall carry, and provide Broker
with proof of, automobile and other insurance suitable to the risks created by
Salesperson‘s business activities.         As an independent contractor, Salesperson
acknowledges that Broker is not Salesperson‘s employer and will not be responsible for
withholding state or federal taxes, providing workers‘ compensation insurance,
unemployment insurance or other state, federal or local employer/employee
requirements, Salesperson warrants that as an independent business entity they will
comply with all state, federal and local regulations regarding the operation of
Salesperson‘s business and defend, indemnify and hold harmless Broker from any
liability arising from Salesperson‘s business activities unless otherwise provided for
under law or the terms of this Agreement.

       6.     Compensation of Salespersons. The compensation of the Salesperson
shall be based upon a proportionate share of the commissions charged by the Broker
for services rendered in real estate transactions in which the Salesperson may be
involved and shall not be related to the number of hours worked. When Salesperson
shall perform any service pursuant to this Agreement, whereby a commission is earned,
the commission shall, when collected, be divided between Broker and Salesperson
pursuant to the schedule set out in Exhibit ―A,‖ a copy of which is attached hereto and
incorporated herein by this reference, and which Salesperson acknowledges he or she
has received. Broker shall advise Salesperson of any special contract relating to any
particular transaction which Salesperson may undertake to handle. In the event of
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special arrangements with any client of Broker or Salesperson on property listed may
apply, such rate of division to be agreed upon in advance by Broker and a service, or
claim to have done so, the amount of commission over that accruing to Broker shall be
divided between the participating salespeople according to agreement between them, or
in the absence of an agreement, in no case shall Salesperson be personally liable to
Broker for any commission, but, when the commission shall have been collected from
the party or parties for whom the services were performed, Broker shall hold it in trust
for Salesperson and Broker to be divided according to the terms of this Agreement.

       7.     Payment of Commissions. The division and distribution of earned
commission as set out in paragraph 5 of this Agreement shall take place as soon as
practicable after collection of such commission from the party and parties for whom the
services may have been performed.

       8.      Expenses. Broker shall not be liable to Salesperson for any expenses
incurred by Salesperson for any expenses incurred by Salesperson or for any of his or
her acts, nor shall Salesperson be liable to Broker for office help or expenses.
Salesperson shall have no authority to bind Broker unless specifically authorized in a
particular transaction. The expenses of attorneys‘ fees, multiple listing fees, costs, title
expenses, and similar fees or expenses which must, by reason or necessity, be paid
from the commission or are incurred in the collection of or the attempt to collect the
commission, shall be paid by the parties as provided for in this agreement in the division
of the commission or as otherwise agreed to by the parties. Suits for commission shall
be maintained only in the name of the Broker.

        9.    Termination. This Agreement and the association created hereby may be
terminated by either party at any time, upon written notice given to the other, but the
rights of Salesperson to any commissions which accrued prior to such notice shall not
be divested by the termination of this Agreement. Upon termination, all listing and
prospects shall be those of Broker, as its sole property, and Salesperson shall return all
listings, manuals and materials, forms and sales literature loaned to Salesperson by
Broker.

      10.    Unfair Advantage. Salesperson shall not, after the termination of this
Agreement, use to his or her advantage, or the advantage of any other person, firm or
corporation any information gained for or from the files or business of Broker.

        11.    Legal States and Responsibilities. It is intended that the relationship
established hereby is one of independent contractor and not that of servant, employee,
joint venturer, agency or partnership. It is understood as follows:

(a)    The Broker has the right to control the result of the work and not the means or
methods for accomplishing the result.
(b)    The Salesperson shall pay any amounts due as a result of the Federal Insurance
Contributions Act (FICA), the Federal Unemployment Act (FUTA, and federal or state

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income tax in regard to the Salesperson‘s earnings and to furnish proof of said payment
in a form reasonably requested by Broker.
(c)     The Salesperson shall not be required to meet any sales quota.
(d)     The Salesperson shall be entitled to engage in any other kind of work, besides
real estate sales or leasing for any other person.
(e)     The Salesperson may hire other people to assist with clerical and accounting
work as needed.
(f)     The company manual does not contain any mandatory rules.
(g)     The Broker shall not make appointments for Salespersons or determine whether
appointments are kept.
(h)     No draw or other form of minimum income shall be provided by Broker to the
Salesperson.
(i)     Salesperson shall not be treated as an employee with respect to the services
performed hereunder for federal tax purposes.
(j)     The Salesperson will not be treated as an employee with respect to the services
performed by such Salesperson as a real estate agent for all Louisiana tax purposes,
including, but not limited to, income tax, unemployment insurance tax, and workman‘s
compensation.
(k)     All of the Salesperson‘s remuneration (whether or not paid in cash) for the
services performed as a real estate agent will be directly related to sales or other output
rather than to the number of hours worked.

      12.    Entire Agreement. This Agreement is the entire Agreement between
Broker and Salesperson. The terms of this Agreement are the complete, final
expression of the Agreement between Broker and Salesperson and cannot be
contradicted by evidence of any prior agreement or contemporaneous oral agreement.
This Agreement cannot be modified, altered or amended other than by further written
agreement signed by both Broker and Salesperson.

       IN WITNESS WHEREOF, the parties hereto have signed or caused this contract
to be signed, all on the day and date first above written.

BROKER                                           SALESPERSON


(Signature)                                      (Signature)


(Printed Name)                                   (Printed Name)



(Address)                                        (Address)


(City, State, Zip)                               (City, State, Zip)




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(Phone)                                         (Phone)

DATED THIS           day of                                  ,                    .

EXHIBIT A

This EXHIBIT shall be part of the Agreement between
(―Broker‖) and                                   (―Salesperson‖), dated
               ,                          . This EXHIBIT may be revised or amended
only in writing and if so revised or amended, a signed and dated copy of the revisions or
amendments shall be attached hereto.

BROKER AND SALESPERSON AGREE:

1.     Any listing commission collected by Broker as a result of Salesperson‘s efforts
under the Agreement noted above shall be divided as follows:

SALESPERSON ……………………………………………                                                     %
BROKER …………………………………………………….                                                      %

2.     Any sales commission collected by Broker as a result of Salesperson‘s efforts
under the Agreement noted above shall be divided as follows:

SALESPERSON ……………………………………………                                                     %
BROKER …………………………………………………….                                                      %

3.      Any rental or lease commission collected by Broker as a result of Salesperson‘s
efforts under the Agreement noted above shall be divided as follows:

SALESPERSON ……………………………………………                                                     %
BROKER …………………………………………………….                                                      %

4.      Any commission(s) collected by Broker on listings, sales, rentals or leases
resulting from Salesperson‘s efforts prior to termination of their Agreement shall be
divided in accordance with the above provisions. Broker may, however, offset
Salesperson‘s share by an amount necessary to reasonably compensate Broker, or
another Salesperson, if they provide services necessary to complete the transaction.
Any dispute regarding this provisions shall be subject to the Dispute Resolution Clause
of the Agreement noted above.




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BROKER                                          SALESPERSON


(Signature)                                     (Signature)




(Printed Name)                                  (Printed Name)


DATED THIS                 day of                       ,        .

Company

Branch




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B.     REAL ESTATE ASSISTANTS
The Louisiana Real Estate License Law, Louisiana Revised Statutes 37:1430 et seq.,
(hereinafter the ―License Law‖) does not establish with specificity which activities can or
cannot be engaged in by personal assistants to licensed real estate brokers or agents.
However, the License Law allows the Louisiana Real Estate Commission to impose a
civil penalty of up to $5,000 against any unlicensed person found to have engaged in a
―real estate activity‖. The License Law defines real estate activity as activity relating to
real estate transactions performed on behalf of another person or business entity for a
fee, commission or other consideration or the execution thereof. Such activities include
among other things, the selling, purchasing, managing, leasing or the negotiation on
behalf of another for the sale, purchase, management or lease, the offering to sell or
offering to negotiate the sale or leasing of such properties, the listing or offering to list
for sale or lease real estate, the advertising of one self as being engaged in the
business of selling or renting or managing real estate, or the assisting or directing in the
procuring of potential clients for the sale, lease or management of any real estate.

Based upon the definition of real estate activity as provided by the Licensing Law,
generally personal assistants to real estate brokers or agents may engage in clerical or
administrative duties associated with the operation of the real estate licensee‘s business
but in no way should such assistants engage in work which if viewed by a third party
would give such third party reason to believe that the assistant was or is a licensed real
estate broker or salesperson.

The Louisiana Real Estate Commission website, www.lrec.state.la.us contains the
following list of activities:

A secretary or assistant CAN:

       1)     Answer the phone and forward calls to licensee
       2)     Submit listings and changes to a multiple listing service
       3)     Follow up on loan commitments after a contract has been negotiated
       4)     Place signs on listed property
       5)     Order items of routine repair as directed by licensee
       6)     Prepare flyers and promotional information for approval by licensee and
              supervising broker
       7)     Type contract forms as directed by licensee and supervising broker
       8)     Act as courier service to deliver documents, pick up keys, etc.
       9)     Schedule appointments for licensee to show listed property
       10)    Secure public information documents from courthouse, sewer district,
              water district, etc.
       11)    Have keys made for company listings
       12)    Write ads as directed by licensee and supervising broker and place
              advertising (promotional information, newspaper ads, etc.)


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A secretary or assistant CANNOT:

      1)     Host an open house;
      2)     Prepare promotional material or ads without the review and approval of
             licensee and supervising broker;
      3)     Show property listed for sale;
      4)     Answer any questions on listing;
      5)     Discuss or explain a contract, listing, or other real estate document with
             anyone outside the firm;
      6)     Be paid on the basis of real estate activity, such as a percentage of
             commission, or any amount based on listings, sales, etc.; and
      7)     Negotiate or agree to any commission, commission split, management fee
             or referral fee on behalf of a licensee.




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VI.   ENVIRONMENTAL OVERVIEW
Background
Recommendations
       Asbestos
              What it is
              What to look for
              What to do if you believe asbestos is present
       Formaldehyde Gas and UFFI
              What it is
              What to look for
              What to do if you suspect the presence of UFFI
       Lead
              What it is
              What to look for
              What to do if you observe a ―red flag
       Radon Gas
       Underground Storage Tanks
              What they are
              What to look for
              What to do if you know or suspect there is a problem
       Ground Water Contamination
              What it is
              What to look for
              What to do if you believe there may be a ground water problem
       Electro-Magnetic Fields (EMF‘s)
              What they are
              What to look for
              What to do if you suspect there is a problem
       Waste Disposal Sites
              What they are
              What to look for
              What to do if you believe there may be a problem
Environmental Contacts
       Environmental Site Assessments
       Limitations on ESAs
       Dry Cleaners
       Underground Storage Tanks (UST‘s)
All Appropriate Inquiry Rule and Innocent Landowner Requirements
Brownfields




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A.    BACKGROUND
Environmental hazards and conditions are of increasing concern in real estate
transactions and to the parties and real estate professionals involved in such
transactions. The reason for this is the serious impact some environmental problems
can have on the health and well-being of occupants or users of the property, and the
fact that the presence of environmental hazards can substantially affect the value,
salability and use of real property. In some cases the cost of correction or removal of
environmentally hazardous substances or conditions required by law, safety or
prudential considerations may exceed the value of the property. In other cases, the
cost of correcting an environmental problem (often referred to as remediation) may not
be as dramatic, but the risks to property occupants or users of failing to discover and
resolve an environmental problem may be serious.

Litigation regarding environmental hazards may involve property owners, tenants, real
estate agents and their clients and customers. Agents may be subject to claims that
they should be held liable for not discovering or disclosing facts pertaining to hazardous
substances or conditions which, it is claimed, they should have recognized and
reported. Lenders too are becoming increasingly concerned and cautious about the
environmental condition of properties purchased with mortgage loans they may make.

In many ways, the risks of environmental problems associated with real estate are
similar to the issues confronting real estate professionals in the context of avoiding
misrepresentation of more common features or conditions of property. The primary
concern is that a purchaser may not fully be aware of or understand the condition of the
property, and it may be less desirable to him because of the unknown condition. The
purchaser may seek to hold the real estate professional liable for damages based on
the claim that the agent had a duty to disclose and/or identify the problem to the
purchaser before he became obligated to or completed the transaction.

There are also important differences from the typical misrepresentation case. In the
case of environmental concerns, the typical problems may be unfamiliar to real estate
buyers and sellers and, in many cases, even to real estate professionals themselves.
The problem of discovering the existence, nature or extent of an environmental problem
is often more difficult than in the more common identification of ordinary property
defects, and may require special testing and/or the retention of specially qualified
experts. Also, the remediation of environmental problems may be more difficult, more
costly, more time-consuming, or it may be simply difficult to find firms qualified to
perform such work.

To minimize the risk of liability which might arise as a result of the presence of
unrecognized environmental defects of real property, and to appropriately fulfill their
legal and ethical duties and responsibilities to clients and customers, real estate agents
should:


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            Be aware that environmental problems and issues may affect real estate
             and result in liability for sellers, brokers and agents
            Learn and know the nature of the most common environmental problems
             affecting real estate, including the kinds of hazards presented to
             occupants and users of affected properties and the warning signs or ―red
             flags‖ which indicate that such problems may be or are present
            Discuss with the seller any indications that an environmental problem may
             be present, and reach an understanding and agreement on a course of
             action in correcting the problem and disclosing the concern to potential
             buyers in the course of marketing the property
            Be sure to disclose to potential property purchasers any environmental
             problems that are known to be present, or any indications that certain
             problems may or are likely to be present. This includes sharing any
             environmental assessments that have been performed.
            Be aware of and comply with all duties and obligations imposed on real
             estate professionals or otherwise related to real estate and real estate
             transactions under local, state and federal regulations and requirements
            Be prepared to provide to concerned clients and customers information
             about environmental issues and hazards, such as the brochures,
             pamphlets and other publications issued by federal, state or local
             government agencies on such matters.               Such publications usually
             describe how to identify or test for environmental problems and how to
             remediate problems that are found to exist.

This section provides a basic description of the most common environmental hazards
and defects as well as more specific guidance on how brokers and agents can deal with
and avoid or minimize their liability arising out of such problems.

B.    RECOMMENDATIONS
1.    Asbestos
      a.     What it is

Asbestos is a mineral fiber widely used in the past as thermal insulation because of its
excellent fire and sound retardant qualities. The presence of intact asbestos-containing
material is not, in itself, a health hazard. A health hazard may occur, however, when
asbestos-containing materials are distributed by physical destruction, direct impact or
mere decay and, as a result, such fibers are released into the air. This most often
happens to asbestos-containing materials that are ―friable‖ – that is, those that crumble
easily to the touch. Minute asbestos fibers which thereby escape into the air may be
inhaled and cause various types of cancer as well as the degenerative lung disease
known as asbestosis.



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      b.     What to look for

Asbestos may be found in acoustical tiles, cement, floor tiles, roofing materials and
insulating materials that are sprayed or wrapped on pipes and boilers. Like most
environmentally hazardous substances, specialized and highly technical experience,
knowledge and equipment is necessary to conduct the testing necessary to confirm the
presence of asbestos or to determine whether health hazards from asbestos-containing
materials may be evident from a visual inspection. Four common types of materials
often contain asbestos:

            A fluffy, cotton-candy like material sprayed on ceilings or walls as a fire
             retardant
            A granular, cement-like plaster that was either sprayed or troweled on
             walls and ceilings for fireproofing and soundproofing purposes
            Wallboard used for insulation that has sprayed or troweled on material
             behind it
            Pipe or boiler insulation that may be felt-like or cement-like in appearance
             or may look like fibrous wrapping paper

      c.     What to do if you believe asbestos is present

Remind the owner or occupants to use care to insure that the material is not disturbed
(scraped, sanded, drilled through, etc.). Suggest further investigation to determine
whether the material contains asbestos fibers. Environmental consultants or state and
local health or environmental protection officials can perform testing to determine if the
material contains asbestos, and to assess whether an asbestos-related hazard exists.
Inform parties to the transaction that you suspect or know asbestos is present. This
allows the parties to seek more factual information from qualified sources and get
advice on how to address the problem based on the facts that are currently known or
later determined.

2.    Formaldehyde Gas and UFFI
      a.     What it is

Formaldehyde is a gas emitted by a variety of common household materials including,
most particularly, the thermal insulation known as Urea-Formaldehyde Foam Insulation,
or UFFI. Formaldehyde is also emitted by material used in plywood, furniture,
carpeting, and draperies.

When formaldehyde gas is released into building interiors, it may cause problems
ranging from minor complaints of eye, nose and throat irritation to potentially serious
health effects. It is important to note, however, that the most serious of these problems
are not ordinarily caused by levels of formaldehyde gas commonly present in homes,


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and that different people react quite differently to exposure to various levels of
formaldehyde gas.

The Consumer Product Safety Commission banned the installation of UFFI in 1982. An
appeals court overturned the ban, but in doing so specifically noted that such reversal
did not exonerate formaldehyde, and UFFI in particular, of health-based concerns.
Formaldehyde gas is generally recognized as a health threat or irritant, but there is
dispute over whether such problems arise as a result of the amount of gas emitted by
properly installed UFFI.

      b.     What to look for

Insulation containing formaldehyde was a popular type of insulation in older homes. It is
estimated that formaldehyde-type insulation was installed in a half-million homes in the
U.S. Formaldehyde insulations often cannot be identified by sight, but it was generally
installed by ―blowing‖ it into walls and other spaces and insulation installed in that
fashion during the relevant time period may be suspected of being UFFI.

      c.     What to do if you suspect the presence of UFFI

            Testing of the indoor air for formaldehyde can be done when a client or
             customer believes that action is necessary or if UFFI or other
             formaldehyde emitting compound may be present
            Inform the seller of the need to consult the appropriate health authorities
             or other experts, and likewise disclose to buyers where formaldehyde is
             known or believed to be present. In some cases, removal of gas-emitting
             insulating material may also be necessary.

3.    Lead
      a.     What it is

Lead is a heavy metal that is hazardous to health if ingested or inhaled. Lead can be
extremely toxic. It impairs the physical and mental development of children and
aggravates high blood pressure problems in adults. The EPA, the Department of
Housing and Urban Development (HUD), and the Consumer Product Safety
Commission (CPSC) have all moved to take action to restrict public exposure to lead
and to prevent further discharge of lead into the atmosphere.

      b.     What to look for

The concern about lead poisoning in housing arises principally from the presence of
lead-based paint and lead plumbing. Although the manufacture of lead-based paint was
banned in 1978, it is estimated that between thirty and forty million older homes around
the country contain lead-based paint. Thus, older homes, and particularly those were

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there is decaying, flaking or peeling pain, raise special concerns regarding the potential
presence of lead-based paint hazards. Exposure to lead poisoning primarily occurs by
ingesting flakes of lead-based paint released by peeling or flaking paint, or by inhaling
dust particles that are released into the air when paint is removed by sanding, scraping,
heating or other methods.

Lead poisoning can also occur from drinking water that has been contaminated by lead
plumbing or plumbing materials, such as lead solder. The existence of lead-based paint
or lead plumbing in a particular property can be determined only by testing of the paint
or water supply.

Effective in 1996, federal law requires agents involved in sale or lease transactions of
residential property constructed prior to 1978 to insure that the seller or lessor complies
with his obligation to provide prospective buyers or tenants with an EPA/HUD-published
brochure on lead-based paint hazards. The brochure, entitled ―Protect Your Family
from Lead in Your Home,‖ is available from EPA or HUD. The results of any tests done
to detect the presence of lead-based paint or lead-based hazards must also be provided
to buyers and tenants, and the known presence of any such hazards must be disclosed.
Buyers and tenants will also have up to 10 days to test the premises for lead-based
paint if they choose to do so. Specific warning language pertaining to lead-based paint
must also be included in sales contracts. The laws of a number of state or local
jurisdictions may also impose additional requirements. For more detailed information
see the special section on lead-based paint in the property conditions section.

      c.     What to do if you observe a “red flag”

            Be sure to observe and comply with all requirements of federal, state and
             local law pertaining to lead-based paint
            Inform the seller of the possible and significance of lead hazards
            Inform the potential buyer of any concerns you may have about the
             possible presence of lead-based paint based on your own observations
            Provide the parties with information about lead-based paint hazards,
             including that which describes testing and remediation or any problems
             that may be identified

For more information, see the additional section on lead-based paint.

4.    Radon Gas
The Property Disclosure Document requires a seller to inform a potential purchaser the
presence of various hazardous materials on property, including Radon gas of which the
seller is aware.




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Radon is a colorless and odorless radioactive gas that is a decay product of uranium.
Radon occurs naturally in soil and rock, and therefore Radon levels can vary home to
home. Other sources of radon include well water and building materials.

Radon can be a health problem. Although some scientists dispute the precise number
of deaths due to Radon, all major health organizations (like the Centers for Disease
Control and Prevention, the American Lung Association and the American Medical
Association) agree with estimates that Radon causes thousands of preventable lung
cancer deaths every year.

Radon tests are available from qualified radon testers and companies. Radon testing is
easy and can by done by homeowners themselves or by hiring a qualified Radon test
company.

Radon can be a problem in all types of homes, including old homes, new homes, drafty
homes, insulated homes, homes with basements and homes without basements. It
should also be noted that Radon levels vary from home to home. Thus, a neighbor‘s
Radon test is no indication of whether a nearby home has a Radon problem. The only
way to know if a home has a Radon problem is to test it. While Louisiana generally, as
a state, is in a low potential zone for Radon, high Radon levels have been found in
every part of Louisiana.

More information on radon is available on the United State Environmental Protection
Agency website at www.epa.gov

5.    Underground Storage Tanks
      a.     What they are

Underground storage tanks are, as their name suggests, buried tanks which contain, or
previously contained, liquids or other materials which may be hazardous if discharged
freely into the ground or the ground water. Because such tanks or the piping associated
with operation of the tanks often deteriorates and leaks, they represent a potentially
immense national problem. The EPA estimates that there are between 1.5 and 2 million
underground storage tanks currently in use and there are also a significant number of
abandoned tanks. Only a small percentage of tanks are protected against corrosion,
and EPA estimates that there are 100,000 leaking tanks with the number quickly rising.
The presence of underground storage tanks on a property can represent a serious
potential problem and source of liability for the owner, since leaking storage tanks pose
severe contamination problems for soil and water supplies. Even a slow leak of one
gallon per day can contaminate the water of a 50,000 person community to the point of
endangering public health.

Federal law requires certain specific action with respect to particular types and sizes of
tanks, whether they are currently being used or abandoned. Many states and some
local jurisdictions have also adopted laws and regulations addressing underground
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tanks and any possible contamination of the surrounding site, so be sure also to check
laws and regulations in your state. Where a tank exists, the seller should be sure to
comply with all applicable requirements which, in some cases, means the removal of
abandoned tanks.

      b.     What to look for

A physical examination of the property may provide clues to the possible presence of
one or more underground tanks, since such tanks usually have an air vent that sticks
out of the ground above the tank.

Real estate agents do not possess the technical expertise needed to accurately predict
or determine the presence or condition of an underground storage tank on a property,
but oil sheens in wet areas, piping or vents sticking out from the ground, or trances of
concrete, metal or asphalt may indicate former commercial use of the property and may
suggest the presence of an underground tank. Particularly where such indicators are
observed, the seller should be questioned concerning any knowledge he/she may have
about the presence of such tanks.

      c.     What to do if you know or suspect there is a problem

            Consult with the seller to determine whether underground storage tanks
             are known to be present on the property.
            Seek whatever information may be available from the seller if you observe
             any indication that a tank may be present.
            Be sure the buyer is made aware of the results of your inquiries.
            If you learn that a property does or may contain an underground storage
             tank, or if you know a gasoline station or fuel oil distribution center was
             formerly located on the property, you should advise the buyer that it may
             be prudent to have further investigation performed by a qualified
             environmental consultant or, where available, a government
             environmental protection department.

Closure of UST‘s in Louisiana is accomplished through the oversight of the Louisiana
Department of Environmental Quality (―LDEQ‖) underground Storage Tank Division
(―UST‖). If a UST is to be closed, the LDEQ must be notified by the UST owner at least
thirty (30) days prior to closure by submitting to the UST Division (of the LDEQ) a
―Notification of Intent to Perform Closure or Change-In-Service to an Underground
Storage Tank System‖ form which may be obtained from the UST Division. The
submitted form is invalid if work is not performed within ninety (90) days of submission.

The UST regulations require that a contractor being used to perform a UST closure or
change in service must employ an individual who holds a current LDEQ certificate for
closure. The employee must be present at the site and exercise supervisory authority
during the closure process.

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Another key regulatory requirement is that before a closure or change in service is
completed, an assessment must be made of the site for the possibility of contamination.
A guidance document, Underground Storage Tank Closure/Change-In-Service
Assessment Guidelines can be obtained from the LDEQ which provides an overview of
the closure process for petroleum underground storage tanks. Contact the UST
Division    at   225-219-3236       or    you    can   access     the   document       at
http://www.deq.louisiana.gov/remediation for a copy. The above are only a few key
points for consideration. All parties involved with UST closures should first contact the
UST Division before any work is undertaken.

Louisiana Department of Environmental Quality regulations regarding UST‘s are found
in the Louisiana Administrative Code, Environmental Quality Regulations, at LAC
33:XI.101    et      seq.         These      regulations  can     be   found      at
http://www.deq.louisiana.gov/portal/ on the LDEQ homepage.

The National Association of REALTORS® (NAR) does not have specific policy
pertaining to USTs. However, NAR policy states that ―Provisions should be included in
legislation and regulation to relieve intermediaries of liability when they are unknowingly
involved in property transactions where hazardous waste has been generated, stored or
disposed.‖

6.     Ground Water Contamination
       a.     What it is

Ground water is the supply of fresh water under the earth‘s surface. Ground water
sources are the principal water supply for approximately 50% of all residences either
through on-site wells or the wells of a municipal or private water company. Ground
water contamination may occur when ground water, used as drinking water supply, is
also subject to discharge of pollutants from irrigation, industrial activities, permitted or
unpermitted waste disposal or other potential contaminants. Clean up of contaminated
ground water is very difficult, if not impossible, and is almost always beyond the
economic reach of individual property owners.

       b.     What to look for

       Typical sources of ground water contamination include:

             Leaking underground storage tanks and pipelines
             Faulty septic systems
             Hazardous and nonhazardous landfills
             Excessive road de-icing
             Run-off of agricultural pesticides and fertilizers
             Mining activity


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Real estate agents do not ordinarily possess the technical knowledge or expertise
needed to make a judgment about the quality of the drinking water or the likelihood that
it has been or will be contaminated. Visual inspection of the property, may, however,
reveal ―red flags‖ pointing to or suggesting typical potential sources of contamination,
such as vent pipes for underground storage tanks.

In addition to visual inspection, you should familiarize yourself with the area surrounding
a property and maintain an awareness of reports of ground water contamination from
common sources such as commercial establishments, industrial parks, gasoline stations
or any widespread use of pesticides or fertilizers near the property.

       c.     What to do if you believe there may be a ground water problem

             Consult the local or parish health department for information about ground
              water quality.
             Tell the seller that you suspect a problem exists and why; expect that any
              known or suspected problem must be disclosed to prospective buyers.
             Recommend testing by an expert, as this is the only sure way to
              determine whether or not ground water is contaminated.

Most water tests for ―common‖ chemicals are inexpensive and can be conducted by a
private laboratory, although real estate agents are ordinarily not qualified to determine
what tests may be necessary. If there is reason to suspect industrial contamination, the
parties should be advised to consult local, state, or federal environmental officials or
other experts to arrange for more complex and often costly testing, which the possibility
of such problems may warrant.

7.     Electromagnetic Fields (EMF’s)
       a.     What they are

Electromagnetic fields are sources of electric and magnetic energy which are created
whenever electric current is flowing, such as during the use of electrical appliances or
the transmission of electricity. Common sources of EMFs in the home are various
electrical appliances (electric lights, toasters, clocks, electric blankets, hairdryers) and
electric transmission and residential distribution lines.

Research to determine the effects of human exposure to EMFs has been ongoing for
years, and continues today. To date, the results of that research is inconclusive, and
does not establish either that EMFs are or are not harmful to human health.

       b.     What to look for

Because of the equivocal nature of the research results, it is uncertain whether real
estate professionals have any legal or professional duty or obligation to ―look for‖ or

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disclose anything which might suggest the possibility of exposure to EMFs. While close
proximity to overhead power transmission lines tends to indicate the possibility of EMF
exposure on a particular site, the specific facts and circumstances are decisive in
determining whether EMFs are in fact present and, if so, the strength of such fields.
Moreover, common household appliances can and may create an equal or more
significant EMF exposure problem.

      c.     What to do if you suspect there is a problem

There are presently no federal laws and believed to be no state or local laws requiring
real estate professionals or property owners to disclose the presence or possibility of
EMFs on a property. Until the research advances further and establishes conclusively
the risks, if any, of EMF exposure, real estate professionals are probably best advised
to equip themselves with information and publications to provide to parties expressing
concern about EMFs. Such publications may be available from federal, state or local
government agencies, and from private sources such as power companies (Bonneville
Power Co., and the Electric Power Research Institute, in particular). These publications
provide useful information about the potential hazards EMFs may pose, and strategies
that can be employed to reduce any risks associated therewith.

8.    Waste Disposal Sites
      a.     What they are

Waste disposal sites may be authorized landfills used for disposing of community
waste, landfills approved to receive industrial and agricultural hazardous wastes,
unauthorized and illegal dump sites used by ―midnight dumpers‖, or simply sites
previously subject to industrial uses where wastes or other hazardous materials were
intentionally or accidentally discharged. State and federal law comprehensively regulate
the generation, flow and disposal of hazardous and other solid wastes, but there are
thousands of known and unknown hazardous waste sites that may present a public
health hazard by contaminating water and soil.

The potential presence of hazardous wastes or other contaminants on property poses
certain economic and practical risks as well. The Comprehensive Environmental
Response, Compensation and Liability Act (―CERCLA‖ also known as the ―Superfund‖
law) imposes on current and most prior owners of certain severely contaminated
properties the obligation to clean up such properties or to bear the financial
responsibility for costs incurred by the government to clean up such properties.
Although the CERCLA contains an ―innocent purchaser‖ defense to liability, the nature
and requirements of the defense are imprecisely stated, making it difficult to take
advantage of protection from liability as an ―innocent purchaser‖. When CERCLA
liability is assessed, the costs of property clean up can be staggering, making lenders
often unwilling to make loans on properties which are or may be contaminated. It is


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also important to note that many states, including Louisiana, have adopted legislation
similar to CERCLA that is enforced by their state environmental agencies.

      b.      What to look for

Visual inspection of the property may identify red flags of problematic dumpsites that
warrant further inquiry or investigation. Be vigilant for:

          Depressions, mounds or soft spots that could indicate the possible presence
           of a landfill
          Tanks, vessels, piles of drums, etc. located above or below ground
          Traces of concrete, metal or asphalt that could indicate prior commercial use
          Ravines or earth embankments that could indicate former dumping on the site
          Discoloring of soil or stressed vegetation that may be caused by
           contamination

      c.      What to do if you believe there may be a problem

          Review any available information regarding former uses of the property
           including aerial photographs from various geographic surveys can provide
           snapshots of property use over time.
          Consult the EPA or your state environmental agency for information about
           known waste disposal sites in the area that may affect the property, such as
           EPA-designed (or state-designed) Superfund sites.
          If either through physical inspection or research you uncover a ―red flag‖,
           advise potential purchasers of the information you have obtained and
           recommend that they seek expert assistance and appropriate investigation
           and testing to determine whether a site has been contaminated.
          You should also recommend that the parties to the transaction involving a
           suspected hazardous waste site consult with state and federal environmental
           protection officials or local health and planning officials for information about
           any problems affecting the property.

If property is suspected of being a waste disposal site, leave detailed inspection to an
environmental professional. The Louisiana Department of Environmental Quality,
Inactive and Abandoned Sites Division maintains a list of hazardous waste sites located
across the state and is an excellent source of information. If remediation of any site is
to be undertaken, then the Inactive and Abandoned Sites Division MUST be notified
prior to any work being conducted at the site.




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C.    ENVIRONMENTAL CONTACTS
Federal Governmental Offices

U.S. Environmental Protection Agency (EPA)
Public Information Center
401 M. Street SW
Washington, DC 20460
202-260-7751

U.S. Department of Housing and Urban Development (HUD)
415 7th St. SW
Washington, DC 20410
202-708-1422

Office of Energy and the Environment
U.S. Department of Housing and Urban Development
Washington, DC 20410

RCRA/Superfund Hotline
800-424-9346 (Outside of Washington, DC)

Toxic Substances Control Act (TSCA) Information Services
(Also provides information on the EPA asbestos programs)
202-554-1404

Consumer Product Safety Commission
CPSC Western Regional Center
600 Harrison, Rm. 245
San Francisco, CA 94107

EPA Regional Office
Region 6
1445 Ross Ave.
Dallas, TX 75202
214-665-6444

State Contact
Louisiana Department of Environmental Quality (LDEQ)
7290 Bluebonnet Blvd.
Baton Rouge, LA 70810
225-765-0741




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1.    Environmental Site Assessments
An Environmental Site Assessment (―ESA‖) is a tool being used with increasing
frequency in real estate transactions. By having an ESA preformed, a prospective
purchaser can obtain important information regarding the site, including the prior history
of the site (e.g., was the use of the site for industrial purposes), environmental issues
which must be addressed before the sale, and any environmental conditions which
could limit the future use of the property.

Of additional significance is that by performing an ESA the purchaser may obtain
remediation liability protection from state and federal authorities under certain
circumstances. Legal counsel should be consulted to determine if these circumstances
are present.

An environmental professional normally conducts ESA‘s in accordance with American
Society for Testing and Materials (―ASTM‖) Standards, e.g., ASTM Standards on
Environmental Site Assessments for Commercial Real Estate. Standards E1527 and
E1528.

A Phase I ESA can involve onsite inspections and record reviews including a review of
all relevant records, visits to the property for both discussions with property owners and
tenants and a walk down of the site. Depending on the situation, state and federal
environmental personnel might also be interviewed.

If a Phase I ESA reveals the possible presence of hazardous substances then a Phase
II ESA is performed. A Phase II ESA involves taking soil, water and/or air samples and
having the samples analyzed by a laboratory. The environmental professional then
evaluates the sample results and usually provides a report outlining what action should
be taken at the site, including whether remediation is needed and if reporting of site‘s
environmental conditions to state and federal environmental authorities is required.

The trend across the country and in Louisiana is to base remediation decisions on risk
based factors. A ―risk analysis‖ analyzes such factors as chemicals present at the site,
media contamination levels and exposure pathways to both the population at large and
the environment. Based on a series of calculations of risk, a determination can be
made on what, if anything, needs to be done to address the environmental conditions at
the site. This approach bases any decision involving remediation on scientific principles
and not popular opinion.

In summary, an ESA is a useful tool to buyers and sellers of property. An ESA provides
a clear picture of environmental conditions at a site, and under certain circumstances
can provide environmental remediation liability protection against state and federal
agencies.



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2.    Limitations on ESAs
It must be recognized that regardless of the thoroughness and the amount of sampling
done, an ESA can never prove that hazardous materials do not exist on the site or that
no environmental risks exist. As a matter of illustration, given unlimited amounts of time
and money, it may be possible to find a needle in a haystack. However, short of
completely destroying the haystack, it is virtually impossible to prove that the needle
does not exist in the haystack. It should be recognized that the purpose of an ESA is
not to prove that there are no environmental risks on the property, but rather to provide
proof that the purchaser has made ―all appropriate inquiry‖ into the environmental
condition of the property and thus avail himself of the innocent landowner defense. It
should also be recognized that the more thorough the report, the less the possibility that
some item may not be have been found. For instance, after examining the names in the
chain of title for the last 50 years and reviewing the available aerial photographs, it may
be possible to say that buildings were constructed on a site that is now vacant.
However, a more detailed investigation might include the research of each street
address involved through city directories for each of the last 50 years to see if any
occupants of the buildings were dry cleaners, filling stations, or if there were other uses
that may have had a negative effect upon the environmental condition of the site.
Interviews of people that have been associated with the site over the past years might
also provide additional information. However, this detailed research takes time,
creativity, and additional expense. Competitively bidding for this type of research may
not be in the best interest of a client.

3.    Dry Cleaners
In recent years, concerns have arisen regarding properties where commercial dry
cleaners have operated. State and federal environmental laws strictly regulate present
dry cleaning operations, but this was not always the case. In addition, environmental
concerns related to dry cleaning operations have not always been well understood.

The process of dry cleaning involves cleaning garments through the use of a dry
cleaning solvent and a detergent. No water is used; hence, ―dry cleaning‖ came to
describe the process.

It is the dry cleaning solvents that give rise to environmental concerns. Normally one or
two types of solvents are used for dry cleaning purposes; a chlorinated hydrocarbon
solvent (perchlorethylene) and to a lesser degree, a petroleum based solvent. Today,
dry cleaning solvent wastes are reduced through solvent recycling and better
management practices. However, in prior years, dry cleaning solvents were not always
recycled, nor were the potential environmental problems caused by disposal or sloppy
handling of the spent solvents understood.

Perchlorethylene (sometimes call ―perc‖) has a density greater than that of water and is
insoluble in water. These properties along with other chemical characteristics of

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perchlorethylene make it an extremely pervasive environmental contaminant. When
introduced to soil, perchlorethylene will ―sink‖ through soil until it reaches ground water.
This ability to migrate through soil makes remediation of sites contaminated with
perchlorethylene both expensive and difficult. Perchlorethylene also tends to spread
over wide areas, making remediation very expensive.

Real estate professionals should always recommend that property be checked for a
history of dry cleaning operations (such evaluation should include nearby properties as
well). If such a search reveals evidence of dry cleaning operations, then consultation
with an environmental professional is advised.

4.     Underground Storage Tanks
Regulation of underground storage tanks (―UST‖) in Louisiana is overseen by the
Louisiana Department of Environmental Quality (―LDEQ‖).         Until recently, The
Underground Storage Tank Division of the LDEQ administered the program. However,
the LDEQ organizational structure was recently re-engineered; there is no longer an
Underground Storage Tank Division. Functions of the Division have been reassigned
across all of the LDEQ.

The reassignments are as follows:
              Tank Closures – Surveillance Division
              Underground Storage Tank Trust Fund Operations – Fiscal Services
              Tank Registrations – Permitting Division
              UST Site Remediation – Remediation Services Division

In most situations financing on properties containing UST‘s is not available unless the
UST‘s are closed, which means either removal or closure in place, with removal the
preferred option. Before a UST is closed, the LDEQ must be notified by submitting to
the Remediation Services Division a completed Notification of Intent to Perform Closure
or change-In-Service to an Underground Storage Tank System form.

In order to perform UST closure in accordance with LDEQ regulations, the contractor
performing the closure must employ an individual who holds a current LDEQ closure
certification. Failure to use a contractor who employs an employee with such a
certification could entail performing aspects of the closure over again.

A list of contractors who employ certified closure employees can be obtained from the
Surveillance Division. To pay for the cost of closure, the Underground Storage Tank
Fund administered by the LDEQ may disburse funds for the UST closure under certain
circumstances. To determine whether the circumstances are applicable to the property
in question, an environmental professional with knowledge of UST closure should be
consulted.



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UST‘s can substantially impact property. Anytime a property transaction potentially
involves a UST an environmental professional and/or the LDEQ should be consulted.

D.     ALL APPROPRIATE INQUIRY RULE AND INNOCENT
       LANDOWNER REQUIREMENTS
INTRODUCTION:

Environmental hazards and conditions are of increasing concern in real estate
transactions and to the parties and real estate professionals involved in such
transactions. The reason for this is the serious impact some environmental problems
can have on the health and well-being of occupants or users of the property, and the
fact that the presence of environmental hazards can substantially affect the value,
salability and use of real property. In some cases the cost of correction or removal of
environmentally hazardous substances or conditions required by law, safety or
prudential considerations may exceed the value of the property. In other cases, the
cost of correcting an environmental problem (often referred to as remediation) may not
be as dramatic, but the risks to property occupants or users of failing to discover and
resolve an environmental problem may be serious.

REGULATORY BACKGROUND:

Under the Comprehensive Environmental Response, Compensation, and Liability Act
(―CERCLA‖), current owners and operators of property, and past owners and operators
at the time of disposal are, among others, potentially responsible parties (―PRPs‖) for
remedial costs to address releases of hazardous substances on property.

The so-called Innocent Landowner defense under CERCLA relieves a person from
liability if the person can show that at the time of acquisition on the property, the person
did not know and had no reason to know of hazardous substances on the property, and
made all appropriate inquiries into the previous ownership and uses of the property in
accordance with good commercial and customary standards and practices.

When CERCLA was amended in 2002 by the Small Business Liability Relief and
Brownfields Revitalization Act (Brownfields Amendments), additional liability protections
were extended to (i) contiguous property owners, and (ii) bona fide prospective
purchasers who satisfied certain regulatory criteria. The amendments required EPA to
pass standards for how to conduct all appropriate inquiries, one of the criteria for
maintaining a CERCLA defense.

ALL APPROPRIATE INQUIRY RULE:

EPA issued a final rule for All Appropriate Inquiry (AAI) November 2005, which became
effective November 1, 2006. The AAI Rule addresses the minimum requirements for
environmental due diligence for purchasers of property seeking to avoid liability for
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hazardous substance contamination. In essence, AAI requires the purchaser, prior to
acquiring the property, to conduct a Phase I environmental site assessment in
accordance with the ASTM-1527-05 standard. The 1527-05 standard replaces ASTM-
1527-00 which had heretofore been used to demonstrate good commercial and
customary standards and practices.

SUMMARY OF KEY PROVISIONS:

To qualify for CERCLA liability protection as an innocent landowner, bona fide
prospective purchaser, or contiguous property owner, a purchaser must conduct AAI on
or before the acquisition (and comply with other statutory continuing obligations). AAI
requires:

     (i)      Environmental Professional must perform AAI
     (ii)     Interviews with past and present owners, operators and occupants
     (iii)    Review of historic sources showing use since first development
     (iv)     Review of federal, local, and state government records
     (v)      Environmental lien search
     (vi)     Visual site inspection of subject property and adjacent properties
     (vii)    Evaluation of special knowledge or experience of purchaser
     (viii)   Evaluation of any purchase price adjustment for contamination
     (ix)     Data gaps must be identified and addressed
     (x)      Shelf life of 1 year, with update of some information required in 180 days

CONCLUSION:

A potential purchaser should conduct the appropriate inquiry regarding the present and
past uses of a property before purchasing the property. This inquiry minimizes the risk
for a potential purchaser and can help avoid unexpected issues with the resale of a
property.

E.       BROWNFIELDS
The United States Environmental Protection Agency (―EPA‖) defines Brownfields as
property, the expansion, redevelopment, or reuse of which may be complicated by the
presence of a hazardous substance, pollutant, or contaminant. The EPA estimates that
there are more then 450,000 brownfields in the United States. Due to the significant
economic impacts of failure to utilize brownfields properties, brownfields redevelopment
has become a priority for both federal and state governments. To encourage such
redevelopment, the Small Business Liability Relief and Brownfields Revitalization Act
(the ―Brownfields Act‖) was enacted in 2002. Among other things, the Brownfields Act
provides protection from CERCLA liability to certain owners (Innocent Landowners and
contiguous property owners) and purchasers (Bona Fide Prospective Purchasers) of
contaminated properties. Determining whether an owner or prospective purchaser
qualifies for these exceptions to CERCLA liability may be difficult and highly technical.
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Therefore, real estate professionals should suggest that the parties to any transaction
potentially involving a brownfield property retain legal counsel familiar with both the
state and federal brownfields redevelopment regulations.

State governments, including Louisiana, have also developed substantial brownfields
programs to encourage the redevelopment of distressed industrial properties. In 1995,
the Louisiana Legislature passed Act 1092, known as the Voluntary Investigation and
Remedial Action law, which allows property owners and other persons who clean up
properties to risk-based standards to get a Certificate of Completion from the Louisiana
Department of Environmental Quality (LDEQ). With this Certificate, the property owner
and any subsequent owners of the property are released from further liability under
state law for the past contamination at the site. In effect, the certificate allows potential
buyers to acquire and remediate brownfields properties without fear of state superfund
liability. On April 20, 2001, LDEQ promulgated the Louisiana Voluntary Remediation
Regulations. LDEQ will use the statute and these new regulations to facilitate voluntary
cleanups and foster accelerated brownfields redevelopment.                   Louisiana also
participates in the EPA‘s ―Ready for Reuse‖ program, which provides for risk-based
cleanup of contaminated properties. Additional information regarding these programs is
available on the LDEQ website (www.deq.louisiana.gov) and the EPA website
(www.epa.gov).

Louisiana Local Brownfields Program Contact Information
Baton Rouge
Beth Hughes, City Planning Commission
City of Baton Rouge-Parish of East Baton
Rouge Planning Commission
P.O. Box 1471
Baton Rouge, La. 70821
(225) 389-3144
bmhughes@brgov.com

New Orleans
Yarrow Etheredge, Director
Mayors Office of Environmental Affairs
New Orleans City Hall
1300 Perdido Street, Suite 8E06
New Orleans, LA 70112
(504) 658-4070
yjetheredge@cityofno.com

New Orleans Regional Planning Commission
Walter Brooks, Executive Director
1340 Poydras Street, Suite 2100
New Orleans, LA 70112
(504) 568-6611
rpc@norpc.com
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Shreveport
H.M. Strong, Director
Director of Operational Services
P.O. Box 31109
Shreveport, LA 71130
(318) 673-7660
Mike.Strong@ci.shreveport.la.us




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VII. ALTERNATIVE DISPUTE RESOLUTION
Arbitration
       Introduction
       Frequently Asked Questions About Arbitration
       Louisiana REALTORS and National Association of REALTORS Policies
Mediation




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A.     ARBITRATION

1.     Introduction

Disputes can be resolved by arbitration or mediation rather than litigation if the parties
can agree to use of these methods. Arbitration is an informal hearing to resolve a
dispute in front of a neutral third party, the arbitrator. The arbitrator who discovers the
facts of the dispute through testimony and documents, then renders a final
determination of the dispute. This award is called an arbitration award. Louisiana has a
state law arbitration act provided for in LA R.S. 9:4201.

2.     Frequently Asked Questions About Arbitration
1Q.    How does the arbitration process work?

A.     The basic structure of an arbitration process is as follows:

             Generally by contract, parties to a real property transaction agree to
              submitting their disputes to either binding or non-binding arbitration should
              a dispute arise.

             A dispute arises and a request for arbitration is made to the arbitration
              company. This request may be accompanied by a written complaint.

             Notice is given to the other relevant parties with a request for a response
              to the complaint.

             A list of qualified arbitrators is provided to the parties. Each party notes
              arbitrators that are acceptable to them. The arbitrator lists are matched
              and the arbitrator/s are appointed. There is usually an option to have one
              to three arbitrators on the panel.

             The arbitrators shall notify all parties to the dispute of the time and place
              for the hearing. Parties are also notified that they may be represented by
              legal counsel.

             Prior to the hearing, limited discover is allowed.

             During the hearing, each party may open with a statement of their position
              relative to the dispute. Testimony from witnesses may be heard and the
              witnesses cross-examined. Documents in support of a position are also
              received at this time.



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            The hearing ends. The arbitrators render the award within a specified
             time period following the hearing.

2Q.   How does arbitration differ from litigation?

A.    Arbitration is generally more relaxed, informal, faster and can be less expensive
      than litigation. Discovery is usually limited to the production of relevant
      documents and testimony from key witnesses. Like mediation, arbitration
      hearings are private and only include the parties, attorneys, and witnesses
      relative to the dispute.

3Q.   What is the difference between binding and non-binding arbitration?

A.    With binding arbitration, the parties agree to accept the arbitration award as the
      final resolution of the dispute. With non-binding arbitration, parties generally
      have a set period of time whereby they can set aside the award and proceed to
      litigation. However, if at the end to the specified time period, the award is not
      rejected, the award then becomes binding.

4Q.   If a party signs a contract or an addendum that contains an arbitration
      clause, is the party required to arbitrate if a dispute arises?

A.    Generally, yes. It is important for all parties to understand the ramifications of
      committing to the arbitration process before the contract containing an arbitration
      clause or addendum is signed. Once the contract is signed, not only are the
      parties required to arbitrate the dispute, but in cases of binding arbitration, they
      have committed to accept arbitration as the final arena for resolution of the
      dispute and are precluded from litigating at a later date.

5Q.   What types of disputes can be arbitrated?

A.    Almost any type of real estate dispute can be arbitrated, but, litigation may be the
      best alternative for disputes criminal in nature or those that would benefit the real
      estate industry by setting legal precedence.

6Q.   Who pays for arbitration?

A.    Parties may negotiate their own arrangements. However, most parties split the
      fees equally.

7Q.   How much does arbitration cost?

A.    The cost of the arbitration depends on the size of the claim, the complexity of the
      issues, and the arbitrator (For an example of the fee schedule, contact the
      Louisiana REALTORS® website at www.larealtors.org).

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3.    Louisiana REALTORS and
      National Association REALTORS Policies

The Louisiana REALTORS® has adopted the National Association of REALTORS®
Dispute Resolution System (DRS) Arbitration Program. If you wish to arbitrate under
this system, you should follow the steps outline below:

Step 1:

Obtain a copy of the Association‘s arbitration rules and procedures which is available on
the National Association of REALTORS website at www.realtor.org

Step 2:

Include the Association-approved arbitration clause or attach the approved arbitration
addendum with all of the firm‘s listing agreement forms, buyer representation forms, and
purchase agreement forms.

Step 3:

Educate your office about the arbitration process and the Association‘s rules and
procedures.

Because binding arbitration precludes parties from ever litigating the dispute, real estate
brokers and salespeople need to be certain that their explanation of the process to
potential clients/customers does not result n the unauthorized practice of law. Part of
the educational process should include an education session about how to explain
arbitration to potential clients/customers without engaging in the unauthorized practice
of law. This education session should be developed in conjunction with legal counsel
so that it complies with Louisiana law.

Step 4:

Maintain arbitration packets for all potential clients/customers. These packets should
contain:

            An informational brochure on the Association‘s arbitration program with a
             clear statement that encourages individuals to seek legal counsel prior to
             committing to binding arbitration.
            A copy of the Association‘s arbitration rules and procedures.
            The name of the Association‘s approved arbitration company and fees.
            The form to be completed to initiate arbitration; this form should note to
             where the form should note to where the form should be forwarded, i.e.,
             the Association or directly to the arbitration company.

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             The informational packet should be provided to all potential
              clients/customers before they sign an agreement that includes an
              arbitration clause or addendum.

Step 5:

When a dispute arises, because of the adversarial nature of the arbitration process,
direct all inquiries to the arbitration company. If you are initiating the arbitration request,
complete the form and submit it to the designated party on the form. The arbitrator will
contact all named parties and schedule the arbitration hearing in accordance with the
Association‘s rules and procedures.

Step 6:

Prepare for the arbitration hearing. In many cases, you will want to be accompanied by
legal counsel. Be certain that both you and your counsel understand the arbitration
process. Use the time prior to the hearing to prepare witnesses and to gather relevant
documents. Limited discovery may be initiated between the parties and most likely will
involve the exchange of documents. Most importantly, work with legal counsel to
prepare the opening and closing statements and to anticipate questions and arguments
from opposing parties.

B.     MEDIATION
Alternative dispute resolution is methods of resolving dispute other than litigation filed
through the court system. This can include arbitration and mediation. Mediation is a
procedure in which a mediator facilitates communication between parties concerning
the matters in dispute and explores possible solutions to promote reconciliation
understanding in settlement without the deem for litigation. The National Association of
REALTORS provides procedures for mediation as an alternative to arbitration when a
matter is arbitral under the National Association‘s rules. Mediation can resolve disputes
between REALTORS, promote amicable resolution and reduce the number of cases
requiring the more formal arbitration procedures, if the parties agree to mediation.
Further, mediation can be included in Purchase Agreement as a prior step to any
litigation regarding a potential default in the contract.

Louisiana has a Mediation Act set forth in La. R.S. 9:4101 et seq. Mediation can be
ordered by a Court in a civil case or can be made part of a contract between parties.
Mediation between the parties with a qualified mediator is generally not binding and
therefore, no appeal is required. Unless the parties agree to settlement at the
mediation, the dispute will then go on to a more formal arbitration or litigation. If the
parties agree to a settlement and the settlement is reduced to writing and signed by all
parties, the matter is generally deemed resolved and will not go forward to arbitration or
litigation.

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VIII. EMPLOYMENT/OFFICE POLICIES
Employment Laws
       Title VII of the Civil Rights Act
       Louisiana‘s Anti-Discrimination Statute
       Family and Medical Leave Act
       Age Discrimination in Employment Act
       Americans with Disabilities Act
       Fair Labor Standards Act
       The Equal Pay Act
       Uniformed Services Employment and Reemployment Rights Act
Harassment
       Sexual Harassment
       Other Harassment
       Effective Harassment Policy
       Investigation of Harassment Claims
       Employer Liability and Defenses
The Hiring Process
       Advertisements
       Obtaining Information
       Medical Exams
       Drug Testing
       Business Recordkeeping
       Required Posters
Miscellaneous State Statutes Regulating Employment Practices
       Accrued Wages and Benefits
       Jury Service/Voter Protection
       Louisiana‘s Smoking Discrimination Statute
       Employee Payments
       Other Louisiana Statutes
Privacy Issues
       Monitoring Employee Communications
       E-mail and Internet Usage Policies
       Sample E-mail and Internet Usage Policy
Sample Personnel Policy Manual




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A.     EMPLOYMENT LAWS
The legal duty not to discriminate on the basis of race, color, religion, sex, national
origin, disability, age (40 or older), citizenship, or veteran status applies to a broker‘s
employment practices. In addition to the various anti-discrimination statues, both state
and federal, brokers may be subject to the payment of minimum wages and overtime
imposed by the Fair Labor Standards Act and the mandates of ―equal pay for equal
work‖ under the Equal Pay Act.

1.     Title VII of the Civil Rights Act
The principal statute governing employment discrimination is Title VII of the Civil Rights
Act of 1964, as amended. Title VII makes it unlawful for an employer to discriminate as
to hiring, firing, compensation, terms, conditions or privileges of employment on the
basis of race, color, religion, sex or national origin. It also forbids employers from
limiting, segregating or classifying employees in any way that tends to deprive any
individual of employment opportunities or adversely affect his employment status
because of race, color, religion, sex or national origin. It further prohibits retaliation
against employees who raise concerns of discrimination prohibited by Title VII. Title VII
applies to any private employer in an industry affecting interstate commerce with at
least fifteen (15) employees. Punitive damages and jury trials are available to alleged
victims of employment discrimination.

Under the Pregnancy Discrimination Act, which amended Title VII, ―sex‖ discrimination
also includes discrimination because of pregnancy, childbirth or related medical
conditions. Employers are required to treat these conditions the same as any other
illness or disability with regard to all employment decisions, including discharge and
leaves of absence.

2.     Louisiana’s Anti-Discrimination and Anti-Retaliation Statute
Similar to Title VII, Louisiana has provisions prohibiting discrimination in employment
based on race, color, religion, sex, national origin, disability, sickle cell trait, protected
genetic information, and age (40 to 70 years old). Louisiana‘s anti-discrimination and
anti-retaliation statute is substantively similar to the federal statute, except that it applies
to employers with 20 or more employees in the State of Louisiana. Louisiana courts
routinely look to the interpretations of the federal statute for guidance. At this time,
there is no Louisiana state law providing that ―sex‖ includes marital status such that a
person cannot be discriminated against on the basis of their marital status. There is
also no Louisiana law prohibiting discrimination based on sexual orientation. However,
employers should consult attorneys before discriminating against a person on the basis
of their sexual orientation, as some city or municipal laws do prohibit discrimination on
that basis.

Discrimination in employment based on pregnancy, childbirth and related medical
conditions is also prohibited by state law in Louisiana. The Louisiana statute only
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applies to employers with more than 25 employees within the state. The statute entitles
employees disabled by pregnancy or childbirth to the same benefits and privileges of
employment provided to those disabled by other conditions. For normal childbirths, a
female employee is entitled to six (6) weeks of unpaid leave. If complications occur
during the pregnancy or related childbirth, the female employee shall be afforded four
(4) months of leave. Upon the advice of a physician and at the pregnant employee‘s
request, an employer may be required to temporarily transfer a pregnant employee to a
less strenuous or hazardous position where such transfer can be reasonably
accommodated. The employee is not required to work for the employer for any specific
period of time before being entitled to leave.

3.    Family and Medical Leave Act
The ―FMLA‖ applies to employers with 50 or more employees and requires employers to
provide eligible employees with up to 12 weeks unpaid annual leave for the birth of a
child, the placement of a child for adoption or foster care, or to care for their own or a
family member‘s serious health condition. An employee is eligible for ―FMLA‖ leave if
he or she has been employed for at least 12 months by the employer from whom leave
is requested, during which time the employee must have worked at least 1250 hours.
While they are out on leave, employees are to be treated as if they were at work for
purposes of receiving benefits, such as health insurance coverage. Employees are
entitled to be restored to the same position they held when the leave period began, or to
an equivalent position with the same benefits, pay and other terms and conditions of
employment. An employer cannot terminate an employee because he or she has
exercised his or her right to leave under the FMLA or because he or she is entitled to
leave under the FMLA. An employee who is unlawfully discharged under the FMLA is
entitled to reinstatement with back pay, and double back pay if the employer‘s violation
is a ―willful‖ violation. The employee can also recover attorney‘s fees.

In Louisiana, employers with more than 25 employees must provide unpaid pregnancy
and/or childbirth leave to its employees. As discussed above, a female employee is
entitled to six (6) weeks of unpaid leave for the purpose of a normal pregnancy,
childbirth or related medical condition. If there are complications related to the
pregnancy or childbirth, a female employee is entitled to up to four (4) months of unpaid
leave.

4.    Age Discrimination in Employment Act
The Age Discrimination in Employment Act (ADEA) prohibits discrimination against
individuals age 40 and over on the basis of age. The Act applies to any private
employer engaged in an industry affecting interstate commerce with at least twenty (20)
employees. In deciding whether age was a factor in an employment decision, courts
will generally look to see if ―substantially‖ or ―significantly‖ younger employees are
treated differently than employees in the protected age group. Employers may not
establish mandatory retirement ages unless the mandatory retirement age is a bona fide
occupational qualification for the particular job. This is a difficult standard to meet.
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Employers also may not retaliate against employees who raise concerns of age
discrimination.

Age discrimination is also prohibited by state law in Louisiana. Louisiana Revised
Statutes 23:312 prohibits age discrimination against employees ages 40 to 70 years old
for employers with 20 or more employees.

5.     Americans with Disabilities Act
The Americans with Disabilities Act (ADA) prohibits discrimination against a ―qualified
individual with a disability.‖ The ADA‘s statutory definition of ―disability‖ contains three
prongs:

              a.     A physical or mental impairment that substantially limits one or
                     more major life activity of an individual;

              b.     A record of such an impairment; or

              c.     Being regarded as having such impairment.

The ADA thus prohibits a refusal to hire or discharge an employee because of a
disability, a perceived disability or a record of a disability. If an otherwise qualified
disabled individual is unable to perform essential job duties because of a disability, the
employer is required to initiate an interactive process to determine whether the
employee can perform the essential job duties with a reasonable accommodation. The
employer is required to provide a reasonable accommodation to the known physical or
mental limitations of otherwise qualified individuals with disabilities, unless it results in
undue hardship on the employer‘s business or poses a significant threat to the health or
safety of the disabled individual, co-workers or others with whom the individual will
come into contact while performing the job.

The ADA‘s vagueness and ambiguities can make compliance with the ADA
troublesome. Thus, employers should approach the ADA cautiously when dealing with
any personnel decision that might implicate the ADA.

Similar to the federal ADA, Louisiana law prohibits discrimination against an ―otherwise
qualified disabled person.‖ Employers who employ twenty or more employees within
the state are covered under the statute and must make reasonable accommodations to
qualified disabled persons unless doing so would create an undue hardship.

6.     Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) establishes employment requirements relating to
overtime compensation. It requires employers to pay their employees at least the
minimum wage for all ―hours worked‖ and requires payment of one and one half times
the employee‘s regular rate for all ―hours worked‖ in excess of forty hours in one
workweek.
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      a.     Coverage

      There are three basic tests to determine whether an individual is covered by the
      Act. Under the first test, an employee is covered if he is engaged in interstate
      commerce. Second, coverage is provided to any employee engaged in the
      production of goods for interstate commerce. Under the third test, any employee
      of an enterprise engaged in the production of goods in commerce or which uses
      instrumentalities of interstate commerce in its business is covered. The FLSA
      covers the vast majority of the employers in the United States.

      b.     Hours worked

      In 1944, the Supreme Court defined ―hours worked‖ as all time spent by an
      employee in ―physical or mental exertion (whether burdensome or not) controlled
      or required by the employer and pursued necessarily and primarily for the benefit
      of the employer and his business.‖ Under this definition, the hours of work for
      which an employee must be paid not less than the minimum wage, and which
      must be counted in computing liability for weekly overtime pay, includes all time
      an employee is actually at work or is required to be on duty and cannot use the
      time for his or her own purposes.

      Time during which an employee is required to be on duty on the employer‘s
      premises is, obviously, a compensable ―worked hour.‖ Similarly, work on behalf
      of the employer performed away from the job site (including work performed at
      home) constitutes compensable time. Moreover, time spent by an employee who
      voluntarily continues to work after his or her shift ends is compensable ―hours
      worked‖ regardless of whether the employer granted permission for those extra
      hours, provided the employer knew or should have known of the extended time.
      Other activities that are deemed ―hours worked‖ are not as obvious. To assist
      employers in determining what constitutes an ―hour worked‖ and what can be
      excluded from compensable time, the Department of Labor included a variety of
      examples in its FLSA regulations.

      c.     Regular rate

      The FLSA defines the employee‘s ―regular rate‖ as including ―all remuneration for
      employment paid to, or on behalf of, the employee.‖ Obviously, wages and
      salary paid to the employee are part of his or her regular rate. Certain
      supplemental payments, however, are also considered remuneration for work
      performed and must be included in the regular rate computation. These include
      (1) the value of prizes or awards, bonuses and incentive payments for or based
      on the quality, quantity or efficiency of the performance of work; (2) bonuses
      based on the number of hours worked; (3) commission payments; (4) employer-
      provided meals, lodging and facilities; (5) shift differentials and so-called ―dirty
      work‖ premiums; (6) tip credits taken by an employer to fulfill minimum wage
      requirements; (7) on-call pay; and (8) accrued sick leave bought by an employer.

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      The regular rate cannot be lower than the statutory minimum wage (currently
      $5.85 per hour, rising to $6.55 per hour effective July 24, 2008 and then to $7.25
      per hour effective July 24, 2009).

      d.     Calculating the regular rate

      There are various acceptable methods of calculating the ―regular rate‖ for the
      purpose of determining the amount of overtime pay owed. The most common
      method of determining the employee‘s ―regular rate‖ of pay is simply paying a
      fixed hourly wage rate, and multiplying that amount by 1½ for each overtime hour
      worked. Although special computation methods apply in certain circumstances,
      to determine the regular rate when an employee is paid on a salary, commission,
      piece-rate, day-rate or either non-hourly basis, or if an hourly wage worker
      receives other forms of compensation in addition to wages, the regular rate is
      determined by dividing the total compensation received by the number of hours
      worked during the workweek.

      e.     Exemptions

      An employer is not responsible for paying overtime to those employees who are
      deemed exempt. The most common FLSA exemptions are those for ―white
      collar‖ employees: executives, administrative employees, professional
      employees, computer professionals, and outside sales employees. A high-
      sounding job title is not enough, however. Job titles and job descriptions are not
      controlling; actual job duties and responsibilities control. Often, employers
      confuse ―salaried‖ status with ―exempt‖ status. However, the fact than an
      employee is paid a salary, rather than an hourly wage, is only one factor to be
      considered. Regardless of the amount of an employee‘s salary, the employee is
      not ―exempt‖ unless he or she performs exempt work or otherwise falls within a
      specific exemption.

      Under the new regulations, to qualify for the executive, administrative or
      professional exemption, an employee must earn more than $23,660 a year ($455
      a week) and meet certain minimum duties tests related to the employee‘s primary
      job duties. The ―long‖ and ―short‖ tests, with their corresponding salary
      requirements, have been replaced with the following single tests for each
      exemption:

      The Executive Exemption

      To qualify as an exempt executive employee, an employee must:

             1)     Be compensated on a salary basis at a rate of not less than $455
                    per week;

             2)     Have the primary duty of managing the enterprise or a customarily
                    recognized department or subdivision of the enterprise;
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             3)     Customarily and regularly direct the work of two or more other
                    employees; and

             4)     Have the authority to hire or fire employees or make suggestions
                    regarding hiring, firing, advancement, promotion or other changes
                    of status that are given particular weight.

      The Administrative Exemption

             To qualify as an exempt administrative employee, an employee must:

             1)     Be compensated on a salary or fee basis at a rate of not less than
                    $455 per week;

             2)     Have the primary duty of performing office or nonmanual work
                    directly related to the management or general business operations
                    of the Company or its customers; and

             3)     Exercise discretion and independent judgment with respect to
                    matters of significance in performing their primary duty (Note: an
                    employee can still meet this requirement if his or her decisions are
                    not final and are subject to review by a higher authority).

      The Professional Exemption

             To qualify as an exempt professional employee, an employee must:

             1)     Be compensated on a salary or fee basis at a rate of not less than
                    $455 per week; and

             2)     Have the primary duty of performing work requiring knowledge of
                    an advanced type in a field of science or learning customarily
                    acquired by a prolonged course of specialized intellectual
                    instruction or requiring invention, imagination, originality or talent in
                    a recognized field of artistic or creative endeavor.

7.    The Equal Pay Act
The Equal Pay Act (EPA) prohibits discrimination on the basis of sex in the payment of
wages or benefits, where men and women perform work of similar skill, effort, and
responsibility for the same employer under similar working conditions.

Employers may not reduce wages of either sex to equalize pay between men and
women. A violation of the EPA may occur where a different wage was/is paid to a
person who worked in the same job before or after an employee of the opposite sex. A
violation may also occur where a labor union causes the employer to violate the law.
Employers may not retaliate against employees who raise equal pay concerns.
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8.     Uniformed Services Employment and Reemployment Rights Act
Understandably, the Federal Government has an interest in encouraging participation in
the military.     To facilitate this goal, the Uniformed Services Employment and
Reemployment Rights Act (USERRA) makes it unlawful to ―discriminat[e] against
persons because of their service in the uniformed services.‖ This service includes past
or present military service and application for membership in the uniformed services.
The Act also provides ―for the prompt re-employment of such persons upon their
completion of such service under honorable conditions.‖ USERRA prohibits employers
from denying initial employment, promotion, or any benefit of employment because of
an employee‘s military service. The law requires that employers grant leaves of
absences to employees for military training and military duty, including active military
duty for up to five (5) years. If the employee follows the appropriate procedures under
the Act, the employee is entitled to re-employment in the same or substantially
equivalent position upon completion of the military service.

If an employee leaves the employer to perform military service, the employee has the
right to elect to continue existing employer-based health plan coverage for the
employee and his/her dependents for up to 24 months while in the military (and similar
to COBRA premiums, typically at the employee‘s expense). If the employee elects not
to continue coverage during his/her military service, the employee has the right to be
reinstated to the employer‘s health plan when he/she is reemployed, generally without
any waiting periods or exclusions (e.g. pre-existing condition exclusions), except for
service connected illnesses or injuries.

It is unlawful to refuse to hire or discharge an individual because he or she has military
obligations or because he or she exercises his or her rights to military leave. In addition,
an employer may not retaliate against anyone enforcing or assisting in the enforcement
of USERRA rights, even if that person has no service connection.

Louisiana Revised Statutes 29:38 requires employers to re-hire honorably discharged
National Guard veterans without any loss of seniority for veterans who report to their
place of employment within 72 hours of their release from duty. The section mandates
for cause only discharges for one year after re-hire. Louisiana Revised Statutes 29:38.1
prohibits employment discrimination based on an applicant or employee‘s status as a
member of any reserve unit of the U.S. Armed Forces or Louisiana National Guard.
Louisiana Revised Statutes 29:38.3 allows the recovery of attorney's fees and damages
for proceedings filed to enforce the provisions of these sections.

B.     HARASSMENT
Both state and federal law generally forbid harassment of a person because of these
―legally protected characteristics‖: race, color, sex/gender, pregnancy, religion, national
origin, citizenship, age (40 and older), and disability.


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1.     Sexual Harassment
Sexual harassment is a form of discrimination that is illegal and violates Title VII of the
Civil Rights Act of 1964, as amended. Sexual harassment is defined as unwelcome
sexual advances, requests for sexual favors, sexually motivated physical conduct or
other verbal or physical conduct or communications of a sexual nature when:

             submission to such conduct is made a term or condition, either explicitly or
              implicitly, of employment or education;

             submission to or rejection of such conduct by an individual is used as a
              factor in decisions affecting that individual‘s employment or education; or

             the conduct has the purpose or effect of substantially or unreasonably
              interfering with an individual‘s employment or education, or creating an
              intimidating, hostile, or offensive environment.

Sexual harassment may include, but is not limited to:

             unwelcome verbal harassment or abuse and/or pressure for sexual
              activity;

             unwelcome, sexually motivated or inappropriate patting, pinching or
              physical contact, other than necessary restraint of student(s) by teachers,
              administrators, or their school personnel to avoid physical harm to persons
              or property;

             unwelcome sexual behavior or words, including demands for sexual
              favors, accompanied by implied or overt threats concerning an individual‘s
              employment or educational status;

             unwelcome behavior or words directed at an individual because of gender;
              or

             physical acts of aggression or force or the threat thereof which involves
              the touching of another‘s intimate parts, or forcing a person to touch any
              person‘s intimate parts.

Intimate parts include the genital area, groin, inner thigh, buttocks or breast, as well as
the clothing covering these areas.

Generally speaking, there are two broad types of harassment that are considered
unlawful: ―hostile environment‖ harassment and ―tangible job action‖ (also known as
―quid pro quo‖) harassment.


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             Generally, a ―tangible job action‖ occurs when a harassing manager or
              supervisor discharges, demotes, denies a promotion, or makes other
              significant or adverse changes in an employee‘s terms and conditions of
              employment as part of the harassment.

             Hostile work environment harassment exists when there is ―unwelcome‖
              conduct that targets or affects a ―legally protected characteristic‖,
              unreasonably interferes with an individual‘s job performance or creates a
              hostile, intimidating or offensive work environment.

2.     Other Harassment

Any form of harassment related to any individual‘s race, color, sex/gender, religion, age,
national origin, disability, citizenship, or veteran status is unlawful. In addition to sexual
harassment discussed above, ―harassment‖ includes:

             Offensive physical conduct, including touching, regardless of the gender of
              the individuals involved, including threats of harm, violence or assault.

             Offensive pictures, graffiti, cartoon, drawings or photographs or other
              communications, including e-mail.

             Unwelcome slurs, jokes, and harassing comments about someone‘s race,
              color, religion, sex, national origin, citizenship, age, disability, veteran
              status or any other legally protected status.

3.     Effective Harassment Policy
Adoption of a general anti-discrimination policy by a company is not sufficient to protect
it from a harassment claim. Prudent employers would be remiss if they did not bolster
(or create) a strong policy against harassment – in addition to their policy that prohibits
discrimination. The policy should prohibit harassment based on sex, race, color,
religion, gender, national origin, age, citizenship, disability, or any other characteristic
protected by law. At a minimum, the policy should:

             Affirm the employer‘s opposition to discrimination and harassment, and its
              commitment to complying with all federal and state anti-discrimination
              laws.

             Define unacceptable behavior.

             Establish procedures for reporting violations in confidence, investigating
              those reports, and acting promptly to remedy the complaints through
              appropriate disciplinary and corrective measures.

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             State that no retaliation will occur to anyone bringing forth an alleged
              harassment or discrimination claim.

Such a policy should also address the use, and misuse, of the Internet and e-mail.
Whether the employer has an electronic communications policy that references its
harassment policy or incorporates in the harassment policy its guidelines for Internet
and e-mail use, the employer should make employees aware that harassment over the
Internet and e-mail is a violation of company policy and will not be tolerated.

Every worker in the office should be provided with a copy of the policy and
acknowledge, in writing, that they read and understand the policy. Keep the
acknowledgements on file.

4.     Investigation of Harassment Claims
When an employer has actual notice of a hostile working environment, either through a
complaint by the victim or because of the open and notorious nature of the hostile
environment, the employer should take prompt and effective remedial action. Upon
receiving notice of a hostile working environment an employer should:

             Act promptly.

             Conduct a thorough and fair investigation.

             Take actions to stop any harassment.

             Focus remedial action on the perpetrator and not the victim.

             Consider punitive actions to deter future harassment.

It is important that an employer speak with the ―harasser‖ during the investigation to get
his/her version of the facts. It will go a long way toward preventing a suit by the alleged
harasser.

5.     Employer Liability and Defenses
The United States Supreme Court has held that a complaint procedure – namely a
properly written policy that requires employees who have been subjected to harassment
in the workplace to report the harassment – is a defense to a sexual harassment claim.
To take advantage of the defense, the employer must establish that the policy existed,
that the employee did not make use of the known policy, and that the employee did not
experience any ―tangible job detriment,‖ such as a demotion or termination. If the
employer does not have a written anti-harassment policy and an established procedure
for publishing the policy to its employees, the employer cannot make use of this
affirmative defense.
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An employer who makes a good faith effort to comply with Title VII should be protected
from punitive damages, even if a supervisor or management-level agent of the employer
has subjected the company to compensatory damages by engaging in intentional
discrimination. This ―good faith‖ defense is intended ―to encourage employers to adopt
anti-discrimination policies and to educate their personnel on [federal] prohibitions.‖
Again, without the anti-discrimination policies in place, an employer cannot assert this
―good faith‖ defense to a claim for punitive damages. Such an amount could range from
up to $300,000.00 per violation depending on the size of the employer.

However, the written policy alone is not enough – the lack of training for employees,
lack of notice to employees, and lack of training for supervisors to respond adequately
to instances of ―clear discrimination‖ would vitiate the good faith defense.

C.    THE HIRING PROCESS
So much litigation occurs over terminations that employers are understandably
concerned about their documentation to support those difficult decisions. Employers
can be sued, and not infrequently are sued, over decisions in which a prospective
employee is not hired. Moreover, certain laws require employers to maintain certain
records from the hiring process.

1.    Advertisements
When preparing advertisements for job openings, employers should not use any words
that indicate a preference that is prohibited by law. For example, the use of masculine
or feminine terms in advertisements, such as the term ―salesman,‖ would constitute an
unlawful expression of sex preference. Use terms that are considered sexually ―neutral‖
such as ―salesperson‖ or ―sales agent.‖ Also avoid use of phrases such as ―young and
aggressive salesperson‖ or ―recent graduate‖ which indicate a preference for youth.
Finally, add ―Equal Opportunity Employer‖ to all ads.

2.    Obtaining Information
There are several ways to obtain information from a job applicant. The most common
are: (1) the job application; (2) the job interview; and (3) background checks, including
criminal record and credit history checks. The function of a job application and oral
interview is to assemble an initial body of information about the applicant on his/her
qualifications for the position available. The most routinely solicited and important
information is prior education and job experience. Job applications and interviews
become suspect as they become increasingly personal in nature or have less bearing
on an applicant‘s ability to do the job. The guidelines provided below are designed to
assist in obtaining the information needed to make a proper hiring decision, while at the
same time avoiding mistakes that may create legal headaches in the future.

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It is important to remember that the employer‘s procedures must reflect the form and
substance of compliance. Therefore employers would be wise to put these procedures
in writing and maintain them as evidence of compliance. This procedural document
should address: (1) the method for dissemination and submission of applications and
tests; (2) the length of time applications and tests will be retained; and (3) the factors to
be considered for employment ranked by priority.

Finally, while the numerous federal and state laws discussed above limit an employer‘s
discretion in hiring, employers should keep in mind that they do not have to hire
someone just because he or she is in protected status (e.g., is a minority, is disabled, is
a union member, is over 40). Employers are free to and should apply the consistent
standards for hiring all employees.        Education, training, experience, past job
performance, and recommendations, as well as testing, are all appropriate bases for
hiring or not hiring any employee. Employers should design applications and the hiring
process itself with this in mind.

       a.     Employment Application Forms

       Application forms, like all forms used in the hiring process, must be reviewed in
       order to determine that no inquiries are made which are legally prohibited. The
       employment application is a selection device to be used to find the best-qualified
       people for jobs. Questions on the application should elicit information that leads
       to the selection of the most qualified applicant, but should not request information
       that has the effect of excluding qualified candidates, either intentionally or
       unintentionally. An application form that excludes qualified candidates not only
       deprives the company of potential valuable employees, but also may violate
       federal and state job discrimination statutes. Any employment application should
       include the following information:

             an Equal Employment Opportunity statement confirming your adherence
              to federal and state prohibitions against job discrimination;

             an acknowledgment by the applicant that all of the information provided in
              the employment application is complete, true and correct, together with a
              warning notifying the applicant of the company‘s policy disqualifying from
              consideration or discharging all who falsify information, make any
              misrepresentations, or material omissions on the application, regardless of
              when the falsification, misrepresentation or material omission is
              discovered;

             instructions on filling out the application on the employer‘s premises;

             a clear statement that employment with the company is ―at-will,‖ and that
              either party is free to terminate the employment relationship at any time
              without cause;

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            a release and waiver for the employer‘s verification of all information
             identified in the employment application;

            a statement that applications which are not completely filled out will not be
             considered; and

            a statement that the application will be kept active for a stated period of
             time after which it will not be considered.

      The only questions that should appear on an application are those necessary to
      obtain information to evaluate an applicant‘s qualifications for a job. Asking other
      questions leaves the employer vulnerable to charges of discrimination.           For
      example, do not ask for date of birth or age. Do not ask about arrest records
      which is considered improper because members of minority groups tend to be
      arrested proportionately more often than other persons. Also, do not ask where
      an applicant or his parents were born or of what country he is a citizen, although
      it is permissible to inquire whether an applicant is a United States citizen or
      possesses a visa which permits him/her to work in the United States.

      Do not accept applications where there are no positions available. Any review of
      a firm‘s hiring practices conducted in connection with a charge of discrimination
      will take into consideration total applicant flow – whether those applicants were
      qualified or not and regardless of whether there were any job openings at the
      time the application was received.

      The employer should designate those persons and locations where applications
      will be accepted, and should not allow anyone else in the company to give out or
      accept completed applications. These designated persons should be thoroughly
      trained in company hiring procedures.

      b.     Employment Interviews

      When conducting employment interviews, the goal once again is to elicit only that
      information necessary to make informed employment decisions and avoid
      questions that are not job-related. The same questions that are inappropriate for
      inclusion on an application form are equally inappropriate for an interview.

      Be certain that each question asked in an interview has a direct relation to the
      qualifications required for the job. For example, when interviewing for real estate
      salespeople, ask questions pertaining to their experience and training in real
      estate, attitudes toward selling, and views and expectations of their real estate
      career. It may be helpful to outline in advance specific areas of inquiry to assure
      that the interview is as effective as possible and that similar inquiries are made in
      each interview for a particular position.

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      Avoiding Civil Law Claims. To avoid unintended contractual obligations or tort
      liability, employers should provide proper training of hiring managers. To ensure
      that the interviewer‘s oral statements do not result in implied employment
      contracts, those who conduct employment interviews should be instructed that
      they are not authorized to enter into an employment contract and that they
      should avoid vague statements concerning future job security or a specific term
      of employment. To avoid fraud claims, hiring managers should be strictly
      instructed not to make promises they know they cannot keep.

      Complying with the Americans with Disabilities Act. An employer cannot seek
      information concerning an applicant‘s disabilities by pre-employment inquiries.
      An employer may make pre-employment inquiries into the ability of the applicant
      to perform specific job-related functions, but not as to the nature of specific
      disabilities. Pre-employment inquiries must be narrow and directly related to
      essential job duties and must relate to the job duties.

      An employer also may not ask an applicant about prior workers‘ compensation
      claims, their marital status or whether they have or plan to have children. It is
      acceptable to ask whether the applicant has any responsibilities that might
      prevent him or her from meeting work or attendance schedules. Such questions,
      however, must be asked of all applicants. It is also appropriate to ask about
      membership in professional associations, but not social or religious clubs that
      reveal religion, national origin or other non-job-related factors.

      c.     Criminal Background, Credit and Reference Checks

      Perhaps the most dependable sources of information about an applicant‘s
      reliability and capabilities are the applicant‘s past employers, supervisors, co-
      workers and teachers. Employers may investigate applicants by questioning
      these sources, and in practice, an informal telephone call may produce more
      information than a written request. Reference checks can and should also be
      used to ensure the accuracy of the information the applicant provides about his
      or her prior employment and education background.              Even though the
      information may often be difficult to obtain, since former employers may be
      accused of defamation or interference with business relations, employers should
      generally attempt to obtain it, especially for applicants for positions with high
      customer or employee contact. Many employers, if asked, will at least indicate
      whether or not the former employee is eligible for rehire. Finally, the employer
      should be cognizant of special considerations under the anti-discrimination and
      ―fair credit reporting‖ laws.

      In Louisiana, any employers that provides accurate information about a current or
      former employee‘s job performance or reason for separation, upon request by a
      prospective employer, current employer or employee is immune from civil liability
      and other consequences as long as the information was not given in bad faith.
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      Moreover, Louisiana employers who reasonably rely on such information are
      immune from civil liability including liability for negligent hiring, negligent retention
      and other claims related to hiring the employee, unless further investigation,
      including a limited criminal background check, is required by law.

                    (i).    “Fair Credit Reporting Act” Considerations.

      If an employer uses an outside firm to conduct background checks, the employer
      should not only assure that the firm complies with the ADA, but also that the
      employer has taken steps to comply with the federal Fair Credit Reporting Act
      (FCRA).

      Employers often do background checks on applicants and employees. Some
      employers only want an applicant or employee‘s credit payment records; others
      want driving records and criminal histories. For sensitive positions, it is not
      unusual for employers to request that a specialized agency interview the
      applicant or employee‘s friends, neighbors, co-workers, former employers, and
      associates for additional information. All of these types of reports are ―consumer
      reports‖ within the coverage of the FCRA if obtained from and prepared by a
      ―consumer reporting agency,‖ which is a business that assembles such reports
      for other businesses. As defined in the FCRA, a consumer report contains
      information about the employee or applicant‘s personal and credit characteristics,
      character, general reputation, and lifestyle. An ―investigative consumer report‖
      goes beyond records and involves interviews of the applicant or employee‘s
      friends, neighbors, and associates.

      Applicants are often asked to give references.          Whether verifying such
      references is covered by the FCRA depends on who does the verification. A
      reference verified by the employer is not covered, while a reference verified by a
      consumer reporting agency (e.g., a reference checking agency) is covered. The
      FCRA provides special procedures for reference checking; otherwise, checking
      references may constitute an ―investigative consumer report‖ subject to additional
      FCRA requirements.

      There are three specific provisions that affect the hiring process:

            Before an employer obtains any ―consumer report,‖ the employer must
             provide the applicant a clear and conspicuous written disclosure notifying
             the applicant that a consumer report may be obtained for employment
             purposes. This disclosure must be in a document that consists solely of
             the disclosure.

            Before an employer orders any consumer report, the employer must
             obtain written authorization from the applicant.


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            If the employer decides not to hire the applicant, it is obligated to provide
             that individual with a copy of the consumer report and a summary of the
             FCRA dispute resolution process before taking the adverse action against
             the individual.

      Under the FCRA, adverse action generally means the denial of employment or
      any other decision for employment purposes that adversely affects any current or
      prospective employee. Therefore, an employer must also comply with these
      requirements when ordering a consumer report on any current employee.

3.    Medical Exams
Under the Americans with Disabilities Act (ADA), the employer may not require a
medical examination until after an offer of employment is made. The ADA imposes
several specific requirements on medical examinations:

      New Employees: All new employees must be subjected to the physical
      examination, i.e., not just those suspected of having disabilities. This may be
      limited to classes of employees. For example, an employer could conduct
      medical examinations of all individuals hired as laborers, while not requiring
      physical examinations for office employees.

      Current Employees: Current employees may be subjected to medical
      examinations only when it is shown that such examination is job-related and
      consistent with business necessity.

      No Discrimination: The results of the physical examination may not be used to
      discriminate against individuals with disabilities, but may only be used to
      establish that an individual is not qualified for the job, i.e., cannot perform the
      essential job function with reasonable accommodation.

      Confidentiality: All information gained through the medical examination must be
      collected and maintained on separate forms in a separate medical file and
      treated as a confidential medical record. All employee medical records obtained
      thereafter must be maintained in the separate medical records file, not in
      personnel files. Access to the confidential medical records must be restricted to
      supervisors and managers who must be advised of necessary restrictions on
      work duties and those responsible for implementing necessary accommodations
      and to first aid or safety personnel. EEOC representatives are also entitled to
      review the information, as is the OFCCP if a government contractor is involved.

4.    Drug Testing
Employees who abuse controlled substances or alcohol are a danger not only to
themselves, but also to their fellow employees, their employer‘s customers and to the

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general public. Employee substance abuse, on or off duty, can lead to increased
accidents, injuries, illnesses, medical claims, and to the deterioration of employees‘
health and family lives. Applicant drug tests are one way in which employers may avoid
these problems. The ADA does not prohibit employers from ―conducting . . . drug
testing for the illegal use of drugs by . . . employees or making employment decisions
based on such test results.‖ Moreover, the ADA provides that ―a test to determine the
illegal use of drugs shall not be considered a medical examination.‖

Note that while the ADA permits drug testing pre-offer of employment, alcohol testing is
a medical exam, and is therefore prohibited until after an offer of employment is made.

Louisiana Law: For private employers, Louisiana law applies some restrictions to the
drug testing of employees; however, the Louisiana provision is not applicable to
employees covered by federally mandated drug testing. The drug test must comply with
NIDA guidelines, such as having a Medical Review Officer and abiding by the cut-offs
(most reputable drug testing facilities are aware of these guidelines). The drug tests
generally includes testing for marijuana, opioids, cocaine, amphetamines and
phencyclidine. The Louisiana Drug Statute does not preclude the testing for other
drugs, and only regulates the testing of the foregoing drugs, alcohol, and substances
defined in Schedules I, II, III and IV of 21 U.S.C. § 812. In addition, Louisiana law
specifies that an individual may be disqualified for unemployment benefits if he or she
has been discharged for illegal drug use.

Employees, public or private, that are tested have a right to records relating to the drug
test. Furthermore, the results and information from the test may not be used as
evidence in public or private proceedings, except in administrative hearings, disciplinary
proceedings, or civil litigation where drug use by the individual is relevant.

Any employee, confirmed positive on a drug test, has the right of access within seven
(7) working days to the records relating to the drug test – upon written notice. On a pre-
employment screen that is not confirmed, the employer is obligated to notify the
applicant of the positive drug screen and offer the applicant the opportunity to pay for
the confirmation test and review by a MRO. In addition, an employer may, but is
certainly not required, to offer an employee who has failed a drug test to undergo
rehabilitation without termination from employment.

All drug testing information is strictly confidential, and may not be used as evidence
except as indicated above. There exists no cause of action for defamation, libel,
slander or invasion of privacy pertaining to a drug test against an employer unless:

            the results of the test were disclosed to any person other than the
             employer or testing entity, an authorized employee or agent of the
             employer or testing facility, the tested employee, or the tested applicant; or

            the information disclosed was based upon a false test result or a failure to
             comply with the provisions of this chapter; or
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            all the elements of an action for defamation, libel, slander, or invasion of
             privacy are satisfied.

There is no restriction on private employers in whether they conduct for cause,
reasonable suspicion, post-accident and/or random drug testing.

5.    Business Recordkeeping
There are certain business records an employer must keep to comply with federal laws
such as the Fair Labor Standards Act (FLSA), Title VII of the Civil Rights Act of 1986
and the Age Discrimination in Employment Act (ADEA). In addition, many states have
laws requiring employers to maintain certain records for specified lengths of time. It is
an employer‘s responsibility to keep necessary records and to assure that they are
accurate. The statutes and their record keeping requirements are set forth below:




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Statute                 Record To Be Kept                         Duration

Age Discrimination Payroll   records   containing    each 3 years
in Employment Act  employee‘s name, address, date of birth,
                   occupation,   rate   of    pay,    and
                   compensation earned each week

                        Personnel     records     containing:    job 1 year from date of
                        applications, resumes, or any other form personnel action to
                        of employment inquiry, including records which record relates
                        pertaining to the failure or refusal to hire
                        any individual

                        Personnel records relating to promotion, 1 year from date of
                        demotion, transfer, selection for training, personnel action to
                        layoff, recall or discharge of any which record relates
                        employee

                        Job orders submitted by employer to an 1 year from date of
                        employment agency or labor organization personnel action to
                        for recruiting for job opening          which record relates


                        Test papers completed by applicants or 1 year from date of
                        candidates for any position            personnel action to
                                                               which record relates


                        Result of any physical examination (Note: 1 year from date of
                        must be kept separate from employee‘s personnel action to
                        personnel file)                           which record relates


                        Advertisements or notices to the public or 1 year from date of
                        to employees relating to job openings, personnel action to
                        promotions,     training   programs,    or which record relates
                        opportunities for overtime work

                        Copies of all employee benefit plans (or Full period of the plan
                        memoranda outlining benefits)            and for one year
                                                                 thereafter

                        Copies of any seniority systems and merit Full period of the plan
                        systems                                   and for one year


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                                                                     thereafter



Americans with          Application forms and other records          1 year after making
Disabilities Act        related to hiring, requests for reasonable   record    or      taking
                        accommodation, promotion, demotion,          described        action,
                        transfer, lay-off or termination, rates of   whichever is later
                        pay or other terms of compensation, and
                        selection for training or apprenticeship

                        Medical information                          Must be maintained
                                                                     separately from other
                                                                     personnel records
COBRA                   Notification records                         6 years
                        Election forms
                        Claims forms
                        Letters rejecting coverage
Equal Pay Act           Employers must maintain any records At least 2 years
                        made in the regular course of business
                        relating to:

                        Payment of wages
                        Wage rates
                        Job evaluations
                        Job descriptions
                        Merit systems
                        Seniority systems
                        Collective bargaining agreements
                         Descriptions of practices effecting pay
                        (Note: regulations do not require
                        employers to create records, only
                        maintain those that are made)




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Executive       Order Affirmative Action Plan and supporting Must     be              updated
11246                 documents                              annually

                        All employment records including records        1 or 2 years depending
                        pertaining      to    hiring,    assignment,    on size of employer
                        promotion, demotion, transfer, layoff or        and       size       of
                        termination, rates of pay or other terms of     government contracts
                        compensation, and selection for training
                        or     apprenticeship,        requests    for
                        reasonable accommodation, results of
                        any      physical      examinations,     job
                        advertisements and postings, applications
                        and resumes, tests and tests results,
                        interview notes
Fair Labor              For each non-exempt employee:                   3 years
Standards Act           Full name
                        Payroll identification/number
                        Home address
                        Date of birth for employees
                        under 19
                        Sex
                        Occupation
                        Workweek records
                        Regular rate for any workweek in which
                        overtime is worked
                        Wage based used
                        Hours worked
                        Straight-time earnings
                        Weekly overtime pay
                        Deduction from and additions to wages
                        Pay period covered
                        Total wages paid
                        Retroactive payments

                        For each exempt employee:                       3 years
                        Full name
                        Payroll Identification/number
                        Home address
                        Date of birth for employees
                        under 19
                        Sex
                        Occupation
                        Workweek records

FLSA, cont.             The basis on which wages are paid
                        Total remuneration
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                        Records supporting exempt status

                        Sales and purchase records relevant to 3 years
                        determine whether an enterprise meets
                        FLSA‘s ―business volume‖ test

                        Collective bargaining agreements        3 years

                        Plans, trusts, employment contracts and 3 years
                        union contracts involving exclusions from
                        regular pay rates

                        Contracts and memoranda pertaining to 3 years
                        ―Belo‖ contracts

                        Agreements basing overtime pay on 3 years
                        piecework, hourly or basic rates

                        Certificates authorizing the employment 3 years
                        of learners, apprentices, handicapped
                        workers, students, home workers, and
                        child laborers

                        Basic employment and earnings records   2 years
                        Wage rate tables                        2 years

                        Work-time schedules                     2 years

                        Order, shipping and billing records     2 years

                        Certificates of age (for employees under Until termination   of
                        age 18, excluding part-time after school employment
                        and summer employees)

                        Written training agreements             Duration   of   training
                                                                program

Family and Medical Basic payroll records, including:            3 years
Leave Act          Employee identification data
                   Rate of pay or basis of compensation
                   Days and hours worked
                   Additions to and deductions from wages
                   Total compensation

                        Dates FMLA leave was taken (or hours 3 years
                        taken if less than a full day)
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                        Copies of employee notices of leave          3 years

                        Documents describing employee benefits 3 years
                        or employer policies and practices
                        regarding the taking of paid and unpaid
                        leave

                        Premium payments for employee benefits       3 years

                       Records of any disputes between 3 years
                       employer and employee regarding
                       designation of leave
Immigration Reform Form I-9 and any documents copied in 3 years from the date
and Control Act        connection with I-9 compliance   of hire or 1 year from
                                                        date of termination,
                                                        whichever is later
                                                        if not hired, 3 years
                                                        from       date        of
                                                        recruitment or referral
Title VII of the Civil Standard Form 100 (EEO-1)        Filed once a year by
Rights Act of 1964                                      employers with 100+
                                                        employees.        Latest
                                                        EEO-1      must       be
                                                        maintained.

                        Any personnel or employment record           1 year from the date
                        maintained by an employer (including         the record is made or
                        application forms, records of hiring,        the date the personnel
                        promotion, demotion, transfer, layoff or     action       is    taken,
                        termination, rates of pay or terms of        whichever occurs later
                        compensation, and selection for training     (Note: Employers may
                        and apprenticeships) Note: this does not     want      to     consider
                        require employers to create a record, only   extending this to 4
                        to keep records that are created)            years       given     the
                                                                     extension of the statute
                                                                     of limitations period of
                                                                     Federal        §    1981
                                                                     discrimination     cases
                                                                     per the US Supreme
                                                                     Court‘s decision in
                                                                     Jones         v.     R.R.
                                                                     Donnelley & Sons Co.)

                        Personnel      records    of    individual 1 year from date of
                        employees                                  termination
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                         If employer maintains apprenticeship              2 years from date
                         programs, employer must keep records              application received, or
                         of: (1) chronological list of names and           period of successful
                         addresses of all applicants, dates of             applicant‘s
                         application, sex, and minority group              apprenticeship,
                         identification, or file of written applications   whichever is longer
                         containing same information; and other
                         records pertaining to apprenticeship
                         applicants; and

                         (2) any other record made solely for 1 year from date of
                         completing EEO-2 report              report

Employees of non-governmental employers have no ―right‖ of access to their personnel
files. Generally, under Louisiana law, personnel files and the material therein are the
property of the employer. Employees do, however, have a right to copies, without cost,
of any medical examination or medical report received by the employer to which the
employee was required to submit. Such a report or record is required to be submitted
within thirty (30) days of demand. Further, employees also have the right to access an
employer‘s records of employee exposure to potentially toxic material or harmful
physical agents, including the employee‘s medical records or any analysis done using
employee exposure or medical records.

6.    Required Posters
 Several state and federal laws or regulations require that employers covered by
particular statutes display posters which advise employees of their rights under the law.
Posters that are required by federal law are:

            Equal Employment Opportunity Commission
            Minimum Wage
            Fair Labor Standards Act
            Family Medical Leave Act
            Employee Polygraph Protection Act
            Occupational Safety and Health Administration
            Uniformed Services Employment and Reemployment Rights Act

Federal law also provides that if a ―significant portion‖ of workers in an organization is
not literate in English, then a certain portion of the federal labor law postings in that
workplace must be written in a language these employees understand.

In addition to the need to display the federal posters, employers also have poster
obligations under state laws. Louisiana state law requires the following posters:

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            Louisiana Age Discrimination
            Louisiana Equal Employment Opportunity
            Louisiana Child Labor (required if company employs minors)
            Louisiana Out-of-State Motor Vehicles
            Louisiana Timely Payment of Wages
            Louisiana Worker‘s Compensation
            Louisiana Unemployment Insurance
            Louisiana Sickle Cell Anemia
            Louisiana Genetic Information and Privacy
            Louisiana‘s Employers Support/Guard & Reserves
            Louisiana Smoking Notice
            Louisiana Earned Income Credit (EIC)

Anti-harassment    and    Louisiana   Workers    Compensation      Fraud    posters   are
recommended.

These posters may be obtained free of charge from regional offices of the United States
Department of Labor and the Louisiana Department of Labor.

D.    MISCELLANEOUS STATE STATUTES                                   REGULATING
      EMPLOYMENT PRACTICES
1.    Accrued Wages and Benefits
Louisiana Revised Statutes 23:631-634 governs an employer's duties to pay accrued
wages and benefits to an employee who resigns or quits and imposes substantial
penalties for non-compliance. Wages include accrued vacation pay or other similar
benefits and written or other policies requiring the forfeiture of such accrued rights are
not enforceable. Fired employees, as well as employees who resign or quit, must be
paid any amount due on or before the next regular payday or no later than fifteen days
following the date of discharge or resignation, whichever occurs first. The employee
can be paid at the place of employment if that is the way employees are usually paid, or
payment can be sent by mail. Mail payments are deemed made when the postage
prepaid and correctly addressed letter with the check is sent. If there is a dispute, the
employer must pay the employee the undisputed amount as set forth above.

      a.     Vacation Pay, Holiday Pay, Sick Leave and Bonuses

In addition to the foregoing, upon termination, an employee is entitled to vacation pay
pursuant to the employer‘s stated policy if: (1) the employee is eligible for and has
accrued the right to take vacation time with pay, and (2) the employee has not taken or
been compensated for the vacation time as of the date of separation. The employee‘s

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right to the vacation pay occurs when vacation pay is treated as wages and the benefit
has vested. A policy which provides that vacation pay is accumulated on the basis of
years of employment becomes the property of the employee during the year. In such a
case, the employee would be entitled to a prorated portion of the vacation pay earned
during the year. Therefore, vacation policies should provide that any vacation pay is a
gratuity or a gift, and not a benefit or a wage to the employee. In addition, the policy
should provide that vacation pay is not available to employees who do not take
vacation, who quit, or who are terminated. Holiday pay is generally governed by an
employer‘s policies.

An employee is entitled to the sick leave accrued as of the time of resignation or
discharge, minus what has already been used. For example, in Keiser v. Catholic
Keiser of Shreveport, Inc., 880 So.2d 230 (La.App. 2 Cir. 8/18/04). Keiser had worked
30% of the school year. Accordingly, she was entitled to 30% of the ten days of sick
leave provided for in her contract, or three days. Based upon seven-hour workdays,
Keiser had earned a total of 21 hours of sick leave, of which she had used 7.5 hours.
Thus she was entitled to 13.5 hours of sick leave as of the effective date of her
resignation.

An annual bonus to which employee is entitled under an employer's incentive program
may constitute ―wages‖ under La. R.S. 23:621. For purposes of the statute, ―wages‖ are
any amounts due under the terms of employment, which are earned during a pay
period. An unwritten forfeiture policy is illegal. When an employer promises a benefit to
employees, and employees accept by their actions in meeting the conditions, the result
is not a mere gratuity or illusory promise, but a vested right in the employee to the
promised benefit.

Employees are entitled to accrued and earned bonuses. If an employer‘s policy
requires that an employee is employed on the last day of the year, and the employee is
not, but has earned a bonus, the bonus earned is considered ―wages‖ due under the
terms of his or her employment.

      b.     Penalties

There are substantial penalties imposed by La.R.S. 23:632 for an employer‘s failure to
pay the amount due within the time provided which arise once the employee makes
demand for the amount due. The employer is liable to the employee for the lesser of 90
days wages at the employee‘s daily rate of pay, or full wages from the time that the
employee first demanded payment until the unpaid wages are tendered. Attorney‘s fees
may be awarded if the employee files suit to recover the amounts due. An employer‘s
ignorance of the law is not a good faith defense to the employee‘s right to recover
penalties and attorney's fees.




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2.     Jury Service/Voter Protection
Employees who are called to serve on a grand jury, civil trial, or criminal trial are entitled
a leave of absence of up to one day without loss of wages, sick leave, emergency
leave, personal leave, or other benefit. The remainder of the leave granted for the jury
duty may be without pay. Any employer who violates this provision shall be liable to
make the employee whole, and shall be fined not less than $100.00 and not more than
$500.00 for each offense.

Under both federal and state laws, an employer may not discharge an employee
because he or she is required to miss work to serve on a state or federal jury.
Louisiana law prohibits employers from discharging, without cause, any employee
called to serve on jury duty. Further, an employer is prohibited from adopting a rule or
policy which provides for the termination of employees called to serve on a grand jury,
civil trial or criminal trial. Violation of this rule entitles the employee to reinstatement,
lost wages, lost salary, lost benefits, and any other condition of employment lost.
Further, the employer shall be fined between $100.00 and $1,000.00 for each employee
discharged.

3.     Louisiana’s Smoking Discrimination Statute
Under Louisiana law, employers are prohibited from discriminating against a person
because the person is a smoker or a non-smoker if the person, during the course of
employment, complies with all applicable laws and any adopted workplace policy
regulating smoking.

4.     Employee Payments
Generally, Louisiana employers cannot require employees to pay for medical exams,
fingerprinting, drug tests or furnishing of records. However, if an employee quits within
90 days of being hired and earns more than $1.00 per hour above the minimum wage
(currently $5.85, rising to $6.55 per hour effective July 24, 2008 and then to $7.25 per
hour effective July 24, 2009), an employer may seek reimbursement for those costs.

5.     Other Louisiana Statutes
In addition to the Louisiana statutes set forth above, Louisiana law also regulates many
other areas of the employment relationship. For example, Louisiana law:

       a. prohibits discrimination based on a person having Sickle Cell trait for
          employers with 20 or more employees (La. R.S. 23:352)

       b. prohibits discrimination against, or efforts to direct or influence, or termination
          of, employees based on political activities or voting (La. R.S. 23:961 & 962)

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      c. prohibits discrimination or retaliation against employees for testifying at labor
         investigations or proceedings (La. R.S. 23:964)

      d. bars an employer from taking reprisals against an employee who in good faith
         discloses or threatens to disclose illegal work-related practices, provides
         information or testimony before a public body investigating any such illegal
         activities, or objects or refuses to participate in an illegal act. An employee
         against who retaliatory action is taken may recover damages and attorney‘s
         fees; however, if the employer prevails, the employer may recover attorney‘s
         fees against the employee (La. R.S. 23:967)

      e. prohibits requiring union or labor organization membership as a condition of
         employment (La. R.S. 23:981)

      f. bars an employer from refusing to employ a person or terminating an
         employee based on any workers‘ compensation claim made by any such
         person, and allows recovery up to one years‘ wages and attorney‘s fees for
         any violation by an employer (La. R.S. 23:1361)

      g. bars discrimination or retaliation against persons who made claims for
         unemployment compensation benefits (La. R.S. 23:1691)

      h. bars employment discrimination or retaliation against an employee who in
         good faith reports or threatens to disclose any violation of environmental laws
         or regulations, and allows any person disciplined or terminated in retaliation
         for such actions to recover triple damages and attorney‘s fees (La. R.S.
         30:2027)

      i.   bars employment discrimination based on a person‘s unwillingness to
           recommend, counsel, perform, assist with or accommodate an abortion (La.
           R.S. 40:1299.31)

      j.   requires employers with 25 or more employees to establish a written smoking
           policy, which provides for a reasonable accommodation for complaints made
           by non-smokers (La. R.S. 40:1300.21-40:1300.27)

      k. bar an employer‘s termination of, or taking retaliatory action against, an
         employee based on a support order issued by the Louisiana Department of
         Health & Human Resources (La. R.S. 46:236.3(J) & (K))

      l.   prohibits discrimination on the basis of a handicap for housing, education, real
           estate transactions, and provides for handicapped persons‘ full utilization of
           and equal access to public services and accommodations (La. R.S. 46:2251-
           46:2256).


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E.     PRIVACY ISSUES
1.     Monitoring Employee Communications
The results of the American Management Association‘s (AMA) year 2005 survey
demonstrate the pervasiveness of workplace monitoring of communications. This
survey found when it comes to evaluating workplace computer use, employers are
primarily concerned about inappropriate Web surfing. Of the U.S. employers
participating in the survey, over three-quarters (76%) acknowledged recording and
reviewing employees‘ Website connections. Employers are also engaging in other types
of computer monitoring, with 36% of employers tracking content, keystrokes and time
spent at the keyboard and another 50% storing and reviewing employees‘ computer
files. Companies are also looking at employees‘ e-mails, with 55% retaining and
reviewing messages.

From computer monitoring and telephone taping to video surveillance and GPS satellite
tracking, employers are using policy and technology to manage productivity and protect
resources. To motivate employee compliance, companies increasingly are identifying
consequences for workplace computer use abuses in their technology policies.
According to the AMA‘s 2005 Electronic Monitoring & Surveillance Survey, 26% of
employers have fired workers for misusing the Internet, another 25% have terminated
employees for e-mail misuse, and 6% have fired employees for misusing office
telephones.

A 2006 Workplace E-Mail, Instant Messaging & Blog Survey co-sponsored by the
American Management Association and The ePolicy Institute found that a small number
of employers are also beginning to terminate workers who violate computer privileges
involving inappropriate instant messenger (IM) chat and for offensive blog content—
including posts on employees‘ personal home-based blogs. Unmanaged blogging can
potentially create significant legal exposure for employers, including claims relating to
copyright infringement, invasion of privacy, defamation, sexual harassment/other legal
claims. Such blogging could also result in trade secret theft, financial disclosures, and
other security breaches, public relations issues, and mismanagement of electronic
business records.

Since 1997, the AMA has issued the following advisory:

       Policies and practices in electronic monitoring and surveillance should be
       promulgated and posted so that employees are aware that their action and
       communications are subject to recording and review.

In light of the statutory and decisional law in this area, this is sound advice.




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      a.     Telephone Monitoring

Employers must consider the potential application of both state law, Louisiana Revised
Statute 15:1301, et seq. (Louisiana’s Electronic Surveillance Act, prohibiting the
interception, disclosure and use of information of any wire or oral communications); and
federal law, 18 U.S.C. §§2510, et seq. (The Electronic Communication Privacy Act of
1986, amending the 1968 Federal Wiretap Act, prohibiting the interception and
disclosure of wire, oral or electronic communications.). Under both state and federal
law, however, consent is a complete defense, and limited monitoring ―in the ordinary
course of business‖ is allowed. As a result, employers should notify employees of
potential monitoring of phone calls, through company policies (including the employee
policy manual), state the business reasons for the policy, and obtain employees‘
consent (preferably in writing).

It is not, however, unlawful, under Louisiana law, for a person not acting under color of
law to intercept a telephone conversation where the person is a party to the
communication, or where one of the parties to the communication has given their prior
consent. Thus, it would be lawful in the State of Louisiana for the Human Resource
Director to tape record her conversations with employees. Nevertheless, caution should
be taken in tape recording conversations.

      b.     Electronic Communications

Monitoring e-mail and internet access, although controversial, can effectively reduce
potential liability for harassment claims based on racist and sexist email and visits to
pornographic web sites. The Electronic Communications Privacy Act of 1986, 18
U.S.C. ''2510-2521, prohibits the ―interception‖ of ―electronic‖ communications.

Sophisticated computer programs are available to automatically apply complex linguistic
analyses to every single outgoing and incoming e-mail message in a workplace. The
employer may also make use of a ―history‖ feature of internet browser software to reveal
all web sites recently accessed and when such sites were visited. Similarly, the
employer may examine the ―bookmarks‖ or ―favorite places‖ listings to determine
whether an employee has recorded a shortcut to an objectionable web site.

2.    E-Mail and Internet Usage Policies
Because employers own the computer systems involved, employers should have the
right to require that employees use the systems responsibly. A reasonable e-mail and
internet access policy should begin with the fundamental proposition that the computer
systems are a company resource and are to be used ―for business purposes only.‖
Broad, nonspecific restrictions on use of e-mail and the internet for any non-work
related activity, enforced consistently, is the most appropriate approach.



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An e-mail and internet access policy should stress that the employee‘s privilege of using
these electronic tools should be exercised responsibly and with caution. The policy
should emphasize that the same rules of employee conduct already in place apply with
equal force to an employee‘s use of these new technologies. Certain acts, however,
should be expressly forbidden, e.g., downloading pornographic material, using
offensive, abusive or defamatory language in e-mail, misrepresenting oneself or one‘s
authority in an internet transaction, or sending out company confidential information.

An e-mail and internet usage policy should emphasize that employees should say
nothing in an e-mail or instant message and should visit no web sites which he or she
would not want published. The policy should remind employees of the potential for use
of e-mail, instant messaging systems, and records of internet usage in litigation. The
policy should dispel any employee perceptions of privacy by explaining the technology
and informing employees that e-mail messages, instant messages, and internet access
records remain on computer servers and, although ―deleted‖ on a user‘s screen, may
still be retrieved using special software. This notification of the employee‘s lack of
privacy as regards use of e-mail, instant message systems, and access to the Internet
should be clear and prominent. Explicit assurances to employees that e-mail will be
private should be avoided as such assurances may support an employee‘s invasion of
privacy or fraud claim. The policy should further identify the specific medium to be
monitored, such as e-mail, instant message, or Internet usage; describe the scope of
the monitoring; identify the reason for the monitoring; and identify the form of the
monitoring, such as random, across-the-board, or for cause. The policy should finally
outline the consequences of violating the policy.

Employers may want to consider adding provisions in this policy regarding company-
sponsored and non-company sponsored blog activities. However, employers should
proceed with caution in creating such provisions as there may be certain conduct on
blogs that is protected, such as employees who engage in what they call protected
concerted speech or activity about the wages, benefits or other terms and conditions of
their employment on a blog.

The policy should be distributed to all prospective and current employees with a
release/waiver form. The employee must sign and return the form prior to being
allowed access to the system. The employer should also periodically redistribute the
policy and use a pre-login screen informing the user of the existence of the policy and
the employer‘s reservation of the right to monitor use.

Employers should keep in mind that adopting a monitoring policy may give rise to the
possibility of negligent supervision claims. Employers who monitor employee e-mails
may find that they have a duty to protect the public if it is discovered that an employee is
using the company e-mail system to communicate threats to outsiders.




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      a.     Sample E-Mail and Internet Usage Policy

THE COMPANY      is committed to providing an environment that encourages the use of
computers and electronic information as essential tools to support THE COMPANY 's
business. It is the responsibility of each employee to ensure that this technology is used
for proper business purposes and in a manner that does not compromise the
confidentiality of proprietary or other sensitive information. This policy, should be read
in conjunction with, THE COMPANY‘s policies regarding, equal employment opportunity
and harassment. This policy applies to all users of THE COMPANY 's computer systems.

E-mail Procedures

                All E-mail correspondence is the property of THE COMPANY.

                Employee E-mail communications are not considered private despite
                 any such designation either by the sender or the recipient.

                Messages sent to recipients outside of THE COMPANY, if sent over the
                 Internet and not encrypted, are not secure.

                THE COMPANY      reserves the right to monitor its E-mail system -
                 including an employee's mailbox - at its discretion in the ordinary
                 course of business. Please note that in certain situations, THE
                 COMPANY may be compelled to access and disclose messages sent
                 over its E-mail system.

                The existence of passwords and "message delete" functions do not
                 restrict or eliminate THE COMPANY 's ability or right to access electronic
                 communications.

                Employees shall not share an E-mail password, provide E-mail access
                 to an unauthorized user, or access another user's E-mail box without
                 authorization.

                Employees shall not post, display or make easily available any access
                 information, including, but not limited to, passwords.

                Offensive, demeaning or disruptive messages are prohibited. This
                 includes, but is not limited to, messages that are inconsistent with THE
                 COMPANY 's policies concerning Equal Employment Opportunity and
                 unlawful harassment.

The same provisions outlined in the above Email Procedures apply to instant
messages. (Additional language addressing blogs inside and/or outside of THE


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COMPANY     could be added here). Any employee who violates this policy shall be subject
to discipline, up to and including discharge.

Internet Procedures

      THE COMPANY's     network, including its connection to the Internet, is to be used for
       business-related purposes only and not for personal use (or primarily for
       business-related purposes). Any unauthorized use of the Internet is strictly
       prohibited. Unauthorized use includes, but is not limited to: connecting, posting,
       or downloading pornographic material; engaging in computer-"hacking" and other
       related activities; attempting to disable or compromise the security of information
       contained on THE COMPANY‘s computers or otherwise using THE COMPANY 's
       computers for personal use).

      Internet messages should be treated as non-confidential. Anything sent through
       the Internet passes through a number of different computer systems, all with
       different levels of security. The confidentiality of messages may be compromised
       at any point along the way, unless the messages are encrypted.

      Because postings placed on the Internet may display THE COMPANY's address,
       make certain before posting information on the Internet that the information
       reflects the standards and policies of THE COMPANY. Under no circumstances
       shall information of a confidential, sensitive or otherwise proprietary nature be
       placed on the Internet.

      Subscriptions to news groups and mailing lists are permitted when the
       subscription is for a work-related purpose. Any other subscriptions are
       prohibited.

      Information posted or viewed on the Internet may constitute published material.
       Therefore, reproduction of information posted or otherwise available over the
       Internet may be done only by express permission from the author or copyright
       holder.

      Unless the prior approval of management has been obtained, users may not
       establish Internet or other external network connections that could allow
       unauthorized persons to gain access to THE COMPANY‘s systems and information.
       These connections include the establishment of hosts with public modem dial-
       ins, World Wide Web home pages and File Transfer Protocol (FTP).

      All files downloaded from the Internet must be checked for possible computer
       viruses. If uncertain whether your virus-checking software is current, you must
       check with an authorized Representative before downloading.



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      Offensive, demeaning or disruptive messages are prohibited. This includes, but
       is not limited to, messages that are inconsistent with THE COMPANY's policies
       concerning Equal Employment Opportunity and unlawful harassment.

Any employee who violates this policy shall be subject to discipline, up to and including
discharge.




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F.    SAMPLE PERSONNEL POLICY MANUAL

      1.     Employee Acknowledgement
I agree to read the entire EMPLOYEE HANDBOOK that I received. I agree to be
responsible for knowing its contents and updates. I understand and agree that the
policies and procedures contained in the handbook are to be to be interpreted and
applied by the [COMPANY] in its sole discretion.

Further, I understand that, in the absence of any express written contract executed by
the President or Vice-President, all employment with the [COMPANY] is non-
contractual, ―employment-at-will‖ and that this Handbook constitutes neither an express
nor an implied contract of employment or employment benefits. The policies and all
employment benefits may be amended, modified or revoked at any time by the
[COMPANY] or the [COMPANY] may pursue a different course of action, at any time
without the change being communicated, reprinted or substituted in this Handbook.

I acknowledge and affirm I read the Company‘s Equal Employment Opportunity and
Harassment policies and understand that I should immediately notify [COMPANY]
officials of any discrimination, harassment, or retaliation complaints that I might have,
and any discriminating, harassing or retaliatory behavior that I may witness.

I understand that all matters pertaining to the [COMPANY]‘s business are confidential
and I agree to refrain from discussing or revealing confidential matters to anyone other
than appropriate persons within the organization or as required by law. This obligation
of confidentiality continues even if my employment is discontinued for any reason.

___________________________________
Employee Signature

___________________________________
Employee Name (typed or printed)




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2.     Purpose of Policy Manual
The purpose of this manual is to establish a standard set of policies which incorporates
the basic philosophy of [COMPANY] and to determine the proper course of action to
use in various situations. The policies outlined in this manual may be changed from
time to time to meet the demands of the future. This manual is not a contract of
employment, but is intended solely to give eligible employees and associates a short
description of the working conditions at [COMPANY]. This manual is further not
intended to alter the employment at-will status of eligible employees or associates –
meaning the relationship with [COMPANY] may be terminated by either party at any
time, for any reason or no reason, with or without notice. Any questions or exceptions
pertaining to these policies should be direct to ____________________.

3.     Equal Employment Opportunity
[COMPANY] has a continuing policy to afford equal opportunity to all employees,
associates and applicants without regard to race, color, religion, national origin, sex,
age, disability, sickle cell trait, protected genetic information, citizenship, veteran status
or any other legally protected status. This policy applies to all personnel action
including recruitment, hiring, training, promotions, compensation, benefits, transfers,
layoffs, termination and recreational and social programs. The Company believes that
employees and associates have a right to work in an environment free from harassment
based upon the employee‘s race, color, religion, sex, age, national origin, disability,
sickle cell trait, protected genetic information, veteran status, or any other legally
protected status.

Any employee with questions or concerns about this policy or who believes
discrimination may be occurring in our work environment is encouraged to immediately
bring these issues to the attention of management appropriate in the circumstances. If
the employee or associate should choose to do so, he or she may contact
______________________________.

Do not wait to complain. We need to address these situations at the earliest possible
time. The first time you believe improper conduct in violation of this policy has occurred,
you should make your concerns known. All reports of possible discrimination will be
investigated promptly. We will keep the investigation confidential to the extent we can
under the circumstances.

No retaliation in any form will be tolerated toward an employee or associate for reporting
in good faith concerns of discrimination. Anyone found to be engaging in any type of
discrimination or retaliation in violation of this policy, will be subject to disciplinary
action, up to and including immediate termination of employment.

Responsibility for carrying out this policy is placed with each manager and supervisor at
every level.

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4.     Harassment Policy
       a.     Scope

This policy applies to all employees and associates of [COMPANY], and is intended as
guidance for them.

       b.     Purpose

The purpose of this policy is to express the Company's position that it will not tolerate
sexual harassment or harassment due to race, color, sex (regardless whether sexual in
nature), religion, national origin, citizenship, age, disability, sickle cell trait, protected
genetic information, protected activity, or veteran status in the workplace, or other
legally protected status. This policy complies with Federal Regulations as stated in
Section 703 of Title VII of the 1964 Civil Rights Act as amended. Employees or
associates who believe they have been the subject of harassment are encouraged to
discuss and report such conduct to any Company management appropriate in the
circumstances. If the employee or associate should choose to do so, he or she may
contact ______________________.

       c.     General Policy

It is the Company's policy to maintain a work environment free from discrimination and
to prohibit sexual advances or harassment among or toward its employees or
associates. Given the nature of harassment, the Company realizes that the question of
whether a particular action constitutes harassment requires a determination based upon
the facts. The confidentiality of such information should be emphasized to protect
innocent men and women from the effects of false accusation. The Company expects
all employees and associates to act responsibly in maintaining a work environment free
of discrimination in any form.

       d.     Definition Of Sexual Harassment, Advances And Other Harassment

Unwelcome sexual advances, requests for sexual favors and other verbal or physical
conduct of a sexual nature, regardless of gender, constitutes sexual harassment when:

       i.     Submission to such conduct is made either explicitly or implicitly a term or
              condition of an individual's employment or continued employment.

       ii.    Submission to, or rejection of, such conduct by an individual is used as a
              basis of employment decisions affecting such individual.

       iii.   Such conduct has the purpose or effect of substantially interfering with the
              individual's work performance or creating an intimidating, hostile or
              offensive working environment.

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      e.      Other Prohibited Behaviors

      i.      Racial or ethnic jokes, slurs, epithets, cartoons or graffiti

      ii.     Racially, ethnically or sexually graphic comments, epithets, pictures,
              cartoons, gestures or graffiti

      iii.    Taunting on the basis of actual or perceived sexual orientation or
              individual characteristics

      iv.     Repeated use of demeaning or degrading comments based on individual
              characteristics

      v.      Repeated use of offensive profanity or intimidating behaviors like yelling or
              throwing objects

      vi.     Threats of harm, violence, or assault

      vii.    Unwanted sexual flirtations or unwelcome, unnecessary touching

      viii.   Requesting sexual favors in return for a tangible employment action

      f.      Procedure

      i.      The Company's policy regarding harassment will be posted in a
              conspicuous location which makes it viewable by new applicants,
              employees and associates.

      ii.     Each location must provide or discuss the Company's policy against
              harassment with all newly hired employees or the at the initial relationship
              with an associate.

      iii.    All employees, associates and management personnel should receive
              training on how to identify and prevent harassment in the work place as
              well as on how to handle a harassment complaint.

      iv.     All employees and associates should receive training or information on the
              issue of harassment. Employees and associates should also be aware of
              the appropriate procedures for reporting any incident of perceived
              harassment.

      v.      Management should periodically tour the work place for the purpose of
              detecting and removing any pictures, posters, calendars, graffiti, objects,
              books, magazines or other materials that are sexually suggestive or

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             demeaning, pornographic, violent, discriminatory in nature, or create a
             hostile environment,

      vi.    The following three step program of reporting, Investigation, and corrective
             measures is to be used for suspected incidents of harassment.

      Reporting

      Whenever an employee or associate has reason to believe he/she has been
      subjected to a discriminating work environment because of sexual advances or
      harassment, the individual should promptly report such incidents to their
      supervisor or any management official they choose. The individual receiving the
      complaint is to report to their management who will inform the
      _________________________. No retaliation in any form will be tolerated
      toward an employee or associate for reporting in good faith such incidents. All
      complaints       of  sexual     harassment    should     be     reported      to
      ________________________ regardless of management's evaluation as to the
      merit of the claim.

      Investigation

      Upon notice of any reported incidents of alleged sexual advances or harassment,
      the Company will promptly conduct a full investigation of the matter. The
      investigation will include an opportunity for the accused employee or associate to
      be heard. Confidentiality will be maintained to the greatest possible degree.

      Corrective Measures

      Upon completion of the investigation, the Company will make a decision. If the
      investigation substantiates the accusations, the appropriate corrective action will
      be taken. This may include, but not be limited to, reprimand, suspension,
      reassignment or dismissal, depending on the nature and severity of the offense.

      Appropriate action will also be taken in the event the accusations are intentionally
      false and malicious in intent.

      g.     Responsibility For Administration

Every supervisor, employee and associate is responsible for maintaining a work
environment free from harassment and to take appropriate action if an incident occurs.
_____________________ is responsible for the overall administration of this policy.




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5.    Disability Accommodation
The [COMPANY] is committed to providing equal employment opportunities to
otherwise qualified individuals with disabilities, which may include providing reasonable
accommodation where appropriate. In general, it is your responsibility to notify your
supervisor of the need for an accommodation. Upon doing so, your supervisor may ask
for your input or the type of accommodation you believe may be necessary, or the
functional limitations caused by your disability.          Also, when appropriate, the
[COMPANY] may request you obtain additional information from your physician or other
medical or rehabilitation professionals.

6.    Immigration Compliance
Effective November 6, 1986, the Immigration Reform Control Act of 1976 prohibits the
[COMPANY] from knowingly employing any person who is not authorized to work in the
United States. As a condition of every offer of employment, each person hired by
[COMPANY] is required to present acceptable proof of identity and authorization to
work. The documentation currently acceptable by law will be specified at the time an
offer of employment is made and must be presented prior to accepting any offer or
commencing work.

All such documents must be genuine, and [COMPANY] retains sole discretion to have
any documents reviewed by an Immigration & Naturalization Specialist to determine the
authenticity and/or acceptability of documents. The use of falsified, altered, or stolen
documents is absolutely forbidden. Employees hired on or after November 6, 1986,
must also fill out and sign INS Form 1-9 under penalty of perjury verifying their lawful
immigration status. All employees must immediately advise [COMPANY] of any
changes affecting their entitlement to work in the United States.

The failure to present proper documentation or to satisfy all other requirements of
federal law constitutes grounds for revocation of any offer of employment or discharge
from employment. Employees hired after November 6, 1986, will be discharged if their
authorization to work expires, or if [COMPANY] learns that the employee is or has
become unauthorized to work in the United States.

7.    Employment
It is the policy of the Company to employ or associate individuals who are qualified or
trainable as determined by our standards of education, experience and personal
qualifications with regard to job related criteria. The hiring of an employee shall not
create a contractual relationship between the employee and the Company. Such
relationship is defined as ―employment at will,‖ and either party may dissolve the
relationship at any time, with or without reason.



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Job openings will be filled by promoting qualified personnel from within the Company
whenever possible. When it is necessary to recruit applicants from outside the
Company, the decision to hire the applicant shall be made by the Supervisor. An
applicant can be refused employment, or if already employed, can be terminated for any
misrepresentation on the application form.

8.     Independent Contractor
The relationship of the associate with ___________________ is that of an Independent
Contractor as set forth in LSA R.S. 37 § 1446(H)(3). This relationship affords the
associate maximum freedom and flexibility. It is established and described in a contract
and includes how listings and compensation will be handled in the event that the
associate leaves the Company. The contract must be signed by the associate and
provided to the Company upon affiliation with the Company.

In connection with this relationship, the associate shall do the following:

             Maintain his or her own real estate license and keep it current.
             Meet all Continuing Education (CE) requirements as established by the
              Louisiana REALTORS®.
             Provide the Company with proof of CE compliance and license renewal no
              later than fifteen (15) days prior to the applicable renewal date.
             Maintain mandatory coverage of errors and omissions insurance as set
              forth by the Louisiana Real Estate Commission.
             Be responsible for all CE, licensing and license renewal fees, mandatory
              errors and omission premiums, or fees relating to name changes.
             Become a member of the local Board/Association, Louisiana
              REALTORS®, _________ and be responsible for all applicable dues and
              fees.
             Abide by the rules and regulations of the organizations to which the
              Company must adhere as a member thereof.
             Abide by the Code of Ethics, local Board/Association Constitution and/or
              Bylaws, and the rules and regulations of the Multiple Listing Service.
             Engage in business that promotes the utmost manner of professionalism
              by promoting positive relations, enhancing the business‘ reputation and its
              profits, and increasing community goodwill.
             Put forth his or her best effort in selling, exchanging and leasing all real
              estate and business opportunities listed with the Company and to include
              the solicitation of new clients and customers for future business.
             Act in a lawful and ethical manners in promoting the professionalism of
              himself or herself as well as the Company to the greatest mutual benefit of
              both parties.
             Act on behalf of the Company.
             Provide an automobile in such condition as to promote the professionalism
              of the Company. The associate shall carry liability insurance with
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             coverage for personal injury and coverage for property damage, naming
             the Company as an additional insured in the policy. All expenses related
             to the operation, maintenance, repair and other related automobile
             expenses will be paid for by the associate. In accordance with Louisiana
             law, the associate shall require that all passengers wear a seat belt and
             any infant under the age of four years be secured in a restraining seat.

All other expenses incurred by the associate in connection with the transacting of
business on behalf of the Company will be paid in accordance with the contract
between the associate and the Company.

The terms of compensation for work performed by the associate will be paid in
accordance with the contract between the associate and the Company. The terms of
compensation for work in progress but not completed prior to the termination of the
relationship between the association and the Company will be governed by the contract.

Upon the termination of the relationship between the associate and the Company, the
associate shall return to the Company all property of the Company, including but not
limited to:

            all property files
            all computerized files
            keys
            ―For Sale‖ signs
            notebooks
            lock boxes
            records of any kind used in connection with the listing, sale or leasing of
             property

Each associate is responsible for maintaining the necessary personal financial records
for purposes of reporting income for state and federal tax requirements. The obligation,
commitment or binding of a promise or representation by the Company is not valid
unless the associate receives authorization from the Company in writing and provided
the associate is authorized to execute listing contacts, buyer/seller agency contracts
and other approved forms on behalf of the Company. Authority to terminate a listing
contract, buyer/seller agency contract, or other agency agreement, or to make
amendments to the contract that alter the term and/or change the amount of
compensation established in the contract is prohibited unless such request is first
presented to the Company or management personnel who is authorized to execute
such terminations and amendments and grants authorization in writing.

9.    Fair Housing Law
It is illegal to discriminate against any person because of age, race, creed, color,
religion, sex, disability, familial status or national origin:
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            in the sale or rental of housing or residential lots
            in the advertising the sale or rental of housing
            in the financing of housing
            in the provision of real estate brokerage services
            in the appraisal of housing
            In addition, blockbusting is illegal.

This Company subscribes to the principle of equal opportunity in the acquisition of
housing. This principle can best be accomplished through leadership, example,
education, and the mutual cooperation of the real estate industry and public. Therefore,
this Company requires that all employees and associates are obligated to adhere to the
following:

1.    In the sale, purchase, exchange, rental or lease of real property, associates and
      employees have the responsibility to offer equal service to all clients and
      prospects without regard to race, color, religion, sex, handicap, familial status or
      national origin. This includes:

      a.     Standing ready to enter broker-client relationships or to show property
             equally to members of all racial, religious or ethnic groups;
      b.     Receiving all formal written offers and communicating them to the
             owner;
      c.     Exerting the best efforts to conclude all transactions; and
      d.     Maintaining equal opportunity practices.

2.    Associates and employees, individually or collectively, in performing their agency
      functions have no right or responsibility to volunteer information regarding the
      racial, religious or ethnic composition of any neighborhood or any part thereof.

3.    Associates and employees shall not engage in any activity which has the
      purpose of inducing panic selling.

4.    Associates and employees shall not print, display or circulate any statement or
      advertisement with respect to the sale or rental of a dwelling that indicates any
      preference, limitations or discrimination based on race, color, religion, sex,
      disability, familial status or national origin.

Any employee or associate who violates this policy, the spirit of this policy, or federal
and state laws governing fair housing shall be subject to disciplinary action, up to and
including termination of employment or affiliation with the Company.




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10.    Security
All employees and associates are responsible for maintaining confidentiality with regard
to Company records and for the security of Company property. The last employee or
associate to leave an area should be sure that all entry doors are locked and that all
confidential material locked in a file cabinet or drawer. All unusual happenings noticed
should be reported to the security guard or building management company. Upon
termination, each employee must return all keys and card key to his/her supervisor.

The safeguarding of personal property is the responsibility of each employee and
associate. The Company carries no insurance on and cannot accept the responsibility
for loss of personal property, including cash.

IMPORTANT AREAS OF SECURITY

Client Data and Information are strictly Confidential.
All known passwords to client accounts are to remain Confidential.
The Security System is to be activated when the last employee or associate leaves for
the day.
Access codes allowing entry into office premises, computer rooms and computer
systems. Only [Company] employees and associates are to have these codes.

11.    Weapons Prohibition
Threats of violence, bodily harm or physical intimidation by employees or associates are
not tolerated by the Company and constitute grounds for discipline up to separation. In
furtherance of this policy, weapons of any kind (e.g., handguns, rifles, shotguns, knives,
etc.) are prohibited on the premises of the Company. This prohibition includes
concealed handguns. The Company reserves the right to require an evaluation by a
mental health professional to determine continued fitness for duty.

Likewise, threats of intimidation of employees or associates in the workplace by
individuals from outside the Company will not be tolerated. Employees or associates
receiving a threat should immediately notify _________________________.

12.    Confidentiality
Employees may work with, and have access to, information that must be kept
confidential. The protection of confidential business information and trade secrets is vital
to the interests and the success of [COMPANY].

Employees are to protect the security of confidential information. Employees who are
exposed to confidential information may be required to sign a non-disclosure agreement
as a condition of employment. Any employee who discloses trade secrets or
confidential business information will be subject to disciplinary action (including possible
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discharge) and legal action, even if he or she does not actually benefit from the
disclosed information.

This policy also applies after the cessation of employment with [COMPANY]

13.   Privacy Statement
It is not the Company‘s policy or intent to meddle into an employee‘s or associate‘s
private affairs. At the same time, the Company‘s offices, furnishings and office
equipment are the property of the Company and are intended for the use of the
Company‘s business. Thus, while the Company permits limited use of the Company‘s
property, within reason and subject to the exercise of good judgment, for personal
matters, the ability to do so does not make private anything within the premises of the
Company that is the Company‘s property. Accordingly, there should be no expectation
of privacy anywhere within the confines of the Company‘s office premises.

By way of example only, and not of limitation, no employee or associate of the
Company should have any expectation of privacy to anything stored in any of the
furniture (i.e., locker, desks, credenzas, etc.) within the Company‘s offices or within the
confines of the office itself (irrespective of whether the furniture assigned to any
employee is under lock and key or not). Similarly, employees and associates should
not expect any privacy with respect to information stored in the hard drives of either the
computer which serves as the server to the computer network of the Company or on the
hard drive of any individual computer within any of the offices. Nor may any individual
place any passwords or obstacles to retrieving information stored on the hard drives of
any of the computers in the office. The only passwords permitted are those assigned
and placed by the Company. Any materials intended to be kept personal and
confidential should not be left anywhere in the Company‘s offices or furniture. Instead,
you are encouraged to take such materials home to insure their privacy.

The foregoing is not intended to limit the ability of management to search the premises
and property of the Company. You should be aware that from time to time it may
become necessary for the Company to search the premises and property of the
Company. Such a search may well include personal bags or belongings brought onto
the Company‘s property by individual employees or associate. An individual may refuse
the request of the Company to search his or her own property; however, such a refusal
is considered misconduct by the Company subjecting the employee or associate to
discipline up to and including termination of employment or affiliation with the Company.

The foregoing is also not intended to limit the right or ability of management to restrict
access to certain information regarding the Company‘s business. As such, there may
be certain areas within the premises of the Company‘s offices or certain information
stored on the hard drives of the Company‘s computers relating to the Company‘s
business to which the management, in its sole discretion, have determined should have
limited access.

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Any questions regarding the meaning or application of this policy should be directed to
______________.

14.   Substance Abuse Policy Statement
Concerns about drugs in the workplace as well as our society in general has risen to
such a degree that the need for a substance abuse policy has become apparent.
Accordingly, effective immediately, the following substance abuse policy is implemented
for all of our associates, employees and applicants.

      a.      Purpose and Scope of Policy

The purpose of this policy is to clearly articulate the Company‘s belief that the abuse of
alcohol and prescription drugs, and the use of illegal, nonprescription drugs and
inhalants are incompatible with the operation of a workplace and completely
unacceptable behavior on the part of our employees. The purpose in adopting this
policy is to foster the health and safety of all our employees and their working
environment by the elimination of drug and alcohol abuse. The policy also gives a basic
description of drug testing measures, the procedures we will implement upon the
discovery of substance abuse by employees, and the Company‘s role in providing
assistance to its employees who fall victim to substance abuse and who voluntarily seek
this care. The scope of this policy extends to each of our employees, and continuation
of employment signifies understanding of, and intent to comply with it, the terms of this
policy.

      b.      Definitions

―Substance‖ is defined as any drug, including alcoholic beverages, intoxicating inhalants
and all other illegal drugs. ―Prescription drug‖ is defined as medication or drugs lawfully
prescribed for the employee by a physician, chiropractor or dentist licensed by the State
of Louisiana and for which the employee has in his possession a current prescription.
All other prescribed drugs and medicine are deemed substances.

      c.      Prohibited Conduct

We are committed to having a drug free workplace. In that connection, for purposes of
this policy, the mere intake of illegal drugs constitutes substance abuse. Possession of
any substance defined above while on the Company‘s property or while on the
Company‘s business is likewise prohibited. Reporting to work or attempting to work
while under the influence of alcohol is likewise prohibited. This section is not intended
to prohibit the moderate consumption of alcohol in connection with company business.




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       d.     Disciplinary Action

Any violation of this policy by an employee will result in immediate disciplinary action up
to and including discharge or termination of the affiliation with the Company. Any
person who refuses to comply with any of the terms of this policy or to fully cooperate
with regard to any possible infraction of this policy will be subject to the same
disciplinary action.

       e.     Drug Assistance Program

The Company will work with the employees or associates who believe that participation
in an alcohol or drug treatment program is necessary. The medical insurance that is
provided sets forth the benefits available under such policy, if any. Information
concerning substance abuse policies may be commenced by contacting
___________________________.

       f.     Testing

The Company retains the right to request any prospective or current employee or
associate to submit to a substance test when, in the Company‘s sole judgment, it is
appropriate to do so. Compliance with such a request is a condition of employment.

       g.     Right of Access to Test Results and Confidentiality

By signing the Company‘s copy of this Substance Abuse Policy, the applicant or
employee or associate consents to the release of all testing results to the management
of the Company, and further releases and holds harmless both the Company and the
testing laboratory from any and all claims or causes of action based on any action taken
in connection with such results. Each employee and associate shall have a right to
request and receive the results of any substance test. All employee or associate
information relating to testing will be protected by the Company as confidential unless
otherwise required by law, such as is relevant to any proceedings, where there are
overriding public health and safety concerns, or when authorized in writing by the
employee.

       h.     Searches

The Company may authorize the search of an employee, associate, personal property,
including desks and work area. No search will be conducted without the employee‘s or
associate‘s consent; however, an employee‘s consent to a search is required as a
condition employment or further affiliation with the Company.
_____________________________              _____________________________
Signature                                  Company Representative

_____________________________              _____________________________
Date                                       Date
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15.    Smoking Policy
Smoking in the workplace has been and continues to be a controversial issue. The
Surgeon General of the United States and other research scientists have concluded that
smoking poses potential dangers to the health of both smokers and nonsmokers.

It is the policy of the Company that smoking is prohibited except in the designated areas
for                       smoking,                    which                        includes:
___________________________________________________. Smoking in all other
areas is strictly prohibited. Anyone violating this policy is subject to disciplinary action
up to and including termination of employment or the affiliation with the Company.

16.    No Solicitation Policy
Because distraction on the job leads to unsafe working conditions, poor work
performance and inefficiency, we have established the following rules:

             During periods of your workday when you are engaged in or required to be
              performing your work tasks, you may not engage in solicitation of other
              employees or distribution of literature for any purpose.
             During periods in another employee‘s workday when he/she is engaged in
              or required to be performing his/her work tasks, you may not solicit the
              other employee for any purpose.
             Distribution of literature of any kind may not be made in the work areas of
              the premises at any time.
             Persons not employed by the Company are not permitted to solicit or
              distribute literature on Company premises.
             E-mails are for use for Company‘s business or purposes. Personal use of
              the Company‘s E-mail system is prohibited.

17.    Employee Classifications
       Probationary Employees

During the first 90 calendar days of employment, all employees are considered
probationary. During this trial period, new employees are given the opportunity to
become oriented to their job and new surroundings, and to demonstrate their
willingness and ability to perform assigned work. Probationary employees are not
entitled to paid holidays or any job benefits subject to [COMPANY] Plan documents. At
the end of the probationary period, [COMPANY] will review the employee's performance
and job assignment. Employment during the probationary period may be terminated for
any reason or for no reason by either the employee or [COMPANY].


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       Regular Employees

Every employee who successfully completes the probationary period will be considered
a regular employee and will be employed for an indefinite period so long as the
employment is satisfactory to both the employee and [COMPANY]. Employment may be
terminated at any time for any reason by either the employee or [COMPANY].

18.    Employee Status
       EXEMPT

Employees who are not covered by the provisions of the Fair Labor Standards Act are
exempt and the payment of overtime is not required by law. Exempt positions include
administrative, professional, executive, management, and sales.

       NON-EXEMPT

Employees who are covered by the provisions of the Fair Labor Standards Act are non-
exempt and are paid overtime.

19.    Date of Hire
The date of hire is the first day on which an employee reports for work and becomes
first entered on the Company‘s payroll records.

20.    Office Hours
The regular office hours for [COMPANY] are Monday through Friday from 8:00 a.m. to
5:00 p.m. with one hour off for lunch.

Each employee must notify the receptionist each time he or she enters the building,
each time he or she leaves the building, the manner in which he or she can be reached
(if possible), and his or her expected time of return.

Each employee‘s particular work schedule will be assigned by his/her supervisor.
Variations in the volume of business activity may require flexibility in the work schedule.

21.    Outside Employment
All employees are expected to make the Company their primary occupational interest.
Employees who desire to work at an extra or weekend jobs must request and obtain
written approval from the President before accepting such employment. This written
approval will be filed in the employee‘s personnel record. Any employee who has any
outside employment without written approval will risk having their employment with the
Company terminated.
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22.   Voluntary Termination
When an employee makes a voluntary decision to terminate his/her own employment,
he/she is requested to give written notice of his/her intention two (2) weeks prior to the
effective date of termination.

All keys, card keys, supplies, etc., will be returned to the employee‘s supervisor upon
termination prior to the receipt of the final paycheck.

23.   Involuntary Termination
The Company has the right to terminate an employee at any time without notice, at the
Company‘s discretion, with or without cause. Reasons for involuntary termination
include, but are not limited to the following:

            Lay off.
            Reduction in the work force.
            Unsatisfactory job performance.
            Misconduct or disregard of established policies, procedures or directives.

All keys, card key, supplies, etc. will be returned to the employee‘s supervisor upon
termination prior to the receipt of the final paycheck.

The final paycheck shall include any accrued but unused vacation and wages in lieu of
notice, if any. Wages in lieu of notice are given at the sole discretion of the Company.
All earnings due at termination will be itemized.

24.   Discipline Policy
It is important that you are aware of [COMPANY] discipline policy and of actions that
could warrant disciplinary action up to and including termination.

You should understand all employees are employees-at-will. In other words, your
employment may be terminated at any time, without notice or without specific reasons,
at the option of [COMPANY] or you.

For some violations of [COMPANY] policies your manager may, in his or her sole
discretion, decide to give you an opportunity to correct your behavior. You may, on the
other hand, be terminated without notice and regardless of your length of service.

In any formal disciplinary situation, the manager may prepare a written document which
will describe the details regarding the occurrence, explanation and plan for the future,
and result of reoccurrence. The fact that your conduct may not have resulted in a

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written document being prepared does not mean that a violation of Company policies
has not occurred or that you may not be disciplined or terminated for such violations.

The following is a non-exhaustive list of infractions that might merit discipline up to and
including immediate termination. The list only illustrates some of the conduct that could
result in disciplinary action and is not a limitation on the discretion of [COMPANY] to
take disciplinary action.

       Falsification of the employee‘s employment application or other employment
        records such as expense reimbursement forms

       Using abusive or threatening language or gestures while on [COMPANY]
        premises.

       Unauthorized possession or removal of, or cooperation in the unauthorized
        possession of or removal of property or possessions belonging to co-workers,
        customers, or [COMPANY], or applying to the employee‘s own use, any property,
        record or document of [COMPANY] or of co-workers.

       Reporting for work under the influence of alcohol or illegal drugs.

       Fighting or threatening violence in the work place.

       Sleeping while on duty.

       Loitering or loafing during working hours.

       Taking more than the specified time for meals or break periods.

       Repeated failure to be at a workstation ready to begin work at the appointed
        starting time.

       Performing personal work on company time.

       Leaving the work area without permission from a supervisor.

       Negligence or improper conduct leading to damage of Company-owned or
        customer-owned property.

       Insubordination or other disrespectful conduct.

       Willful disregard or violation of safety rules or procedures.

       Sexual, racial or other unlawful harassment.
       Excessive or habitual absenteeism or tardiness, and any absence without notice.
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      Unauthorized absence from workstation during the workday.

      Excessive use of [COMPANY] telephone for personal matters or making or
       receiving personal telephone calls, other than during authorized breaks and
       lunch periods.

      Unauthorized use of mail system, computer system or other Company-owned
       equipment.

      Failure to maintain the confidentiality of [COMPANY]. Unauthorized disclosure of
       business "secrets" or confidential information.

      Willfully breaking a known [COMPANY] policy.

      Unsatisfactory performance or conduct.

25.    Workplace Violence
Violence by an employee or anyone else against an employee, supervisor or member of
management will not be tolerated. The purpose of this policy is to minimize the
potential risk of personal injuries to employees at work and to reduce the possibility of
damage of [COMPANY] property in the event someone, for whatever reason, may be
unhappy with [COMPANY] decision or action by an employee member of management.

If you receive or overhear any threatening communications from an employee or outside
third party, report it to your supervisor at once. Do not engage in either physical or
verbal confrontation with a potentially violent individual. If you encounter an individual
who is threatening immediate harm to you, another employee, or a visitor to our
premises, contact an emergency agency (such as 911) immediately.

All reports of work-related threats will be kept confidential to the extent possible,
investigated and documented. Employees are encouraged to report and participate in
an investigation of any suspected or actual cases of workplace violence. Your failure to
report or fully cooperate in [COMPANY]‘s investigation could result in discipline.

Violations of this policy will not be permitted and may result in disciplinary action up to
and including discharge.

26.    Date of Termination
Employment is considered to be terminated as of the last day on which the employee
reports for work as defined in 2-07.



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27.    Employee Accident Reporting
Any work related accident must be reported immediately and recorded as required by
Louisiana Worker‘s Compensation Laws. A work related accident is defined as any
accident involving a Company employee that occurs during normal working hours on
Company premises or away from the premises if required by their duties. All employees
must report work related accidents immediately to their supervisor.

Any employee witnessing such an accident should assist the injured, observe the time
and cause of the accident, obtain names of other witnesses and immediately notify
is/her supervisor.

The supervisor should determine the cause and extent of the injury by observation and
questioning. The injured should be dispatched to a physician or the hospital, whichever
is deemed necessary. The supervisor is to interview all witnesses and complete the
accident investigation and worker‘s compensation forms and file them.

28.    Behavior of Employees
As an employee of [COMPANY] you represent the Company to those with whom you
come into contact. Your conduct should reflect favorably on both you and the
Company.

29.    Dress Code
Your attire should reflect favorably on you and the Company. You should dress in
accordance with accepted business practice by presenting a neat and businesslike
appearance at all times during working hours. Improper attire is prohibited, including
but not limited to tee-shirts, cut-offs, low cut blouses, jeans, tank tops, miniskirts, halter
tops, tube tops, etc.

Each supervisor is responsible for seeing that the dress code is followed and for taking
any necessary disciplinary action.

30.    Employee Warnings
The employment of employees with the Company are one of at-will. This means your
employment may be terminated by either party, at any time, for any reason, with or
without notice. Any violation of any of the rules or regulations of the Company subjects
the employee to discipline, up to and including termination. If the conduct of the
employee warrants, the employee may be first warned prior to any disciplinary action
being taken. Failure to correct the situation after being given a warning subjects the
employee to further disciplinary action, up to and including immediate termination.



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31.   Parking
The closest parking spaces are reserved for customers or clients. Please park in all
other available spaces.

32.   Telephone Use
Telephones are necessary in the day to day operations of a real estate agent. Lines
must be kept open at all times for the convenience of customers and clients. Personal
use of the phone is limited and shall be held to a minimum.

Long distance service is available for business purposes only and if it is imperative to
call with no other means to satisfy communication. If you must call, call after 5:00 p.m.
or before 8:00 a.m.

33.   Computer Use
E-MAIL AND INTERNET ACCESS

      Purpose

To define the proper use of electronic mail (E-mail) and Internet services at the
Company.

      Policy

The Company is committed to providing an environment that encourages the use of
computers and electronic information as essential tools to support the Company‘s
business. It is the responsibility of each employee or associate to ensure that this
technology is used for proper business purposes and in a manner that does not
compromise the confidentiality of proprietary or other sensitive information.

      Coverage

All users of the Company‘s computer systems.

      E-Mail Procedures

              All E-mail correspondence is the property of the Company.

              All E-mail communications are not considered private despite any such
               designation either by the sender or the recipient.

              Messages sent to recipients outside of the Company, if sent over the
               Internet and not encrypted, are not secure.
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            The Company reserves the right to monitor its E-mail system - including
             an employee‘s or associate‘s mailbox - at its discretion in the ordinary
             course of business. Please note that in certain situations, the Company
             may be compelled to access and disclose messages sent over its E-mail
             system.

            The existence of passwords and ―message delete‖ functions do not restrict
             or eliminate the Company‘s ability or right to access electronic
             communications.

            Employees and associates shall not share an E-mail password, provide E-
             mail access to an unauthorized user, or access another user‘s E-mail box
             without authorization.

            Employees and associates shall not post, display or make easily available
             any access information, including, but not limited to, passwords.

            Offensive, demeaning or disruptive messages are prohibited. This
             includes, but is not limited to, messages that are inconsistent with the
             Company‘s policies concerning ―Equal Employment Opportunity‖; and
             ―Harassment Policy.‖

            Messages sent to all E-mail users require prior approval by an appropriate
             member of the Company.

            Any employee or associate who violates this policy shall be subject to
             discipline, up to and including discharge or termination of the affiliation
             with the Company.

The same provisions outlined in the above Email Procedures apply to instant
messages. (Additional language addressing blogs inside and/or outside of the Company
could be added here).

          Internet Procedures

            The Company‘s network, including its connection to the Internet, is to be
             used for business-related purposes only and not for personal use (or
             primarily for business-related purposes). Any unauthorized use of the
             Internet is strictly prohibited. Unauthorized use includes, but is not limited
             to: connecting, posting, or downloading pornographic material; engaging
             in computer-―hacking‖ and other related activities; attempting to disable or
             compromise the security of information contained on the Company‘s
             computers (or otherwise using the Company‘s computers for personal
             use).
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            Internet messages should be treated as non-confidential. Anything sent
             through the Internet passes through a number of different computer
             systems, all with different levels of security. The confidentiality of
             messages may be compromised at any point along the way, unless the
             messages are encrypted.

            Because postings placed on the Internet may display the Company‘s
             address, make certain before posting information on the Internet that the
             information reflects the standards and policies of the Company. Under no
             circumstances shall information of a confidential, sensitive or otherwise
             proprietary nature be placed on the Internet.

            Subscriptions to news groups and mailing lists are permitted when the
             subscription is for a work-related purpose. Any other subscriptions are
             prohibited.

            Information posted or viewed on the Internet may constitute published
             material. Therefore, reproduction of information posted or otherwise
             available over the Internet may be done only by express permission from
             the author or copyright holder.

            Unless the prior approval of management has been obtained, users may
             not establish Internet or other external network connections that could
             allow unauthorized persons to gain access to the Company‘s systems and
             information. These connections include the establishment of hosts with
             public modem dial-ins, World Wide Web home pages and File Transfer
             Protocol (FTP).

            All files downloaded from the Internet must be checked for possible
             computer viruses. If uncertain whether your virus-checking software is
             current, you must check with an authorized Information Systems
             Representative before downloading.

            Offensive, demeaning or disruptive messages are prohibited. This
             includes, but is not limited to, messages that are inconsistent with the
             Company‘s policies concerning ―Equal Employment Opportunity‖ and
             ―Harassment Policy.‖

            Any employee or associate who violates this policy shall be subject to
             discipline, up to and including discharge.




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INFORMATION SYSTEM POLICY

The Information Systems which includes all hardware, software, e-mail, voice-mail,
Internet access and data entered, transmitted, downloaded, uploaded, imported,
exported and used in the daily operations of business are proprietary of the Company.
This includes but not limited to the following:

            All business, products and services of the Company.
            All market data, financial data, personnel data and computer programs.
            All client, customer, account and supplier lists, files and data.
            All files, letters, memoranda, reports, records, data and other written
             materials that you prepared as an associate or employee for the
             Employee or that others prepared in the employment of the Company.

With respect to the Information Systems, these items shall not be removed, destroyed
or modified except within the scope of business. Any associate or employee using any
form of the Information Systems is responsible for adhering to the Information Systems
policy. Violation of this policy may warrant termination of certain information systems
access, disciplinary action up to and including discharge.

COPYRIGHT INFRINGEMENT

The Company licenses the use of computer software from a variety of outside sources.
The Company does not own this software or its related documentation, and unless
authorized by the software developer, does not have the right to reproduce it.
Associates and employees shall use the software only in accordance with the relevant
license agreement.

Any duplication of copyrighted software, except for backup purposes, is a violation of
the Federal Copyright Law. All software installed in the information systems must be
pre-approved by the network administrator and be non-proprietary or properly licensed.
The Company will not tolerate any employee or associate making or importing
unauthorized copies of software or data. Likewise, the Company will not tolerate any
associate or employee conveying software or data to an outside third party, including
clients, members, customers or associates in other companies, without proper written
authorization.

34.   Sign Policy
The Company requires that all associates use uniform name signs or sign riders. To
insure uniformity, these sign riders will be ordered by the office secretary at the
associate‘s expense.

Sign riders will be stored ____________________. Sign riders will be placed on the
________________ portion of the yard sign.
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Directional signs will be purchased by the associate and will be used to direct
prospective buyers to the property. Directional signs will be stored ________________
and may be charged back to the associate.

Only after all contingencies of the offer have been waived or satisfied, and after
obtaining the permission of the seller, ―Sold‖ signs shall be posted. ―Offer pending‖ or
similar signs may be posted, with the seller‘s permission, after acceptance of an offer
but prior to waiver or satisfaction of contingencies. Sold signs will be stored
_________________.

Without a current listing contract, signs are not to be left on the property. Signs from
expired listings must be removed within two days after expiration or closing. Sold signs
may remain on a property for up to ____ days after closing provided that the consent of
the new owner (buyer) has been obtained.

35.    Document Control
The following documents must be placed and maintained in the Company‘s files:

       1.     Listing contract or buyer‘s agency contract.
       2.     Deed.
       3.     Loan information obtained from any lender currently holding a loan on the
              property.
       4.     Sales contract or lease.
       5.     Appraisal request.
       6.     Loan pay-off letter.
       7.     Closing statement.
       8.     Any other documents, including correspondence, that pertain to the
              transaction.

The associate is responsible for placing documents in the Company‘s file until the file is
closed due to a closing, the expiration of the listing, or the expiration of the agency
contract. Closed and expired files are maintained by the office secretary for at a
minimum of three years.

For the protection of all parties, all agreements shall be in writing and shall be in clear
and understandable language expressing the specific terms, conditions, obligations and
commitments of the parties. A copy of each agreement shall be furnished to each party
upon their signing or initialing.

36.    Threatened Lawsuits
If the associate is sued or threatened with a lawsuit or administrative action in
conjunction with a real estate transaction, immediate attention of the Company is

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required. The Company will then report the suit to the insurance carrier. The
responsibility as the payment of legal fees will be determined on a case-by-case basis
between the Company and the associate.

37.    Jury Duty Leave
The Company provides its employees with the time off from work for jury duty. When
an employee receives notification to serve as a juror, he/she must inform his/her
supervisor. The employee will be paid full salary or the normal straight-time hourly rate
for the first day of the jury assignment. A copy of notification of jury duty is required for
the personnel file.

38.    Benefits
[COMPANY] may provide a 401(k) Plan and medical insurance for eligible employees.
Eligibility and benefits provided are defined in the plan documents.

39.    Personal Leave
Personal leave is a gift from [COMPANY]. It is not a benefit and is not to be treated as
wages.

Full-time employees are eligible for paid personal leave. Upon completion of one year
of continuous employment, these designated employees are eligible for two weeks of
paid personal leave as a gratuity from [COMPANY].
An employee may take his/her personal leave at any time subject to the following
restrictions:

             An employee must secure approval from [COMPANY] keeping in mind
              that it is necessary to maintain an adequate work force to handle the
              workload. For conflicting personal leave requests, seniority will normally
              prevail.

             Personal leave may NOT be accumulated and carried forward from one
              year to the next.

             Personal leave not utilized in the twelve (12) calendar months following
              that in which they are granted will be forfeited unless delay is requested by
              [COMPANY]. No employee will be paid for unused personal leave.




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40.   Incremental Personal Leave
                                 PERSONAL LEAVE

[COMPANY] provides personal leave to all permanent employees. Personal leave
combines vacation, personal days, and sick time for regular full time employees into one
plan. Personal leave is defined by the following guidelines.

►    New employees are not eligible and do not receive paid time off for the first three
months of their employment.
►    Exempt employees are not charged for partial days off. Personal leave for
exempt employees should only be used in full days in 8-hour increments.

                                    DEFINITIONS:

 Years of Service       Leave per Work Hour Paid       Minimum Leave Per Year
 90 days – 1 year       .062                           97.2     = (12.0 days)
 1 year – 2 years       .062                           128.9    = (16.1 days)
 2 years – 7 years      .084                           174.7    = (21.8 days)
 7 years – 20 years     .96                            199.68   = (24.96 days)
 20+ years              1.00                           208.0    = (26.00 days)

Payment for personal leave is a gratuity. Personal leave is a gift from [COMPANY], is
not a benefit, and is not to be treated as wages. Unused personal leave will not be paid
at year end or upon separation, whether voluntary or involuntary, including retirement.
Unused personal leave may not be carried over from one calendar year to the next.

In the case of an employee‘s own serious illness or the serious illness of a family
member, leave under the Family Medical Leave Act may be available.

41.   Holidays
The Holiday Schedule for the following year(s) will be issued by the President to each
employee in Memorandum form at the end of each year.

In the event a holiday falls during an employee‘s scheduled vacation, that holiday will
not be used in computing the employee‘s eligible vacation time.

42.   Workers’ Compensation
The Louisiana Worker‘s Compensation Law provides insurance coverage for on-the-job
accidents or illness. All employees of [COMPANY] are covered under this law. Any
accident or job related illness must be reported to the employee‘s supervisor according
to the procedures outlined in Employee Accident Reporting 2-09.


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43.    Payroll
The Company will compensate its employees through prompt, accurate payroll
procedures. Employees will be paid semi-monthly on the fifteenth (15th) and the last
day of the month. Should these dates fall on a weekend, the payday will be the
preceding work day.

Employees who are paid on an hourly basis will submit to accounting the hours worked
three (3) working days before the payday.

Basic pay for exempt employees is the pay rate for one (1) calendar month of work
exclusive of any premium pay.

Basic pay for non-exempt employees is the pay received for one (1) hour of work
exclusive of work exclusive of overtime or any premium pay.

The Company is required by law to deduct the following from your pay:

             Federal and State Withholding Taxes
             Social Security Taxes in accordance with Federal Insurance Contributions
              Act

There may be additional voluntary payroll deductions for the following:

             Additional Federal Withholding Taxes

44.    Overtime Pay for Non-Exempt Employees
Non-exempt employees will be paid at one and one-half (1.5) times their base hourly
rate for hours worked in excess of forty (40) hours actually worked in a given week. Any
eligible sick leave or vacation will not be included in the forty (40) hours actually worked
for the overtime computations. Holidays and jury duty will be treated as hours actually
worked for purposes of calculating overtime pay.

Non-exempt employees will submit to accounting/personnel their actual hours worked
including overtime three (3) working days before payday. Overtime hours shall be
approved in advance by the employee‘s supervisor. Any overtime worked during the
three (3) working days prior to payday should be submitted on the next report.

45.    Administrative Pay Corrections
[COMPANY] takes all reasonable steps to assure that employees receive the correct
amount of pay in each paycheck and that employees are paid promptly on the
scheduled payday. In the unlikely event that there is an error in the amount of pay, the

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employee should promptly bring the discrepancy to the attention of his or her supervisor
so that corrections can be made as quickly as possible.

Once underpayments are identified and verified, they will be corrected in the next
regular paycheck.

Overpayments will also be corrected in the next regular paycheck unless this presents a
burden to the employee (where there is a substantial amount owed). In that case,
[COMPANY] will attempt to arrange a schedule of repayments with the employee to
minimize the inconvenience to all involved.

46.    Exempt Employee Salary Deductions
Exempt employees are paid a salary rather than by the hour. [COMPANY] will deduct
pay from an exempt employee‘s salary under the following circumstances: (i) one or
more full day absences for personal reasons; (ii) one or more full day absences for
illness, injury or sickness (after you have exhausted sick leave; (iii) one or more full day
disciplinary suspensions; and (iv) partial or full day absences during an approved family
or medical leave. [COMPANY] will not deduct pay from an exempt employee‘s salary if
the employee has a partial day absence. If you are an exempt employee and you
believe that the [COMPANY] made an incorrect or improper salary deduction, promptly
report the deduction to your supervisor. If [COMPANY] incorrectly or improperly made a
deduction from an exempt employee‘s salary, [COMPANY] will reimburse the employee
for the deducted pay.

47.    Employee Expense Reporting
It is the policy of [Company] to reimburse for reasonable expenses incurred in the
conduct of [Company] business and certain other expenses which are a part of the
employee‘s benefit package.

Expense reports should be submitted by an employee to accounting by the 15th of each
month. Reimbursement of expenses will be made on the last day of each month. All
expenditures must be documented by a receipt.

Reimbursable expenses will ordinarily include the following:

             Travel Expenses (6-04)

Non-business entertainment expenses while on out-of-town trips and other items such
as alcoholic beverages are considered personal expenses and are not reimbursable.




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48.   Travel and Entertainment Expenses
[Company] will reimburse employees for extra expenses that are necessarily incurred
because of out-of-town assignments or in the development and operation of business.
Reimbursement will be made when the expenses are shown on the regular expense
report and supported by proper receipts.

                                 LODGING EXPENSE

Commercial or guaranteed rates for room accommodations should always be
requested. Expenses for lodging must be paid by the individual and submitted for
reimbursement.

                             BUSINESS MEAL EXPENSE

Business meal expenses in-town or out-of-town assignments will be reimbursed to the
employee. Meals, including tips, will be at actual; however, they must be reasonable.
Charges for each meal must be separated. Costs of cocktails and liquor are personal
expenses and are not reimbursable.

                     ACTUAL EXPENSES ON DAY OF TRAVEL

There are usually extra expenses incurred in connection with travel, such as cab and
limousine fares, tips, meals, etc. These are reimbursed on an actual cost basis.

                                    CAR RENTALS

Car rentals will not be permitted unless they are absolutely necessary to the assignment
and have the approval of the department supervisor in advance. In cases where a
rental car approved for business usage is also used for personal travel, an equitable
allocation of the charges is required. Car rentals for the purpose of getting to and from
the office on in-town assignments are a personal expense.

                       AUTOMOBILE MILEAGE ALLOWANCE

When it is necessary to use privately owned automobiles on Company business, a
mileage allowance the IRS approved rate will be paid which is currently $.40½. This
allowance is adequate to cover all normal operating costs including the deductible
amount in case of a collision. The mileage allowance will be paid on all miles driven net
of the round trip mileage from the employee‘s home to his office.




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IX.   CELL PHONE USE AND EMPLOYER LIABILITY
      Employer Liability
      Cellular Phone Use Policy
      Sample Cellular Phone Use Policy
             Policy on Use of Mobile Telephones and Related Devices
             Definitions
             Sample Cell Phone Policy
             Enforcement
      Additional Factors to Consider in Reducing Liability
      Enforcement Policy




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CELL PHONE USE AND EMPLOYER LIABILITY
REALTORS® have welcomed the cellular phone and its advances with open arms over
the last decade, primarily due to the ease with which the cellular age has allowed them
to communicate with clients, co-workers, other REALTORS®, closing attorneys and/or
any others with whom they might regularly deal with in their industry.

An increasing amount of studies are showing that cellular phone use is an ever more
common cause of automobile accidents. Liability for such accidents is almost always
directed at the cell phone user/driver. However, in an effort to recover larger awards
from deeper pockets, plaintiffs have sought to impose vicarious liability upon the
employers of the cell phone user/driver by establishing that the call taking place at the
time of the accident was a ―business call‖ and therefore took place during the course
and scope of the employee‘s employment.

A.    EMPLOYER LIABILITY
Louisiana law permits employers to be held vicariously liable for the fault of employees
if such employee‘s faulty or negligent behavior occurred while the employee was in the
course and scope of his employment. Increasingly cell phone records have been
requested in lawsuits to determine whether employees were taking part in business
calls at the time of the accident in question.

Several courts have made awards based in part on the employee‘s use of the cell
phone during driving as a partial cause of the automobile accident. In a recent case, a
jury in Virginia awarded $2,000,000.00 to the family of a 15 year old girl who was struck
and killed as she walked along the Leesburg Pike Highway in Virginia. The lawyer who
hit her was on a business call on her cell phone as she drove and accidentally hit the
victim. Cell phone records showed that the lawyer used her phone 32 times between
noon and 11:00 p.m. on the day of the accident. Most of those calls were connected
with work at her law firm. The law firm settled the case against it for an undisclosed
sum prior to the verdict against the lawyer individually.

In another case, Smith Barney paid $500,000.00 to settle a case brought by a
motorcyclist who was hit by a Smith Barney broker on a sales call. The driver behind
the wheel of the Mercedes has gone to get carry out meal for his family but decided to
make a cold call as he drove to pick up the family meal. Along the way, he dropped his
cell phone and as he fumbled for it ran a red light, hitting the victim.

In another case, Dykes Industries paid $16.2 Million to a 78 year old woman who was
struck and disabled by a Dykes salesman who was making a sales call on his cell
phone at the time of the accident.



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While there is still little jurisprudence which we can use to assess the validity of such
claims, there are several things a real estate broker/employer can do to help limit its
potential liability under such circumstances.

B.    CELLULAR PHONE USE POLICY
The adoption of a policy which either prohibits entirely or otherwise limiting the use of
cell phones while driving should significantly help to reduce the risk of liability imposed
upon a real estate broker for the use of cell phones. Policies which stop short of
prohibiting all cell phone usage while driving, might limit of the use of cell phones while
driving or require employees to use a hands-free device, prohibit their use in the rain or
other hazardous conditions, or under such circumstances only during day light hours,
and never at peak driving hours, such as rush hour. Whatever the policy adopted by
the real estate broker, the broker should require each sales person to acknowledge their
agreement and acceptance of such policy by signing a copy of the same prior to the
beginning of the salespersons employment. The broker should maintain at all times a
copy of the acknowledgment in its files, and an annual review and update of the policy
should be considered.

C.    SAMPLE CELLULAR PHONE USE POLICY
1.    Policy on Use of Mobile Telephones and Related Devices

Company is aware that as real estate professionals many employees use mobile
telephones and other wireless communication devices (―mobile phones‖) in carrying out
their daily duties and responsibilities. Because instant communication with clients, other
licensees and various vendors is critical to making sales happen, mobile phones are
used a great deal of the time.

Company is also aware of the potential distractions that may arise when mobile phones
are used while operating a moving vehicle. In keeping with its obligations under federal
and state occupational health and safety laws, to maintain a safe and healthful
workplace and minimize the safety risks for employees, clients and passengers in such
moving vehicles and the public at large,

Company has adopted the following policy with respect to the use by employees of
mobile phones while operating a moving vehicle. This policy applies regardless of
whether the employee is operating a company-owned vehicle or the employee‘s own
vehicle in the course of employment.

2.    Definitions
      For purposes of this policy, ―use‖ of a mobile phone includes talking or listening
on a mobile phone.

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        ―Hands-free‖ devices, include any attachment, add-on or addition to a mobile
phone, whether or not permanently installed in the vehicle, that when used allow the
operator of the vehicle to maintain both hands (or prosthetic devices or aids in the case
of a disabled person) on the applicable steering device of the vehicle.

3.    Sample Cell Phone Policy

            Employees are required to use their mobile phones in a safe manner.
            Employees are required to familiarize themselves and comply at all times
             with the laws of the state and/or locality in which they work or travel to
             concerning the use of mobile phones. For example, where a local law
             prohibits the use of a mobile phone by anyone operating a moving vehicle,
             employees are also prohibited by this policy from using a mobile phone in
             that locality.
            When initiating calls, pull over and stop your car before dialing.
            When receiving calls that require more than a brief response such as ―I‘m
             running late‖ or ―I‘m on my way‖, tell the caller that you will call him or her
             back as soon as you pull over and stop your car. Most mobile phones
             have a means of accessing the phone number of the last caller, so you will
             not have to write down the caller‘s phone number.
            If you absolutely must converse on your mobile phone while driving, follow
             these tips to increase safety:
            Use a hands-free device. Even with the hands-free device, mobile phone
             use should be kept to a minimum. Conversations should be a brief as
             possible and employees should refrain from making unnecessary calls.
             Where possible (and again, even with a hands-free device) mobile phone
             calls should be made when the vehicle an employee is operating is not in
             motion.
            Place the mobile phone where you can see it without diverting your eyes
             from the road for any longer than necessary.
            Program emergency and frequently called numbers into your mobile
             phone.
            Practice using your mobile phone so you know how to use hands-free
             devices, memorized numbers and other features without taking your eyes
             off the road.
            If your phone has voice activation, which allows you to initiate calls to pre-
             programmed numbers verbally, use it.
            Keep conversations as brief as possible. There is nothing wrong with
             telling a caller that it is not safe to talk and drive right now and that you will
             call him or her back as soon as you can do so safely.
            Drive in slower lanes and increase the distance between your car and the
             one ahead so you will have more time to react to problems that may
             occur.
            Do not try to take notes or read during a conversation.

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            Don‘t engage in complex discussions that divert your attention from road
             and traffic conditions.
            Don‘t answer the mobile phone or use the mobile phone while driving
             during adverse weather, traffic or visibility conditions. Most phones have
             voicemail and you can return calls once you are stopped and in a safe
             place.
            Employees using mobile phones should always remember not to discuss
             confidential issues with others present who do not need to know such
             information. Also be aware that mobile phones are not as secure as land-
             line telephones, therefore, please refrain from discussing confidential
             information. Mobile phone courtesy should be practiced at all time. For
             example, when others are present, do not talk loud or in a manner that
             could be offensive to others.
            Never forget that safe driving is your first priority.

4.    Enforcement
Any employee found to be in violation of this policy on use of mobile telephones and
related devices or who uses such mobile telephones and related devices in an unsafe
manner shall be subject to appropriate disciplinary action in accordance with Company
policy, up to and including discharges.

I, ______________________, acknowledge that I have read, understand and agree to
abide by the above policy on the use of mobile telephones and related devices this
day of                     , 200 .



                                           [Employee Name]




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D.     ADDITIONAL FACTORS TO CONSIDER IN REDUCING
       LIABILITY
In addition to maintaining a formal policy on cellular phone use while driving, real estate
brokers should also regularly distribute materials to their salespersons discussing the
dangers of cell phone usage while driving. The real estate broker may wish to post
such materials on bulletin boards around its offices to serve as regular reminders.

E.     ENFORCEMENT POLICY
Equally important to the adoption of a policy is the enforcement of the policy once it is
adopted. An employer should enforce its cellular phone use policy strictly and without
exception, penalizing employees who refuse to abide by such policy. The failure to
enforce such cellular phone policy strictly may result in a court or a jury finding that such
policy was merely ornamental, and thus of no real force and effect.




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X.    NON-COMPETE AGREEMENTS
      Non-Compete Agreements




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NON-COMPETE AGREEMENTS
Some brokers request that agents execute non-compete agreements prior to working
with such agents as either employees or independent contractors. These non-compete
agreements limit an employee or independent contractor from engaging in a business
similar to his/her employer for a period of time, following termination of employment
either by firing or quitting.

La. R.S. 23:921 passed by the legislature in 2003 provided revisions to the non-
compete provisions of Louisiana law which can apply to both employers and
independent contractors. Pursuant to this statute:

      Any person, including a corporation and the individual shareholders of
      such corporation, who is employed as an agent, servant, or employee may
      agree with his employer to refrain from carrying on or engaging in a
      business similar to that of the employer and/or from soliciting customers of
      the employer within a specified parish or parishes, municipality or
      municipalities, or parts thereof, so long as the employer carries on a like
      business therein, not to exceed a period of two years from termination of
      employment. An independent contractor, whose work is performed
      pursuant to a written contract, may enter into an agreement to refrain
      from carrying on or engaging in a business similar to the business of
      the person with whom the independent contractor has contracted, on
      the same basis as if the independent contractor were an employee,
      for a period not to exceed two years from the date of the last work
      performed under the written contract. (emphasis supplied)


House Bill No. 403 passed by the Louisiana Legislature in 2005 attempts to more
effectively highlight the non-compete agreement before it is signed by a broker and a
licensee:

§ 1448.1. Non-Compete Agreements:

      A.     A non-compete agreement between a real estate broker and
             licensee which requires the licensee to refrain from carrying on or
             engaging in a business similar to that of the real estate broker or
             from soliciting customers of the real estate broker within a specified
             parish or parishes, municipality or municipalities, or parts thereof,
             so long as the real estate broker carries on a like business therein,
             for any period of time up to two years, shall be unenforceable and
             an absolute nullity unless the licensee shall have the right to
             rescind the non-compete agreement until midnight of the third
             business day following the execution of the             non-compete
             agreement or the delivery of the agreement to the licensee,

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             whichever is later. In any agreement between the broker and
             licensee, which includes a non-compete agreement, the non-
             compete agreement shall be prominently displayed in bold-faced
             block lettering of not less than ten point type.

      B.     Any action to enforce the provisions of this Section shall be brought
             in a court of competent jurisdiction in this state.

Brokers requiring non-compete agreements of employees or independent contractors
will need to comply with these new requirements.




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XI.   RESPA
      Background
      RESPA Prohibitions
      Sample Affiliated Business Arrangement Disclosure Statement Format; Notice
      Frequently Asked Questions
      Regulation Z
      Leasing




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A.    BACKGROUND
The Real Estate Settlement Procedures Act (―RESPA‖) was originally enacted in 1974.
Among its goals was the protection of consumers against unreasonably high loan
settlement fees, which in part were caused by kickback or referral fees commonly paid
by mortgage companies to those in related real estate settlement service industries,
and the truthful disclosure by settlement service providers to their customers as to the
existence of any affiliated business relationship the provider may have with any other
settlement service provider involved in the transaction at hand. RESPA‘s provisions
often apply to REALTORS in terms of any special benefits, or other compensation, or
attention, which mortgage providers may provide to REALTORS® as an inducement for
REALTORS® to steer business opportunities in their direction. It may also apply if
REALTORS® have any interest in title companies, mortgage lenders, real estate
appraisers, and/or other types of business entities commonly included in real estate
closings. It is important for REALTORS to be aware of RESPA and its applicable
provisions, so that they can avoid becoming entwined in a relationship with a mortgage
lender or other real estate settlement service provider which under RESPA is
considered illegal.

B.    RESPA PROHIBITIONS
No kickbacks

RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in
return for referring real estate settlement service. Specifically the relevant portions of
RESPA outlining this Regulation read:

               ―(a) No person shall give and no person shall accept any fee,
               kickback, or thing of value pursuant to any agreement or
               understanding, oral or otherwise, that business incident to or a part
               of a real estate settlement service involving a federally related
               mortgage loan shall be referred to any person.

               ―(b) No person shall give and no person shall accept any portion,
               split, or percentage of any charge made or received for the
               rendering of a real estate settlement service in connection with a
               transaction involving a federally related mortgage loan other than
               for services actually performed.‖

[See 12 U.S.C.A. Sec. 2607. See also 24 D.F.R. Sec. 3500.14 for related provision of
Federal Regulation X.] It is often difficult to ascertain when a violation of these RESPA
provisions exists. An analysis of the above stated rule reveals that three things must
occur for a violation to exist: 1) A payment must occur or a thing of value be given; 2)
The payment or thing must be given as a result of an agreement to refer business and
3) A referral must be made. Violators of RESPA‘s provisions may face both severe
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criminal and/or civil penalties, including jail time. With such severe penalties a
possibility, REALTORS need to know what types of arrangements with settlement
service providers are permissible.

Affiliated Business Disclosure Requirements

Regulation X [See 24 C.F.R. Sec. 3500 et. seq.] which was promulgated by the United
States Department of Housing and Urban Development, pursuant to RESPA, imposes
requirements upon real estate settlement service providers to disclose to their
customers any affiliated business relationship.           Based upon these disclosure
requirements, REALTORS® must disclose to their clients any ownership interest which
such REALTORS may have in any other real estate settlement service provider. In
today‘s ever increasingly competitive world, many REALTORS, in an effort to capture
more business, have sought to provide their customers with more and more settlement
services. Today, REALTORS® may also be licensed as mortgage brokers, closing
attorneys, notaries, or title insurance agents. The affiliated business disclosure
described above seeks to inform consumers of these relationships and affiliations,
ensuring that the consumer is made aware that the referring REALTOR® may have
some alternative (monetary) reason for recommending a specific settlement service
provider, other than that settlement service provider‘s reputation for good work.

RESPA does not prohibit REALTORS from participating or otherwise owning an
interest in a business which offers settlement services. RESPA merely requires that
certain disclosures such as the ABDS described above be provided to the consumer
and that the consumer be informed that he is in no way required to take advantage of
the settlement services of the affiliated entity. RESPA‘s broad definition of a ―mortgage
broker‖ includes ―a person (not an employee of the lender) who brings a borrower and a
lender together to obtain a federally related mortgage loan, and who renders ‗settlement
services‘,‖ such as ―loan origination services including, the taking of loan applications,
obtaining appraisals, loan processing, and communication with the borrower and the
lender.‖ See Regulation X at 24CFR 3500.2(b). Provided REALTORS® are not being
paid or accepting items of value in return for their “referrals”, REALTORS® may
provide such other settlement services and be compensated for the same, so long as, in
accordance with 12 U.S.C.A. 2607(b), such ―services are actually performed.‖ Thus, a
REALTOR® may legally be considered to be acting as a ―mortgage broker‖ as such
term is defined under RESPA, while simultaneously performing tasks as a real estate
broker, provided the existence of an affiliated business relationship is disclosed to the
consumer, and the consumer is made aware that he or she has other options for
obtaining such services.

Included is the form Affiliated Business Arrangement Disclosure Statement provided by
Regulation X.




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C.       SAMPLE AFFILIATED BUSINESS ARRANGEMENT
         DISCLOSURE STATEMENT FORMAT; NOTICE
To: ___

From: ___

(Entity Making Statement)

Property: ___

Date: ___

        This is to give you notice that [referring party] has a business relationship with
[settlement services provider(s) ]. [Describe the nature of the relationship between the
referring party and the provider(s), including percentage of ownership interest, if
applicable.] Because of this relationship, this referral may provide [referring party] a
financial or other benefit.

         [A.] Set forth below is the estimated charge or range of charges for the
settlement services listed. You are NOT required to use the listed provider(s) as a
condition for [settlement of your loan on] [or] [purchase, sale, or refinance of] the subject
property. THERE ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS
AVAILABLE WITH SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO
DETERMINE THAT YOU ARE RECEIVING THE BEST SERVICES AND THE BEST
RATE FOR THESE SERVICES.
-------------------------------------------------------------
 Provider and settlement service Charge or range of charges
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
         [B.] Set forth below is the estimated charge or range of charges for the
settlement services of an attorney, credit reporting agency, or real estate appraiser that
we, as your lender, will require you to use, as a condition of your loan on this property,
to represent our interests in the transaction.
-------------------------------------------------------------
 Provider and settlement service Charge or range of charges

-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
-------------------------------------------------------------
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Acknowledgment

        I/we have read this disclosure form, and understand that [referring party] is
referring me/us to purchase the above-described settlement service(s) and may receive
a financial or other benefit as the result of this referral.

___

Signature

[INSTRUCTIONS TO PREPARER:] [Use paragraph A for referrals other than those by
a lender to an attorney, a credit reporting agency, or a real estate appraiser that a
lender is requiring a borrower to use to represent the lender's interests in the
transaction. Use paragraph B for those referrals to an attorney, credit reporting agency,
or real estate appraiser that a lender is requiring a borrower to use to represent the
lender's interests in the transaction. When applicable, use both paragraphs. Specific
timing rules for delivery of the affiliated business disclosure statement are set forth in >
24 CFR 3500.15(b)(1) of Regulation X. These INSTRUCTIONS TO PREPARER should
not appear on the statement.]




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D.    FREQUENTLY ASKED QUESTIONS
The following questions and answers and Do‘s and Don‘ts, as well as additional
information may be found at the National Association of REALTORS® website
www.realtor.org

1Q.   RESPA prohibits service providers from giving anything of value in
      exchange for referrals of business. Does that prohibition apply only to
      certain types of service providers (i.e. lenders, title companies) from
      providing food at open houses or does it apply to all service providers (i.e.
      home inspectors, pest control companies, advertising companies and
      others)?

A.    RESPA applies to settlement service providers and does not distinguish among
      different types of settlement providers. A settlement service includes any service
      provided in connection with a real estate settlement including, but not limited to,
      title searches, title examinations, the provision of title certificates, title insurance,
      services rendered by an attorney, the preparation of documents, property
      surveys, the rendering of credit reports or appraisals, pest and fungus
      inspections, services rendered by a real estate broker or agent, the origination of
      a federally related mortgage loan and the handling of the processing and closing
      or settlement. This list is broad but not all-inclusive. Anything listed on a HUD-1
      form could be a settlement service and the company providing it a settlement
      service provider.

2Q.   Is a home warranty company a settlement service provider?

A.    As noted above a settlement service provider is one who provides services in
      connection with the purchase/sale of a property that are paid for, directly or
      indirectly, out of the funds at settlement. Most home warranties are sold in
      connection with a property sale and therefore the company selling the warranty
      would be a settlement service provider.

3Q.   If a title/mortgage company sponsors a “get-away” at a resort property for
      brokers and agent and offers education, is it a violation of RESPA?

A.    A title company or mortgage company paying for an educational event, so long
      as the costs associated with the event do not defray the expenses that the real
      estate agent would otherwise encounter, would be permissible. Note, however,
      that a rule of reason should be applied. An educational event hosted by a
      mortgage lender that was held at a local hotel and provided a lunch would be
      quite different from an educational event held in Hawaii in which one hour was
      dedicated to education and the remainder of the event was directed toward
      recreation.


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4Q.   When a title company hosts an agent luncheon at an open house, they are
      providing food in hopes of meeting agents - just as Realtors hold open
      houses. Doesn’t this need to be looked at in a much more practical way
      and allowed under RESPA?

A.    If a real estate agent requested that a title company pay for a lunch that the real
      estate agent was hosting, and the title company agreed, the payment would be a
      thing of value for, or in the hopes of, the referral of settlement service business.
      If, however, the title company paid for the lunch, but attended the open house
      and gave a brief presentation, or prominently displayed a sign indicating the title
      company‘s name and distributed brochures about the title company during the
      open house, there is a reasonable argument that this activity is a form of
      advertising and therefore acceptable under Section 8(c)(2). Again, real estate
      agents should apply a rule of reason. If these activities and materials are present,
      a casual lunch of sandwiches for $200 likely would be acceptable. A catered
      lunch by an expensive restaurant at a cost of $800, however, would more likely
      be viewed as a referral fee.

      ________________________
      1. The answers provided here are based on interpretations of RESPA. Real
      estate brokers and agents should also check any bulletins issued on these
      subjects by state regulators.

5Q.   Is it legal for a REALTOR® Association to solicit sponsorships from affiliate
      members who provide settlement services for Association functions that
      are not education-related such as awards and recognition ceremonies and
      association fundraisers?

A.    While such events provide something of value to the association, the association
      is not in a position to refer business to the settlement service provider. Since real
      estate agents do not receive anything of value from the affiliate member by their
      attendance at these events, such sponsorships would not violate the law. In
      addition, it would be helpful if some sign or brochures are posted so that the
      affiliate member can claim this activity as an advertising cost.

6Q.   Does RESPA bar local boards or associations of REALTORS® or NAR
      affiliates of their local chapters from accepting from settlement service
      providers donations or sponsorships of meetings, awards and
      fundraisers?

A.    Sponsorship of an association event is not prohibited by RESPA unless, as noted
      above, such sponsorship means that the association does not charge brokers
      and agents attending the fee that they would normally be obligated to pay. The
      association is not in the real estate business and therefore not in a position to
      refer buyers or sellers to the party sponsoring the event.


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7Q.   Is it legal for Affiliate Members who are settlement service providers to
      sponsor continuing education or new-member orientation classes?

A.    It depends on whether some of the expenses an agent would otherwise bear are
      defrayed by the affiliate member. In the case of an orientation course there is
      probably no problem because new members pay an application fee which is the
      same whether an affiliate sponsors the course or not. If the affiliate is simply
      recognized as a sponsor it is similar to an affiliate running an ad in the
      association paper and would be considered normal marketing activity.
      Sponsorship of continuing education is more likely to be a violation because
      members normally have to pay a fee to attend such programs. If the cost of the
      course is underwritten by the affiliate so that the agents need not pay fees that
      they otherwise would have to pay, such sponsorship could be interpreted as a
      thing of value received by the agent for RESPA purposes.

8Q.   Is it legal for Affiliate Members to put on education courses about the
      services the affiliate member provides for REALTORS®?

A.    Yes, Affiliate Members may put on classes about their business, since such
      informational programs are consistent with the marketing of an affiliate's
      business.

9Q.   Can an Affiliate Member donate items to the Association’s Political Action
      Committee auctions?

A.    RESPA does not prohibit such donations, but the association should check with a
      campaign finance expert.

10Q. May a mortgage company cater the food to be offered at a broker's open
     house tour?

A.    Again, if the mortgage company came to the lunch and provided a short
      presentation regarding interest rates and loan programs, the payment would
      likely be permissible under Section 8(c)(2). Furthermore, if the mortgage
      company prominently displayed a sign indicating its sponsorship of the lunch and
      distributed brochures during the open house, the payment would likely be
      permissible. A rule of reason should be applied. If these activities or materials are
      present, a casual lunch of sandwiches for brokers could reasonably be a
      permissible marketing cost.

11Q. Can brokers and agents accept from lenders and distribute to prospective
     buyers flyers containing financing information? For instance, at an open
     house, may a lender provide flyers that offer closing cost calculations for
     various down payment scenarios, to be distributed by brokers and agents?

A.    Distribution of such flyers provided by lenders does not violate RESPA. The
      information gathered is consistent with the real estate agent‘s responsibilities to
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       his or her client to facilitate the sale of the property and no separate benefit flows
       to the agent from the lender. The agent may not, however, accept from lenders
       flyers which also promote the listed property, since that would result in the lender
       bearing a portion of the agent‘s advertising expenses, which are the agent‘s
       responsibility.

E.     REGULATION Z

Regulation Z is the well known name for those regulations promulgated by the Federal
Reserve Board pursuant to the Truth In Lending Act originally passed by the federal
government in 1968. Regulation Z seeks to insure that borrowers seeking loans are
provided with an adequate disclosure of the various credit terms which will be a part of
their loans. Regulation Z applies to almost all loans made for residential mortgage
purposes by banks, savings and loans or other financial institutions. Among other
things, Regulation Z requires that borrowers be provided disclosures clearly setting forth
items such as 1) the annual percentage rate incurred in connection with the loan, 2) the
total amount to be paid over the life of the loan, 3) a payment schedule outlining the
amount and number of payments, 4) the amount of any late charges which will be
incurred with any late payment due upon the loan, 5) whether there are any prepayment
penalties associated with an early prepayment of the loan, and 6) whether or not the
loan may be assumed by successors or assigns of the borrower. Regulation Z requires
that these disclosures be made prior to the consummation of the loan and not afterward
or during the life of the loan. Regulation Z also requires that in refinance transactions
involving property which is the principal residence of the borrower, the borrower must be
given a three day right to rescind the refinance transaction. It is important to note that in
any refinance situation governed by Regulation Z, the borrower may not be entitled to a
receipt of the borrowed funds until the three day right of rescission has passed.

F.     LEASING
       Lease Terms

       One lesson learned from the terrible destruction of hurricanes Rita and Katrina
       was that many leases did not adequately address force majeure type of issues.
       The following are a few of the issues which have been debated by landlords and
       tenants after the storms.

       A.     Does your lease address the issue of whether rent is due if the
              tenant is prevented from occupying the leased premises because of
              a mandatory or voluntary evacuation of the property?

              Most leases do not contain an evacuation clause. If a tenant is required to
              evacuate the premises due to a mandatory or voluntary evacuation do
              rental payments abate? In some instances, the leased property was not

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             damaged in any way, but the tenant was unable to return to the premises
             because of the voluntary or mandatory evacuation.

      Suggestions:

                Consider including in leases clauses to address mandatory or
                 voluntary evacuations of neighborhoods or cities.
                Consider clauses in leases addressing the contingency that if the
                 landlord obtains abatement of mortgage payments from the lender due
                 to a catastrophic or fortuitous event, then the tenant may obtain
                 corresponding abatement of leased payments during a like term.
                Consider addressing in the lease whether a tenant may return to the
                 leased premises during a voluntary evacuation.

      B.     Does your lease adequately address the issues of partial or total
             damage to the leased property?

             There are many types of property damage clauses contained in leases.
             The lease may provide that the landlord repair the leased property if
             damaged or that the tenant repair the leased property. Some leases only
             provide a remedy if there is partial destruction of the property, while other
             leases contain clauses on complete destruction of the property.

      Suggestions:

                Consider a value test such that if restoring the leased building would
                 cost more than a certain value or percentage of pre-damage value of
                 the building then the building does not have to be rebuilt.
                Consider whether the landlord or tenant should get an extension of
                 time under the lease for rebuilding of the property due to extenuating
                 circumstances such as a labor shortage.
                Consider how permitting delays impact rebuilding of the leased
                 properties.
                Consider addressing issues of construction to new standards such as
                 under FEMA maps which will be required to obtain flood insurance on
                 the leased property.
                Consider unanticipated extreme inflated cost of construction due to the
                 shortages of supplies and labor.
                Consider availability and cost of insurance if leased property is rebuilt.
                Consider environmental concerns such as toxic mold with partial
                 destruction of the property.

      C.     Does your lease contain adequate notice provisions for
             communication between the landlord and tenant during an
             emergency?
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             One of the most difficult aspects for recovery following the hurricanes was
             the disruption of communication systems. Telephone service was non-
             existent in many areas. Mail service was completely eliminated. The
             whereabouts of tenants, employees and relocated businesses was difficult
             to ascertain. Functioning communication systems are a crucial element
             for recovery after a disaster.

      Suggestions:

                Obtain good information on how to locate tenants and contact
                 landlords that is not just at the property address of the leased property.
                Include multiple alternative addresses and telephone numbers, e-mail
                 addresses and otherwise.
                Consider maintaining a website or other method for communication
                 with the landlord.

      D.     Does your lease adequately address change in principal cause of the
             lease?

             One of the big issues arising in leasing is whether if the city itself has
             changed, does the tenant or landlord have to rebuild the leased property
             assuming a complete destruction rebuild clause is contained within the
             lease. For example, if the tenant no longer wants to occupy the space
             because of the labor shortage and the belief by the tenant that even if the
             property is rebuilt, the tenant will be unable to service its customers
             because of the lack of labor for example, can the tenant terminate the
             lease.

      Suggestions:

                Consider termination of the lease upon proof of certain events. In the
                 commercial context this may include the inability to obtain certain
                 products or services needed for business to survive. In addition, the
                 tenant may want to terminate the lease if a certain number of other
                 tenants in the leased mall or building fail to return.
                Consider lack of services to leased facility such as electricity, gas,
                 water and mail.
                Consider relocation of customer or employee population for tenant.

      E.     Does your lease adequately address options for additional leased
             space or a right of first refusal on leased space?




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             Landlords and tenants both complained after the storm that the traditional
             options and rights of first refusal on additional leased space were
             inadequate after the storms.

      Suggestions:

                Consider decrease in the time period in which a tenant can exercise a
                 right of first refusal clause.
                Consider change in markets impact on time delays for exercising
                 option.

      F.     Does your lease adequately address landlords storage of unclaimed
             property or unsalvageable property?

             Louisiana laws on the landlords rights to enter the leased premises,
             absent consent of the tenant and without judicial intervention were
             inadequate. Judicial remedies were unavailable.

             Louisiana Revised Statutes LA R.S. 9:3391 which was passed after the
             hurricanes, states that in regards to the areas affected by Hurricanes
             Katrina and Rita, a landlord of immovable property can remove the
             tenant‘s property from the premises and the tenant must preserve the
             salvageable property and may dispose of any property that is
             unsalvageable. The salvageable property must be stored at tenant‘s
             expense unless the lessee fails to contact the landlord within a requisite
             time period in which case the property is considered abandoned and
             presumably could be sold or disposed of by the landlord. Any proceeds
             from the property would likely be applied towards those storage costs that
             the tenant has failed to pay.




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XII. PROPERTY CONDITION ISSUES
Property Disclosure Law and Forms
       Property Disclosure Documents
              Who is Required to Make Disclosure
              Disclosure Responsibilities of the Seller
              Rights of Purchaser and Consequences for Failure to Disclose
              Duties and Real Estate Licensees and Consequences for Failing to Fulfill
                     Such Details
              Warranty Implications
       Frequently Asked Questions About Property Disclosure Forms
       Sample-Certificate Regarding Property Disclosure Document for Residential Real
              Estate Form
Sewer/Septic Systems
Building Restrictions
Modular Homes
Louisiana Home Inspectors Licensing Law
Mold Disclosure
       Frequently Asked Questions and Answers
AIDS Disclosure
       Background
       AIDS Disclosure
       Other Stigmas
       Recommendations
       Conclusion
Megan‘s Law
       Frequently Asked Questions and Answers
Meth Lab Disclosure
Lead-Based Paint
       Background
       Lead-Based Paint Recommendations
       Frequently Asked Questions About the Regulations
       HUD/EPA Lead-Based Paint Disclosure Regulations
       Properties to Which the Requirements Apply
       Effective Date
       Obligation of Sellers, Lessors and Real Estate Agents
       Who is an Agent
       The Ten Day Testing Period
       State and Local Requirements
       Penalties
       Record Keeping Requirements
       Supplement to Lead-Based Paint: A Guide to Compliance
       Resolved Issues
       Unresolved Issues
Wood Destroying Insect Disclosure

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       Information and Conditions
       Terms and Definitions
       Species Which May Infest Wood
              Native Subterranean Termites
              Formosan Subterranean Termites
              Drywood Termites
              Powder Post Beetles
              Old House Borer
              Carpenter Ants
       Wood Destroying Insect Report
       Formosan Termites
Home Warranty Act
As/Is Redhibition
Psychological Impacted Property
Homeowners‘ Insurance
       Louisiana Citizen‘s Property Insurance Corporation
       Comprehensive Loss Underwriting Exchange




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A.     PROPERTY DISCLOSURE LAW AND FORMS

1.     Property Disclosure Documents

Louisiana law requires all sellers of residential real property to furnish purchasers with a
Property Disclosure Document (―Document‖). This Document may be on the form
prescribed by the Louisiana Real Estate Commission website www.lrec.state.la.us or in
another form that contains substantially the same information.

       a.     Who is Required to Make Disclosure

A seller‘s obligation to furnish a property disclosure document applies to any transfer of
any interest in residential real property, whether by sale, exchange, bond for deed,
lease with option to purchase, etc. Residential real property means one to four
buildings or structures occupied or intended for occupancy as single-family residences.
A seller‘s obligation to furnish a property disclosure document applies whether or not
the assistance of a real estate licensee is utilized.

The following transfers are exempt from the requirement to provide a property
disclosure document:

(1)    court ordered transfers;
(2)    transfers to a mortgagee by a mortgagor or successor in interest who is in
       default;
(3)    transfers by a mortgagee who has acquired the property at a sale conducted
       pursuant to a power to sell or pursuant to a decree of foreclosure or who has
       acquired the property by deed in lieu of foreclosure;
(4)    transfers by a fiduciary in the course of administration of a decedent‘s estate,
       guardianship, conservatorship or trust;
(5)    transfers of newly constructed property;
(6)    transfers from one or more co-owners solely to one or more of the remaining
       owners;
(7)    transfers pursuant to a testate or intestate succession;
(8)    transfers of property that will be converted into a use other than residential;
(9)    transfers of property to a spouse or relative in the blood line;
(10)   transfers between spouses resulting from a judgment of divorce or separate
       maintenance;
(11)   transfers to or from any governmental entity;
(12)   transfers from an entity that has acquired title or assignment of a real estate
       contract to assist the owner in relocation, as long as the entity makes available
       certain disclosure documents;
(13)   transfers to an inter vivos trusts; and
(14)   acts that, without changing ownership, confirm, correct, modify or supplement a
       deed or conveyance already recorded.

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       b.     Disclosure Responsibilities of the Seller

The seller is required to complete and deliver a signed property disclosure document no
later than the time that the purchaser makes an offer to purchase (or lease, etc.).

       c.     Rights of Purchaser and Consequences for Failure to Disclose

If the property disclosure statement is delivered after the purchaser makes an offer, the
purchaser can terminate any resulting real estate contract or withdraw its offer for up to
72 hours after receipt of the property disclosure statement. This termination or
withdrawal will always be without penalty to the purchaser and in addition, any deposit
or earnest money must be promptly returned to the seller (despite any agreement to the
contrary). A purchaser‘s right to terminate the real estate contract is waived once title is
transferred to the purchaser or the purchaser takes occupancy of the property.

       d.     Duties and Real Estate Licensees and Consequences for Failing to
              Fulfill Such Details

Louisiana law requires real estate licensees to inform their clients of those clients‘ duties
and rights in connection with the property disclosure document requirements discussed
above. Failure to do so could subject the real estate licensee to censure or suspension
or revocation of their license, as well as fines.

       e.     Warranty Implications

Louisiana‘s Property Disclosure Law specifically provides that the property disclosure
document shall not be considered as a warranty by the seller. Louisiana Property
Disclosure Law also provides that the information contained in the property disclosure
form is for disclosure purposes only and is not intended to be a part of any contract
between the purchaser and seller. This leaves open the question of whether the parties
to the transaction are able to explicitly make the information contained in the property
disclosure form part the contract. The significance of this issue is illustrated by the
following case out of Kentucky.

In McLellan v. Yeager, No. 2001-CA-002506-MR, 2003 WL 354407 (Ky. Ct. App.
2/14/03), the Sellers, as required by Kentucky law, completed a property disclosure
form on which they indicated that they had experienced leaking in their basement in
1989 and 1997. The sellers also indicated on the form that the leak had not been
repaired. The Kentucky law that requires property disclosure forms also provides that
the disclosure form does not create a warranty by the seller.

Buyer signed a contract to purchase the property which contained the following
provision: Seller represents and warrants to Buyer that the information provided in the
property disclosure form is true, accurate and complete to the best of their knowledge.
The buyer also hired an inspector who issued a report noting cracks on the basement

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wall and recommending further inquiry into this potential problem. The buyer took no
further action and the transaction closed.

After the buyer moved into the property she experienced leaking and filed a lawsuit
against the sellers claiming they had misrepresented the condition of the basement in
the property disclosure form. The trial court ruled in favor of the sellers based on the
fact that the Kentucky property condition disclosure statute specifically stated that the
property condition disclosure form does not constitute a warranty.

The Buyer appealed. The Court of Appeals reversed and sent the case back to the trial
court for further proceeding. The trial court then found that there was nothing in the
property disclosure statute that prevented the parties from entering into an agreement
that made the statements in the property disclosure form into a warranty and that the
contract entered into between these parties had in fact converted the statements in the
property disclosure form into a warranty.

Although decisions of Kentucky courts are not controlling in Louisiana, they may provide
some guidance since Kentucky‘s property condition disclosure law is similar to
Louisiana‘s property condition disclosure law. If Louisiana‘s law is interpreted like
Kentucky‘s law, then information contained in the property disclosure statement
generally does not become part of a contract between the parties, however the parties
may specifically provide that such information does provide a warranty in a subsequent
contract.

2.    Frequently Asked Questions About Property Disclosure Forms
1Q.   What is the property disclosure law?

A.    The Louisiana legislature in 2003 passed a statute requiring sellers to provide
      certain property disclosures to prospective buyers at the time an offer to
      purchase is made by the potential buyer.

2Q.   What are the duties of a real estate licensee under the property disclosure
      law?

A.    Louisiana law requires real estate licensees to inform their clients of the clients‘
      duties to comply with the property disclosure document requirements and their
      right under the law. Failure to do so could subject the real estate licensee to
      censure or suspension or revocation of their license, as well as fines.




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3Q.    Who is required to make disclosure?

A.     A seller‘s obligation to furnish a property disclosure document applies to any
       transfer of any interest in residential real property, whether by sale, exchange,
       bond for deed, lease with option to purchase, etc. A seller‘s obligation to furnish
       a property disclosure document applies whether or not the assistance of a real
       estate licensee is utilized.

4Q.    What is “residential real property”?

A.     ―Residential real property‖ means one to four buildings or structures occupied or
       intended for occupancy as single-family residences. Commercial property and
       vacant lots are not included in the definition of residential real property.

5Q.    In what form must disclosure be made?

A.     The required property disclosure document may be in the form promulgated by
       the Louisiana Real Estate Commission (―Commission‖) or in another form that
       contains substantially the same information.

6Q.    Are any transfers exempt from the disclosure requirements?

A.     The following transfers are exempt from the requirement to provide a property
       disclosure document:

(1)    court ordered transfers;
(2)    transfers to a lender by a borrower who is in default;
(3)    transfers by a lender who has acquired the property at a foreclosure sale or who
       has acquired the property by deed in lieu of foreclosure;
(4)    transfers by a fiduciary in the course of administration of a decedent‘s estate,
       guardianship, conservatorship or trust;
(5)    transfers of newly constructed property;
(6)    transfers from one or more co-owners solely to one or more of the remaining
       owners;
(7)    transfers pursuant to a will or a succession;
(8)    transfers of property that will be converted into a use other than residential;
(9)    transfers of property to a spouse or relative in the blood line;
(10)   transfers between spouses resulting from a judgment of divorce or separate
       maintenance;
(11)   transfers to or from any governmental entity;
(12)   transfer from an entity that has acquired title or assignment of a real estate
       contract to assist the owner in relocation, (as long as the entity makes available
       certain disclosure documents);
(13)   transfer to an inter vivos trust; and
(14)   acts that, without changing ownership, confirm, correct, modify or supplement a
       deed or conveyance already recorded.
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7Q.   When is the seller required to make the disclosure?

A.    A seller is required to complete and deliver a signed property disclosure
      document no later than the time that the purchaser makes an offer to purchase
      (or lease, etc.).

8Q.   What if the seller does not know some of the information required by the
      disclosure form?

A.    If the seller has no knowledge or information required by the disclosure form, the
      seller shall indicate this on the disclosure form.

9Q.   What happens if the seller fails to make the required disclosure?

A.    If the property disclosure statement is delivered after the purchaser makes an
      offer, the purchaser can terminate any resulting real estate contract or withdraw
      their offer for up to 72 hours after receipt of the property disclosure statement.
      This termination or withdrawal will always be without penalty to the purchaser
      and in addition, any deposit or earnest money must be promptly returned to the
      purchaser (despite any agreement to the contrary). A purchaser‘s right to
      terminate the real estate contract is waived once title is transferred to the
      purchaser or the purchaser takes occupancy of the property.

10Q. Is the property disclosure document considered to be a warranty?

A.    A property disclosure document shall NOT be considered as a warranty by the
      seller. The information contained within the property disclosure document is for
      disclosure purposes only and is not intended to be part of any contract between
      the purchaser and seller. The property disclosure document may not be used as
      a substitute for any inspections or warranties that the purchaser or seller may
      obtain. Nothing in this law precludes the rights or duties of a purchaser to
      inspect the physical condition of the property. The following language may be
      added to contracts, agreement of sales, or purchase agreements above the
      signature lines to clarify that the property disclosure document is not a warranty:

      The purchaser(s) acknowledge receipt of the Louisiana Real Estate Commission
      Property Disclosure Statement, and in accordance with the provisions of LSA
      R.S. 9:3198(D) (1) hereby confirms that any reference to, or attachment of, the
      disclosure statement is NOT to be considered as a warranty by the seller(s).

11Q. How can a seller best document compliance with the disclosure
     requirements?

A.    The best way for a seller to document compliance with the property disclosure
      requirements is to have both the seller and purchaser acknowledge, by time and
      date, delivery of the disclosure document. It is important to document the
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          delivery of the property disclosure document as this is the date from which the
          purchaser‘s rights will be measured. The following certificate can be used to
          document delivery of the property disclosure document.

3.        Sample Certificate Regarding Property Disclosure Document
          For Residential Real Estate Form
The Property Disclosure Document For Residential Real Estate shall NOT be
considered as a warranty by the seller. The information contained within the Property
Disclosure Document For Residential Real Estate is for disclosure purposes only and is
not intended to be part of any contract or purchase agreement between the purchaser
and seller. The Property Disclosure Document For Residential Real Estate may not be
used as a substitute for any inspections or warranties that the purchaser or seller may
obtain. Nothing in this law precludes the rights or duties of a purchaser to inspect the
physical condition of the property.

By signature below, the undersigned acknowledges seller(s) delivery and the
purchaser(s) receipt of the Property Disclosure Document for Residential Real Estate
on the date and at the time indicated and that the real estate license representative
representing the seller(s) has informed the seller(s) of the duties and rights pursuant to
LA R.S. 9:3196 et seq.

Purchaser:                    Date:               Time:

Purchaser:                    Date:               Time:

Seller:                       Date:               Time:

Seller:                       Date:               Time:


Property Description:




Agent/Broker: _______________________




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B.     SEWER/SEPTIC SYSTEMS
       Residential Waste Water Treatment Systems
The Louisiana Real Estate Commission provides an addendum to Property Disclosure
Form for disclosure of information on residential sewage treatment systems for use by
sellers whose property contains an on-site waste water treatment system. The
addendum may be obtained from the Louisiana Real Estate Commission‘s website at
www.lrec.state.la.us

Many rural areas are not served by large centralized treatment facilities. According to
Brenda Guy of Delta Environmental Products, there are approximately 18,000 on-site
treatment systems installed in Louisiana each year. These systems consist primarily of
septic tanks and drain filled type sewer treatment systems. The disclosure addendum
form is intended to provide potential buyers with information regarding the residential
waste water treatment. Further, the local health department office within each parish
can provide information regarding any state laws or specific parish ordinances that
affect the treatment systems in that parish. A list of parish health offices can be found
at www.oph.dhh.louisiana.gov/ophregions

C.     BUILDING RESTRICTIONS
Building restrictions limit the owner of properties ability to build on property encumbered
by the restriction. For example, the restrictions may require a slate roof on houses on a
certain street or may prohibit houses above a certain height.

Louisiana Civil Code Articles 776, 780 and 783 provide that building restrictions once
established may be amended or terminated as provided in this title as follows:

      If the building restrictions provide a provision for amendment, then the building
       restriction may be amended or terminated pursuant to that provision

      If the building restriction does not provide for its amendment or termination, then
       the building restrictions may be amended by agreement of owners representing
       more than one-half of the land area affected by the restrictions (excluding streets
       and rights of way) if the restrictions have been in effect for more than ten years

      The building restrictions can be amended by an agreement of both owners
       representing two-thirds of the land title affected and two-thirds of the owners of
       the land affected by restriction (excluding streets and rights of way) if the
       restrictions have been in effect for more than ten years.

Further building restrictions for a subdivision can sometimes be considered abandoned
by failure to enforce the plan of restrictions. See Louisiana Civil Code Article 782.


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The Louisiana Residential Property Disclosure Form does require the owner of
residential property to disclose if the property violates any known building restriction.

D.      MODULAR HOMES
Constructing homes through a modular home process is becoming more and more
popular across the United States. Modular homes are partially assembled as
components at a factory. The components of the home are then assembled on the lot.
Since the majority of the homes are assembled at a factory, work is not delayed by
factors such as the weather or subcontractor no-shows. The modular home industry
states that quality engineering and modular construction techniques have significantly
increased the energy efficiency of modular homes. Further, construction within a factory
eliminates the possibility of damage to the building materials which can be cause by the
weather and also allows assembly in a protected climate controlled environment.

Modular homes are usually constructed with roughly 20-30% more raw materials than
traditional site built homes to deal with displacement during the shipping process. An
example of this is the drywall of modular homes is typically glued with a special
adhesive and then screwed into metal framing. The drywall in site built homes is often
nailed or screwed to wooden studs. A recent FEMA study on 1992 Hurricane Andrew
concluded that ―the modular to modular combination of units appears to have produced
an inherently more rigid system that performs much better than the conventional
residential framing.‖ Building performance: Hurricane Andrew in Florida, FIA-22, Item 3-
01801.

Do building restrictions apply to modular homes?

Building restrictions for a subdivision may prohibit or allow modular homes just as they
may prohibit or allow manufactured homes.

How is a Modular Home constructed on site?

The manufacturer for the modular homes gives specifications for the foundation. After
the home is constructed, it is shipped to the homeowner‘s lot. A crane is used to place
the housing modular on a foundation and set the roof in place. Generally within a few
days the home has been completely installed and the exterior secured. It generally
takes a few weeks for the builder to finish the interior of the home. Often this means the
building process itself will take a month or less.




        1 Information for this article was obtained from the Modular Building Assistance Association Buildings of Tomorrow

(www.modularhousing.com)




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What is the difference between a Modular Home and a Manufactured Home?

A manufactured home comes to a site, fully completed and assembled and remains
permanently attached to a chaise. In addition, the manufactured home remains portable
once in place. A modular home is not mounted on a chaise but is built in components in
a factory built process. There are also significant differences between manufacture and
modular homes in the site preparation, onsite construction, filling of walls, roof
construction, and insulation. A modular home is treated differently under the law than a
manufactured home.

Do Modular Homes have to be built to the Louisiana building code?

Yes. Under Louisiana law modular home designed and permanently installed or
constructed on a residential site must be constructed in accordance with the
International Residential Code (IRC) adopted by the State of Louisiana (La. R.S.
40:1730.282) and which is enforced by the Louisiana State Licensing Board for
Contractors. Modular housing, consisting of components or sections built off-site,
transported to the residence site, assembled and permanently affixed to a slab or
foundation are regulated by the State Contractors Licensing Board pursuant to La. R.S.
37:2150.1(11).

The Louisiana Manufactured Housing Commission maintains jurisdiction and regulatory
authority over manufactured homes which are built to HUD standards and code.
Manufactured homes are entirely factory-built and mounted on a chassis.

Does the “new home warranty” apply to Modular Homes?

Another clear distinction between a manufactured home and a modular home is that
each provides and follows separate statutory warranties. The New Home Warranty Act
(La. R.S. 9:3141-3150) outlines the warranty available for modular homes and supplies
the remedy available for new home owners. The warranty pursuant to the New Home
Warranty Act is transferable and can last up to five years. La. R.S. 51:911.25 provides
that each new manufactured home be covered by a warranty for only the first retail
purchaser and only for a period of one year from the date of purchase.

Do Modular Homes need to be registered with the Office of Motor Vehicles?

No. A manufactured home is registered with the Louisiana Office of Motor Vehicles and
a title issued similar to that of a motor vehicle. A modular home has no such title since it
becomes part of the property upon which it is assembled and constructed.




2
 Mandatory adoption of certain nationally recognized codes and standards as the state uniform construction code;
adoption by reference
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E.    LOUISIANA HOME INSPECTORS LICENSING LAW
Pursuant to La. R.S. 37 §1471 et seq, any person engaging in, conducting, advertising,
or holding himself out, as a licensed home inspector must be licensed, unless exempt
by Chapter 37.

The minimum qualifications for licensing are as follows:

             At least 18 years of age
             Passed the required exam
             Paid the appropriate fees and submitted an application, as required by the
              board.

Home inspectors must provide a written report of the home inspection to each person
for whom the inspector performs a home inspection for compensation within five (5)
calendar days of the inspection. La. R.S. 37 § 1478.

Further, the statue prohibits an inspector from, at the time or a reasonable time
thereafter, from advertising or soliciting repair services on the home upon which the
inspection was performed.

All home inspectors must carry a group insurance program as well as Errors and
Omissions insurance and general liability insurance.

1.    Referral of Home Inspectors by REALTORS®

Real estate agents are often asked to recommend home inspectors. Many in the real
estate industry feel very strongly that real estate agents have a duty to assist their
clients in selecting a home inspector who will provide a complete and accurate home
inspection. Real estate agents deal with home inspectors and inspection reports on a
routine basis. Due to this experience, they are typically much more knowledgeable
about home inspections than the consumers they represent. Some consider providing
this knowledge and expertise as part of the value that an agent brings to a real estate
transaction. However, making recommendations of experts to clients can lead to
liability for the agent or broker.

Some considerations by agents in making recommendations of home inspectors to a
client include:

             perceived conflict of interest
             availability of information on inspectors
             liability of REALTORS® to buyers or sellers for making recommendation
             liability of REALTORS® to home inspectors for making recommendation


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       a.     Perceived Conflict of Interest

There is an inherent perceived conflict of interest that exists for real estate agents in
referring experts. A real estate agent is often paid on commissions only if the sale is
completed. A home inspector who finds defects with the home could cause the buyer
to terminate the deal. Thus, choosing a highly meticulous home inspector may be
perceived to be against the agent‘s best interest.

Partially, because of this inherent perceived conflict, there are varying views in the real
estate industry as to whether it is appropriate for agents to refer home inspectors.
Massachusetts law for example prohibits Massachusetts real estate agents from
recommending a specific home inspection company or home inspector. Instead, upon
request, the agents must provide a complete list of licensed home inspectors prepared
by the State Board of Home Inspectors. To date, Massachusetts is the only state to
enact such a provision.

       b.     Availability of Information

Some experts recommend that agents remove themselves from the home inspection
process because of the increased availability of this information to the public.
Consumers have far more access to research and information about home inspectors
than they did 10 or 20 years ago. Internet search engines, lists maintained by the
States of licensed inspectors, advertising in real estate publications and Yellow Pages
advertisements all provide access for consumers to find a qualified home inspector.
This increased access to information gives the consumer more options, making the real
estate agent‘s role in choosing a home inspector less of a necessity.

       c.     Liability of REALTOR® to Clients

Another cause for concern for REALTORS® is the possibility of being held liable to a
buyer for referring a home inspector who is negligent in the home inspection. The
buyer then sues the agent for negligence in referring an incompetent inspector. The
level of involvement of the real estate agent in choosing or directing the inspection
plays a major role in determining the liability of the agent.

       1.     White v. J.D. Reece

One case in Kansas provides a good example of agent‘s liability. In White v. The J.D.
Reece Company, 26 P.3d 701 (Kan. App. 2001), Ms. White entered into a purchase
agreement to buy a home. Ms. White was represented by an agent from J.D. Reece, as
was the seller. The parties executed a dual agency disclosure and a seller‘s disclosure
statement, which purported to disclose to Ms. White all material defects of which the
seller was aware. On her agent‘s recommendation, Ms. White decided to have a home
inspection done. Ms. White chose an inspector that her agent recommended.
However, the agent did not furnish the names of any other inspectors. Based on her

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agent‘s advice, Ms. White did not accompany the inspector during the inspection. The
inspector orally relayed the problems that he found in the house to Ms. White.

Thereafter, Ms. White‘s agent prepared a list of items to be repaired based on the oral
representations made by the inspector. The itemized list of repairs was typed on J.D.
Reece‘s stationary and forwarded to Ms. White for her approval. The sale was
conditioned on the repair of the items on the list. All of the items were repaired. The
inspection company issued a written report to Ms. White‘s agent, which she then
forwarded to Ms. White. However, Ms. White did not receive the report until after she
had received and signed the list of repairs compiled by her agent. Ms. White testified
that once the items on the list prepared by her agent were repaired, she wanted to have
the home reinspected. The agent told Ms. White that another inspection was
unnecessary.

When Ms. White later sought refinancing on her home, she learned that she had major
structural damage. Ms. White read the inspection report and it had noted the structural
damage and suggested foundation repair. Ms. White then sued J.D. Reece, the Realty
company that employed her agent, asserting that the company breached its contract
with her to make full disclosure regarding the condition of the property, breached its
fiduciary duty to her, and violated the Kansas Consumer Protection Act.

One of the issues in the case was whether Ms. White relied solely on the inspector‘s
advice and therefore, the Realty company was not be at fault. The Court stated that
―although Ms. White had relied on the oral report made by the inspector, her agent had
inserted himself in White‘s dealings with the inspector. The agent told White not to
accompany the inspector while he inspected the property. The agent drafted a list of
repairs to be made and submitted them to White before she received the inspector‘s
report. After the repairs were completed, the agent told White that a reinspection of the
property would be unnecessary.‖ These factors convinced the Court that the agent had
taken enough of an active role in the inspection that he should be responsible for the
results.

The Court went on to find that ―the evidence indicates that the agent took an active role
in determining what repairs were needed and what repairs would be made. As a result,
the agent controlled the course of repairs that were to be made. The evidence further
indicates that White relied on her agent‘s advice that all necessary repairs had been
completed and that a reinspection of the property was unnecessary. The agent‘s
assurances that the repairs had been made induced White to complete the purchase of
the property.‖

The agent claimed that the seller‘s disclosure statement excused him of any liability
because it stated that ―neither seller nor broker is an expert in detecting or repairing
physical defects in the property.‖ However, the Court determined that ―when a real
estate broker‘s agent purposely injects himself or herself into the independent
investigation of the property to the buyer‘s detriment, the real estate broker and its

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agent cannot rely on the seller‘s disclosure statement to shield themselves from
liability.‖

The White case is an example of an agent becoming too involved in the inspection
process. This led to the possible liability of the broker for the damages suffered by the
buyer.

2.    Carleton v. Winter

A similar case from the District of Columbia also provides some guidance. In Carleton
v. Winter, 901 A.2d 174 (DC 2006), the Carletons enlisted an agent to help them buy a
home. They found a home that they liked and made an offer to the home‘s owners
conditioned upon a favorable report by a professional home inspection company. The
Carletons requested that their real estate agent recommend a competent home
inspector. The agent advise them that there were only three companies in the area that
she would recommend, and particularly favored one specific inspector because he was
well-suited for first-time home buyers. The Carletons chose the inspector that their
agent recommended, received a favorable report from the inspector and the transaction
was consummated.

The Carletons commenced certain renovations and were told by their architect and
contractor that they had structural damage in a wall. The wall collapsed soon after.
The Carletons brought a suit against the inspector and their real estate agent. They
alleged that their agent and her employer were negligent in recommending the home
inspector who failed to detect the structural damage and that the agent had breached
her fiduciary duty owed to the Carletons as their real estate agent.

The evidence showed that the agent had used the inspector a few times and he had
done a good job. The agent knew nothing of the inspector‘s qualifications or ability. The
Carletons alleged that a ―REALTOR® violates his/her standard of care when he/she
recommends a house inspector without knowing anything about the credentials or
background.‖ The Carletons did not present any expert testimony on whether and to
what extent the REALTOR‘S® duties include vouching for careful performance by a
home inspector they recommend. The Court found that these are questions on which
only the standards of the profession – as articulated by an expert – can enlighten a jury.

The Court ruled in the agent‘s favor based on the fact that no expert testimony had
been proffered to show that a REALTOR® has a duty to investigate a home inspector‘s
background and credentials. Had any testimony been presented in favor of the
Carletons‘ position, the result may have been different. This case provides a warning to
REALTORS® that they should know the credentials and background of a home
inspector before referring him/her.




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      d.     Liability of REALTOR® to Home Inspectors

There is a final issue that can have an effect on real estate agents in referring home
inspectors. In Porter v. Joy Realty, Inc., 2005 Pa Super 129 (Pa. 4/11/2005), a home
inspector brought a defamation suit against a real estate agent. The inspector had a
good business with referrals from several real estate companies in his area. The
inspector performed an inspection and issued an unfavorable report after a referral from
a particular agent. Afterward, the agent sent the inspector a scathing fax criticizing his
findings. The agent also made unfavorable comments about the inspector directly to
the buyer. After this, the inspector no longer received referrals from other real estate
companies and was taken off of lists of qualified inspectors. From that point, the
inspector‘s business almost disappeared and he was forced to quit his job as an
inspector.

Although there was no direct evidence that the agent had communicated her derogatory
comments about the inspector to other agents, the Court found that the quantity and
quality of circumstantial evidence presented were enough to proceed to trial. The Court
noted the complete cessation of the inspector‘s referrals in what had been a successful
home inspection business in relation to the agent‘s comments was sufficient evidence
for a jury to find that the agent had communicated defamatory statements. This is one
more case that can help REALTORS® better understand the type of behavior that can
lead to potential problems when dealing with home inspection referrals.

F.    MOLD DISCLOSURE
Many mold related lawsuits have been filed nationally with homeowners alleging mold in
their homes has caused illness. Several homeowner‘s insurers have stopped issuing
new policies and therefore a new homeowner may not be able to obtain insurance
coverage protecting against a loss caused by mold.

La. R.S. 37 § 1470 provides if a real estate licensee delivers the mold educational
pamphlet to the buyer or lessee before a contract for sale or lease is entered into by the
parties, then the licensee is not required to provide any additional information
concerning mold unless the licensee has actual knowledge of mold related material
defect. The information contained in the educational pamphlet is deemed to be
adequate information for the buyer regarding mold problems that can affect real
property.

1.    Frequently Asked Questions and Answers
1Q.   What is the mold informational pamphlet law?

A.    During the 2003 legislative session, the legislature passed a statute providing
      that if a licensee delivers a mold informational pamphlet to a potential buyer, the
      licensee is not required to provide any additional information concerning mold,
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      unless the licensee has knowledge of a mold related material defect to the
      property.

2Q.   What are the duties a real estate licensee under the mold informational
      pamphlet?

A.    The licensee shall deliver the mold informational pamphlet to a potential buyer
      prior to or at the time a lease, rental agreement, or contract for sale is entered
      into by the parties.

3Q.   What is the mold informational pamphlet?

A.    The mold informational pamphlet approved by the Louisiana Real Estate
      Commission www.lrec.state.la.us is the pamphlet prepared by the United States
      Environmental Protection Agency (―EPA‖) www.epa.gov entitled:

      (1)    Residential Property: A Brief Guide to Mold, Moisture, And Your Home
             (EPA, 402-K-02003) or any successor of this pamphlet; or

      (2)    Commercial Property: Mold Remediation in Schools and Commercial
             Buildings (EPA, 402-K-01-001, March 2001) or any successor of this
             pamphlet; or

      (3)    Provides a written statement to the potential buyer that informational
             pamphlets      maintained     on     the      EPA      website      at
             www.epa.gov/iaq/molds/index.html or any successor of this website, are
             available.

4Q.   Is there a cost associated with obtaining the pamphlet?

A.    You may download a copy of the pamphlet free from the EPA website. There is
      a charge to order the pamphlets when ordering in bulk.

5Q.   What are the benefits of the mold informational pamphlet law?

A.    First, the supplying of the mold informational pamphlet is a service to the buyer
      by informing the buyer regarding the possible existence of mold and the possible
      consequences of mold‘s presence in the property. Second, supplying the LRC
      approved pamphlet is all of the information a licensee is required to deliver to a
      potential buyer regarding mold unless the licensee has knowledge of a mold
      related material defect to the property. The mold pamphlet is deemed adequate
      to inform buyers regarding common mold related hazards that can affect real
      property unless the licensee has knowledge of a mold related material defect to
      the property.


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6Q.   What if the licensee is aware of toxic mold in a property? Will the
      supplying of the mold pamphlet relieve the licensee from being required to
      provide any other information regarding mold in the property?

A.    No. The mold informational pamphlet does not limit the duty of a licensee to
      disclose any known material defect regarding the condition of the property.

7Q.   What if the mold informational pamphlet contains inaccurate information?

A.    The mold informational pamphlet law provides that a licensee shall not be held
      liable for any error, inaccuracy or omission of any information contained in the
      mold informational pamphlet delivered if either of the following applies:

(1)   the error, inaccuracy or omission was not within the personal knowledge of the
      licensee; or
(2)   the error, inaccuracy or omission was based on information provided to the
      licensee by the LRC, a public agency, or by other persons providing relevant
      information by delivery of a report or opinion prepared by an expert dealing with
      matters within the relevant scope of his professional license and ordinary care
      was exercised by the licensee in obtaining and transmitting such information.

G.    AIDS DISCLOSURE
1.    Background
Agency disclosure, property condition disclosure – what other kinds of disclosures do
real estate professional need to make to customers? How about stigmas such as
murders, suicides, or AIDS? Do these factors need to be disclosed during the real
property transaction?

The NATIONAL ASSOCIATION OF REALTORS® defines stigmatized property as: ―a
property that has been psychologically impacted by an event which occurred, or was
suspected to have occurred, on the property, such even being one that has no physical
impact of any kind.‖

In other words, when dealing with a stigmatized property, real estate agents are not
dealing with facts about physical characteristics – they are dealing with fears of a
potential purchaser. The most common events associated with stigmatized property are
murders, suicides and criminal activity. Stigmatized property also includes property in
which a current or former occupant has been infected with HIV or diagnosed with AIDS.

2.    AIDS Disclosure
The 1988 Fair Housing Act Amendments established the handicapped, which includes
people diagnosed with AIDS, as a new protected class. It is now illegal to discriminate
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against people with handicaps just as it is illegal to discriminate on the basis of race,
color, religion, sex, national origin or familial status.

According to the Department of Housing and Urban Development (HUD), it is illegal for
real estate agents to make unsolicited disclosures that a current or former occupant of
the property has AIDS. If a prospective purchaser directly asks an agent if a current or
former occupant has AIDS, and the agent knows this is in fact true, HUD advises that
the agent should not respond. NAR advises that the agent respond as follows:

It is the policy of our firm not to answer inquires of this nature one way or the other since
the firm feels that this information is not material to the transaction. In addition, any type
of response by me or other agents of our firm may be a violation of the federal fair
housing laws. If you believe that this information is relevant to your decision to buy the
property, you must pursue this investigation on your own.

3.     Other Stigmas
Although federal law provides guidelines for handling AIDS disclosures, there are still
―Gray‖ areas surrounding disclosures of other stigmas. When a property defect is
physical, disclosure is mandatory in most states. When the defect is an emotional
stigma, however, disclosure becomes dependent on materiality.              The following
guidelines are designed to help a listing agent, when faced with information regarding a
potential stigma, determine whether or not a stigma is material to a particular real estate
transaction.

4.     Recommendations
Step #1, Determine whether the information is fact or fiction.

Investigate the sources of the information, e.g., check newspaper accounts, talk to
neighbors, etc. Separate rumor from reality. If the stigma is based on rumor and not on
fact, you are under no obligation to disclose. If, on the other hand, the stigma turns out
to be factual, e.g., there was in fact a murder, you should proceed to the next step.

Step #2, Determine materiality.

To analyze the materiality of a stigma, you should ask yourself this question: would
knowing about the stigma affect the willingness of most people to buy the property or
reduce the amount of money they would pay for the property?

Most stigmatized property cases involve stigmas that are less sensational than say a
multiple-murder. Less sensational stigmas may or may not impact on the market value
of the property. However, it is your job to make an analysis of what a reasonable
person would do with this information. Would a reasonable person be willing to buy the


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property knowing about the stigma? Or, would a reasonable person pay less for the
property knowing about the stigma?

If, at this point in the analysis, the answer is yes to either question, you have concluded
that the stigma is a material fact which should be disclosed.

Step #3, Consult state law.

Louisiana law on psychologically impact property provides;

§ 1468. Psychologically impact property

A.    The fact or suspicion that a property might be or is psychologically impacted,
such impact being the result of facts or suspicions, including but not limited to:

(1)    That an occupant of real property is, or was at one time, suspected to be,
       infected or has been infected with Human Immuno-deficiency Virus or diagnosed
       with Acquired Immune Deficiency Syndrome, or any other disease which has
       been determined by medical evidence to be highly unlikely to be transmitted
       through the occupancy of a dwelling place; or
(2)    That the property was, or was at any time suspected to have been, the site of a
       homicide, or other felony or a suicide.

Is not a material fact or material defect regarding the condition of real estate that must
be disclosed in a real estate transaction.

Step #4, Discuss disclosure with the sellers.

Go back and talk to the sellers about what you have determined. Walk them through
you analysis and show them why this particular factor may make a difference in the sale
of their property.

If the sellers agree to disclose the stigma, make the disclosure judiciously. It is not
necessary to disclose information about a stigma to those who simply express interest
in the property. The best time to disclose is at the contract proposal stage. Present the
subject as one more relevant piece of information about the property and use simple
non-threatening language.

If the sellers disagree and refuse to disclose what you have determined to be a material
factor regarding the property, you will need to give up the listing. Because the sellers
are your clients, you cannot disclose information that they have specified should remain
confidential without violating one of the duties inherent in your agency relationship with
them. However, you may also be in violation of the basic duty to disclose material
factors that affect the value or desirability of the property. The best way to handle this
dilemma is to give up the listing.

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5.     Conclusion
Remember that property stigmas are emotional issues that need to be handled
carefully. To reduce the legal risks in this area, it is essential that real estate agents:
understand the issues associated with stigmatized property, know pertinent federal and
state laws, and know how to evaluate facts and make informed decisions about
disclosure.

H.     MEGAN’S LAW
In 1996 federal law was enacted requiring sex offenders to register a current address
with a designated state law enforcement agency and allowing such information to be
publicized. This law is referred to as Federal Megan‘s Law. In 1997 the Department
of Justice published final guidelines for states on how to implement Federal Megan‘s
law. These guidelines specifically provide that the issue of whether or not a
REALTOR® has a duty to disclose sex offender information is a matter of state law and
therefore is not addressed in the federal guidelines.

In 2002, the Louisiana legislature passed La. R.S. 37§1469 which provides as follows:

A.     Every written lease or rental agreement executed by any licensee for residential
       immovable property and every written contract for sale of residential immovable
       property shall contain a notice of the availability to the public access to a
       statewide database disclosing the locations of individuals required to register
       pursuant to R.S. 15:540 et seq (registered sex offenders). The notice shall
       include the telephone number and Internet site for the stat database.

B.     Upon delivery of the notice to the lessee or transferee of the residential
       immovable property, the lessor, seller, broker, or licensee is not required to
       provide any information in addition to that contained in the notice regarding the
       proximity of registered sex offenders. The information in the notice shall be
       deemed to be adequate to inform the lessee or transferee about the existence of
       a statewide database of the locations of registered sex offenders‘ information
       from the database regarding those locations. The information in the notice shall
       not give rise to any cause of action against the disclosing by a registered sex
       offender or other parties to the transaction.

This statute provides a notice of the availability of access to Louisiana statewide
database disclosing the locations of individuals required to register under the sex
offender law shall be included on written lease agreements for residential real property
for all written contracts of sale of residential real property.




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A sample notice provided by the Louisiana Real Estate Commission is as follows:

            Notice: The Louisiana Bureau of Criminal Identification Information
             maintains a state Sex Offender and Child Pre-Registry. It is a public
             access database of the locations of individuals who are required to
             register pursuant to LSA-R.S. 15:540 et seq. Sheriff‘s departments and
             police departments serving jurisdictions of 450,000 also maintain such
             information. The state Sex Offenders Child Predator Registry database
             and be accessed at www.lasocpr.lsp.org/socpr/ and contains address,
             pictures, and conviction records for registered offenders. The database
             can be searched by zip code, city, parish, or by offender name.
             Information is also available by phone at 1-800-858-0551 or 1-225-925-
             6100.

1.    Frequently Asked Questions and Answers
1Q.   Should an agent check the Louisiana Registered Sex offender database
      regarding their listings?

A.    Louisiana requires sex offenders to register with the State (these laws are
      sometimes referred to as ―Megan‘s Law‖). This state public notification program
      has always raised questions regarding the duty of REALTORS® to investigate
      and inform home buyers of the presence of sex offenders because public
      notification programs makes information so readily assessable. In response to
      these concerns, a law was passed during the 2001 Regular Session of the
      Louisiana Legislature which requires that every lease or agreement of sale for
      residential property entered into on or after January 1, 2002 contain adequate
      notice informing buyers or lessees of the availability of the statewide sex offender
      registry database, including its telephone number and Internet address.

      This Law does not guarantee that a licensee will never be held liable for failing to
      disclose information relating to sex offenders. But compliance with the law does
      ensure that all purchasers and lessees are aware of the statewide database, as
      well as how to access it. By making the inclusion of such information mandatory,
      the idea was to shift the burden to buyers and lessees to do their own
      investigations. However, it should be noted that this law has not yet been
      interpreted by a court. It should also be noted that the mandatory disclosure only
      applies to residential sales and leases.

2Q.   If an agent knows a registered sex offender lives across the street from a
      listing, do they disclose it to a potential buyer?

A.    A court may find that an agent who intentionally withholds information regarding
      a sex offender living across the street may be withholding material information.
      Again, this issue has not been considered by a Louisiana court. A court might

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      also find that compliance with the above-described mandatory disclosure is
      sufficient, even in the case of actual knowledge on the part of an agent.

3Q.   Can a purchaser get out of a contract if they learn of the presence of a sex
      offender prior to closing but after inspections are completed?

A.    Whether or not a purchaser can get out of a contract in such a situation depends
      on the terms of the contract. If the contract does not condition the sale on the
      absence of sex offenders or does not limit the time for such a discovery, then the
      purchaser could not get out the contract without being in breach thereof upon the
      discovery of a sex offender or upon discovery after the allotted
      investigation/inspection period.

I.    METH LAB DISCLOSURE
As the rate of the manufacture of homemade narcotics, such as methamphetamines,
rises in the United States, the effects on the locations of the laboratories (―Meth Labs‖)
in which they are produced are raising many questions about the disclosure duties of a
seller of such property. The ―cooking‖ of meth produces fumes which can be toxic if
inhaled, leave residues of the chemicals used in the walls, floors, carpets, air
conditioning ducts, etc. These residues can also contaminate water supplies and soil.

According to a recent article in the Denver Post, some of the signs of whether a house
was previously used as a Meth Lab are:

            Numerous empty cold-medication containers. Cold medications containing
             ephedrine or pseudoephedrine are used to make meth.
            Empty chemical containers. Chemicals used during the process include
             acetone, Coleman fuel, starting fluid, methanol such as Heet antifreeze,
             paint thinner and sodium hydroxide such as Red Devil Lye.
            Chemistry equipment. Few people practice chemistry as a hobby, so items
             such as flasks and beakers may be a warning sign. Meth "cooks" also use
             common items such as Mason jars and rubber tubing, so beware of
             bottles or jugs with odd-looking solutions that could be byproducts from
             the manufacturing process.
            Odd odors. A chemical smell that is not typically associated with a
             residential environment is cause for concern.

Several states have begun to take action in altering their state statutes to specifically
include the disclosure of drug labs in their property disclosure laws. In Arizona, under
A.R.S. § 12-1000, a statement that a clandestine drug laboratory was seized or a
person was arrested on the real property for having chemicals or equipment used in the
manufacturing of methamphetamine, ecstasy or LSD must be placed on the real
property along with a statement that if an owner fails to provide any notice required by

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this section, the owner is subject to a civil penalty and a buyer, tenant or customer may
void a purchase contract, rental agreement or other agreement.

The Louisiana Legislature in the 2005 session provided restrictions on the sale of
pseudoephedrine, ephedrine or phenylpropanolamine which can be used to
manufacture methamphetamine. These restrictions include:

       1.     requiring these products to be kept on the shelves in retail establishments
              in limited quantities.

       2.     video surveillance of persons examining or removing packages of these
              products.

       3.     written records of these products sold by retail establishments.

Currently, the Louisiana Residential Property Disclosure form (―Disclosure Form‖)
requires the seller of a property to disclose any ―defects‖ in the property, and specifically
in section 35 of the form, any ―other adverse materials or conditions.‖ Although there is
no reference on the Disclosure Form for specific disclosure of any type of narcotics lab
ever being located on the property, the Disclosure Form defines ―defect‖ as something
that significantly impairs the health or safety of future occupants of the property.
Therefore, it may be advisable to provide the disclosure of a former Meth Lab on the
Disclosure Form.

J.     LEAD-BASED PAINT
1.     Background
Lead is a highly toxic metal, when present in the human body attacking the central
nervous system. Children and fetuses are particularly susceptible since their bodies are
still developing. Anemia, hyperactivity, kidney dysfunction, lower intelligence, stunted
growth, mental retardation, and even death have been linked to lead. Sources of lead
in the environment include water (lead pipes), soil and dust (gasoline consumption), and
air (industry emissions), as well as lead-based paint.

Lead-based paint was used almost universally until the 1950‘s, when caseworkers in a
few large cities sought out lead-poisoned children and identified lead-based paint as a
health hazard. In the 1960‘s in Chicago, New York, and several other large cities began
initiating the first mass screening programs. The Lead-Based Paint Poisoning Act,
passed in 1971, initiated a national effort to identify children with lead poisoning and
abate the lead source. When the Act was passed, the direct legislation of lead paint
chip was regarded as the primary health hazard from lead-based paint. By 1978, lead-
based paint was completely banned for use in all homes and most other buildings (it
can be used for some exterior industrial properties).


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According to the U.S. Housing and Urban Development, more than one-half of the U.S.
housing stock – and more than three quarters of units built before 1978 – contains some
lead-based paint.

In 1992, the U.S. Congress passed the Residential Lead-Based Paint Hazard Reduction
Act, which requires seller disclosure of lead-based paint and lead-based paint hazards
in connection with the sale or lease of pre-1978 dwellings. The law directed the U.S.
Environmental Protection Agency and HUD to issue regulations to implement those
requirements.

New federal regulations requiring sellers or lessors of pre-1978 residential dwellings to
disclose the presence of known lead-based paint in the property went into effect,
September 6, 1996, for the owners of more than four residential dwellings, and
December 6, 1996, for owners of one to four residential dwellings.

2.     Lead-Based Paint Recommendations
Under the regulations, homebuyers and renters must receive known information on
lead-based paint hazards during sales and rentals of housing built before 1978. Buyers
and renters will receive specific information on lead-based paint in the housing as well
as a Federal pamphlet with practical, low-cost tips on identifying and controlling lead-
based paint hazards. Sellers, landlords and their agents will be responsible for
providing this information to the buyer or renter before the sale or lease of the property.

Before the ratification of a contract for housing sale or lease:

             Sellers and landlords must disclose known lead-based paint and lead-
              based paint hazards and provide available property evaluations to buyers
              or renters.
             Sellers and landlords must give buyers and renters the pamphlet
              developed by EPA, HUD, and the Consumer Product Safety Commission
              entitled, ―Protect Your Family from Lead in Your Home.‖
             Homebuyers will get a ten (10) day period to conduct a lead-based paint
              inspection or risk assessment at their own expense. The rule gives the
              two parties flexibility to negotiate key terms of the evaluation.
             Sales contracts and lease agreements must include certain notification
              and disclosure language.
             Sellers, lessors, and real estate agents share responsibility for ensuring
              compliance with these regulations.

This rule does not require any testing or removal of lead-based paint by sellers or
landlords. This rule does not invalidate lease or sales contracts. For owners of a total
of more than (4) four dwelling units, the regulations became effective on December 6,
1996.


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The rules will help inform about nine million renters and three million homebuyers each
year. The estimated cost associated with learning about the requirements, obtaining
the pamphlet and other materials and conducting disclosure activities is about $6 per
transaction. This data was prepared by the EPA and HUD and can be purchased by
calling 1-800-424-LEAD. The website is www.epa.gov/lead/.

3.    Frequently Asked Questions about the Regulations
1Q.   What do the new regulations require of sellers, lessors and real estate
      professionals?

A.    Before ratification of a contract for sale or lease:

            Sellers and landlords must disclose known lead-based paint and lead-
             based paint hazards and provide available reports to buyers and tenants.
            Sellers and landlords must give buyers and renters a federal pamphlet
             titled Protect Your Family from Lead in Your Home.
            Homebuyers will get a 10-day period to conduct a lead-based inspection
             or risk assessment at their own expense if desired. The number of days
             can be changed by mutual consent.
            Sellers and lessors must include certain language in sales contracts and
             leasing agreements to ensure that disclosure and notification actually take
             place. Sellers, lessors and real estate professionals share responsibility
             for ensuring compliance.

2Q.   What are the specific responsibilities of real estate salespeople?

A.    Real estate salespeople must ensure that:

            Sellers and landlords are aware of their obligations.
            Sellers and landlords disclose the proper information to buyers and
             tenants.
            Sellers give buyer the 10-day opportunity (or another mutually agreed-on
             period) to conduct an inspection.
            Lease and sales contracts include proper disclosure language and
             acknowledgments that all the required information was provided.

3Q.   What type of housing is covered?

A.    Most private housing, public housing, federally owned housing, and housing
      receiving federal assistance.




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4Q.   What housing is not covered?

A.    The following types of housing are not covered:

            Housing built after 1977
            Zero-bedroom units, such as efficiencies, lofts or dormitories
            Housing with leases for less than 100 days, such as vacation houses or
             short-term rentals
            Housing exclusively for the elderly (unless there are children living there)
            Housing for the handicapped (unless there are children living there)
            Rental housing that has been inspected by a certified inspector and found
             to be free of lead-based paint
            Houses being sold because of foreclosure

5Q.   Is the seller required to correct any lead hazards that are found?

A.    No, nothing in the law requires an owner to remove lead paint or correct hazards.
      The law also does not prevent the two parties from negotiating hazard reduction
      as a contingency. That will be handled the same as any other defect.

6Q.   Will the salesperson be held liable if the sellers or lessors fail to disclose
      information known to them about the presence of lead-based paint?

A.    As long as the salesperson has informed the sellers or lessors of their obligations
      to disclose, the salesperson will not be held liable for the failure to disclose to a
      purchaser or lessee the presence of lead-based paint or lead-based paint
      hazards known by sellers or lessors but not disclosed to the salesperson, says
      NAR.

7Q.   To whom does the disclosure have to be made?

A.    The disclosure must be made to the purchaser or the lessee. The regulations
      define a ―purchaser‖ as any entity that enters into an agreement to purchase, and
      ―lessee‖ is defined as any entity that enters into an agreement to lease, rent or
      sublease. The regulations make it clear that the rule does not require mass
      disclosure to all prospective purchasers or lessees, regardless of their degree of
      interest. Only the actual purchaser or lessee must receive the information,
      subject to the timing requirements set forth below, says NAR.

8Q.   When should the disclosure occur and the pamphlet be distributed?

A.    For sales transactions, the disclosure must occur prior to the seller‘s acceptance
      of the purchaser‘s written offer to purchase. If the potential purchaser makes an
      offer before the requisite disclosures are provided, the seller may not accept that
      offer until the disclosure activities are completed and the potential purchaser has

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      had an opportunity to review the information and consider whether to amend the
      offer prior to becoming obligated under the contract, says NAR.

      For lease transactions, the lessor must provide the information and complete the
      disclosure portions of the lease before accepting the lessee‘s offer and must also
      provide the lessee an opportunity to review the disclosed information and amend
      the lease offer, says NAR.

9Q.   How will the testing period work?

A.    The regulations do not prescribe any particular method of satisfying this
      requirement, but they allow the potential purchaser and seller to include in the
      sales contract home inspection contingency language similar to that already in
      common use. The only specific requirement is that the purchaser must be given
      up to 10 days to have the testing done. The purchaser can demand on
      opportunity to test even if the seller has already had the property tested. The
      parties can agree, in writing, to a longer or shorter time frame, says NAR.

      The contingency language may provide the purchaser with the right to cancel the
      contract if test results show unacceptable amounts of lead in the home. The
      contingency language may also provide the seller the right to remove the lead
      and correct the problem, thus binding the purchaser to the contract, says NAR.

      The purchaser can also simply waive the right to test, as long as it is in writing.
      Although there is no mandatory federal contingency language, the regulations
      include a suggested format. The parties are free to create other contingencies
      concerning such matters as the starting and ending time for testing, each party‘s
      responsibilities if lead is found, and the disposition of earnest money, says NAR.

10Q. Will buyer’s brokers be required to comply with the regulations?

A.    The regulations define agent as ―any party who enters into a contract with a
      seller or lessor, including any party who enters into a contract with a
      representative of the seller or lessor for the purpose of selling or leasing target
      housing.‖ This means that listing salespeople, selling salespeople, and buyer‘s
      brokers (if paid by the seller through a cooperative brokerage agreement with the
      listing salesperson) are ―agents‖ and are responsible for ensuring compliance
      under the rule.

      Buyer‘s brokers who are compensated solely by the buyer are exempt from the
      regulations, says NAR.




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11Q. How will the federal regulations affect the need to comply with state or
     local lead disclosure law?

A.    Although the federal government can‘t delegate the enforcement of the federal
      lead-based paint law to the states, the EPA and HUD have tried to avoid
      duplication and to allow for the incorporation of the federal requirements into
      existing state laws, says NAR.

      State law already requires use of a lead disclosure pamphlet, the state may apply
      to the EPA for approval to have that document used in lieu of the federal
      pamphlet. However, compliance with the federal law does not eliminate any
      obligations of sellers, lessors, or salespeople to comply with state or local lead-
      based paint disclosure, testing or remediation requirements.

12Q. Will the failure to comply give the purchaser or lessee the right to void the
     sales or lease transaction?

A.    No, says NAR. Bother the federal law and regulations expressly provide that
      noncompliance cannot be used to void or nullify the contract after ratification and
      cannot void any transfer of real estate.

13Q. Where can I get copies of the regulation and the information pamphlet that
     must be given to buyers and renters of pre-1978 dwellings?

A.    Call the National Lead Information Center at 800-424-LEAD. The website is
      www.epa.gov/lead/lead.

14Q. Whom can I contact for technical advice on complying with the
     regulations?

A.    Call HUD or the EPA.

4.    HUD/EPA Lead-Based Paint Disclosure Regulations
The Residential Lead-Based Paint Hazard Reduction Act of 1992 (Title X of Public Law
102-550) directed the U.S. Environmental Protection Agency and the Department of
Housing and Urban Development to jointly issue regulations requiring disclosure of
certain information about lead-based paint and lead-based hazards in residential real
estate transactions.

NAR has developed a publication describing the requirements of the Regulations and
how to comply with them entitled, Lead-Based Paint – A Guide to Complying with the
New Federal EPA/HUD Disclosure Regulations.



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5.    Properties to which the Requirements Apply
The Regulations apply to sale or lease transactions of ―target housing‖, that is,
residential property completed before 1978, with certain exceptions:

            Sales at foreclosure
            Leases of property which has been inspected and found to be lead-based
             paint free by an inspector certified by a Federal or Federally accredited
             State or tribal certification program
            Short term leases of 100 days or less where no lease renewal or
             extension can occur
            Renewal of existing leases, so long as no new information about lead-
             based paint on the premises has come into the possession of the owner,
             and the required information was disclosed when the lease was originally
             created. (In the case of leases which automatically convert to ―month to
             month‖ after a expiration of a fixed term, disclosure must be made when
             the lease first converts (if not made at the time the lease was created, but
             not each month thereafter)
            O-bedroom dwellings
            Housing designed for the elderly or disabled, but only if no children under
             the age of 6 reside or are expected to reside in such housing

Housing completed before 1978 has been interpreted to mean not only that which was
completed and/or occupied before January 1, 1978, but also that for which a building
permit was issued before that date, or if no permit was required, where construction
began before that date.

6.    Effective Date
The effective date of the Regulations is September 6, 1996, for owners of 5 residential
dwellings (apartment or condominium units, as well as townhouses or single-family
homes) and December 6, 1996, for owners for fewer than 5 dwellings.

HUD has announced in Mortgagee Letter 96-29 that the form presently required to be
signed in the case of properties financed by FHA-insured mortgage loans will not be
required after December 6, 1996.

7.    Obligation of Sellers, Lessors and Real Estate Agents

Sellers and Lessors of housing to which the regulations apply must provide the
information and perform the other duties described below to purchasers/lessees. Any
agent hired by a seller or lessor to market the property must insure the seller or lessor‘s
compliance with the requirements of the Regulations.


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The agent must specifically inform the seller/lessor of his disclosure obligations,
described below. The purchaser or lessee must be provided the following:

             All information the seller or lessor may have regarding known lead-based
              paint or lead-based paint hazards on the property
             Copies of any prior reports of testing for lead-based paint or lead-based
              paint hazard evaluation of the property
             A copy of the EPA publication Protect Your Family from Lead in Your
              Home, or a federally-approved equivalent publication
             Sales contracts and leases must include specific lead-based paint warning
              language, which is specifically prescribed in the Regulations.
             A Disclosure and Acknowledgement statement confirming that the
              disclosures have been made, signed by bother parties to the transaction
              and the broker/s involved, must be included as a part of the contract for
              sale or lease
             Property purchasers (but not renters) must be provided an opportunity to
              have the property tested for lead-based paint or lead-based paint hazards
              during a ten day period prior to the time when the purchaser becomes
              obligated under the contract, although that period may be modified by
              agreement between the seller and purchaser, or waived by the purchaser
              entirely
             If the purchaser or lessee makes and offer to buy or lease prior to
              receiving the required disclosures, the seller or lessor may not accept the
              offer until the information is provided and the purchaser or lessee has the
              opportunity to review it and, if desired, to change the terms of the offer
             Sellers, lessors and their agents have no duty to conduct testing of the
              property for lead-based paint of lead-based paint hazards. Their only
              obligation is to provide known information, as described above, regarding
              lead-based paint or lead-based paint hazards on the premises
             Copies of EPA‘s publication Protect Your Family from Lead in Your Home
              may be purchased by calling 800-424-LEAD or on the EPA website
              www.epa.gov. The publication is also available on NAR‘s Website at
              www.realtor.org and the EPA website www.epa.gov and HUD website
              www.hud.gov, as well as the website of the National Safety Council
              www.nsc.org.

8.     Who is an Agent?
The regulations define an agent as any party who enters into a contract with a seller or
lessor, including any part who enters into a contract with a representative of the seller or
lessor, for the purpose of selling or leasing a property…to which the regulations apply.
The duty of an agent to insure the seller‘s or lessor‘s compliance with these disclosure
requirements is imposed on any agent hired by the seller or lessor to market the
property, including both listing agents and selling agents (whether they are buyer‘s

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agents, subagents, or it would appear, facilitators or transaction brokers), and excludes
only agents retained and compensated exclusively by the buyer.

9.     The Ten Day Testing Period
Although the Regulations do not explicitly so provide, EPA and HUD have indicated that
they intend that they intend that the 10-day testing period be conducted much like home
inspection contingencies operate. That is, pursuant to language incorporated in the
sales contract, the purchaser is permitted conduct such lead-based paint testing or risk
assessment as he deems appropriate and, if the results are unacceptable, can seek the
seller‘s correction of the problem, void the contract or exercise such other rights as are
provided in the contract. The length or other terms and conditions of the testing
hazards are identified, are matters for negotiation and agreement by the parties. In
particular, they may agree to a longer or shorter period for testing or no testing period at
all. EPA is in the process of establishing a lead-based paint contractor training and
certification program, also as required by Title X, to train and certify those who perform
lead-based paint inspection, risk assessment and abatement activities. Until that
process is in operation, however, lead-based paint activities need not be performed by
certified contractors unless required by state or local law.

10.    State and Local Requirements
Compliance with these Regulations does not eliminate the need to satisfy any other
applicable requirements of state or local law relating to lead-based paint. It is important
to recognize that this may include common law duties to disclose known material facts,
though compliance with the Regulations will probably result in the disclosure of all such
facts relating to lead-based paint.

11.    Penalties
Substantial penalties may be imposed on sellers, lessors and their agents for non-
compliance: fines of up to $10,000 and civil liability of three times the damages suffered
by an injured purchaser/lessee. EPA has announced, however, that in the first year
following the effective dates their enforcement focus will be on compliance assistance,
and they will pursue civil penalty actions only in response to egregious violations which
put the public at risk.

12.    Record Keeping Requirements
The seller or lessor, and any agent employed to market the property, must retain a copy
of the disclosure and acknowledgment statement included as a part of the contract for
three years from the date of completion of the sale or commencement of the lease.




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13.    Supplement to Lead-Based Paint: A Guide to Compliance
Guidance documents issued by HUD and EPA on August 20, and December 5, 1996,
concerning the Title X Regulations, as well s a letter issued to NAR directly, address
and resolve a number of issues raised by the Regulations. Certain other issues remain
uncertain. The following information supplements that in the NAR publication entitled
Lead-Based Paint: A Guide to Complying with the New Federal EPA/HUD Disclosure
Regulations.

14.   Resolved Issues
       Seller’s Right to Refuse to Have Testing/Risk Assessment Performed

HUD/EPA have now addressed, in a letter to NAR, the important question of whether a
seller may reject an offer to purchase in which the purchaser seeks to pursue the 10-
day opportunity to perform lead-based paint inspection or risk assessment, as provided
in the Regulations. The letter advises that ―the seller is required to provide a potential
purchaser becomes obligated under a contract to purchase target housing,‖ and may
not ―offer or advertise property as being available only if purchasers will not take
advantage of the opportunity to conduct an inspection or risk assessment.

The EPA/HUD goes on to point out, however, that that purchaser is ―entitled‖ to a period
of 10 days to perform such testing but may agree to a different period or may agree to
waive that testing opportunity completely. The seller is not required to pay for testing or
risk assessment.

The letter also addresses an important related issue: whether a seller must also agree
to a ―contingency‖ that permits a purchaser to cancel the sales contract if the results of
lead-based paint testing or risk assessment are unacceptable. On that issue, HUD and
EPA have advised that ―the regulation provided broad flexibility for buyers and sellers to
develop mechanisms for providing the opportunity for inspection or risk assessment…‖
The letter goes on to indicate explicitly that where a ―seller wishes to require a buyer to
honor the other terms of the contract regardless of the outcome of a lead-based paint
inspection or risk assessment, such a clause must be included in the contract language,
and such a procedure is acceptable to HUD and EPA because the rule only covers the
opportunity to obtain an inspection or risk assessment.‖

In short, while the seller and purchaser may negotiate regarding the lead-based paint
testing or risk assessment provisions in the contract, the seller may not refuse the
purchaser opportunity to test. The protocol preferred by HUD and EPA is that sales
contract provide the purchaser the right to cancel the contract if the test results are
unfavorable, but the seller may insist that the purchaser not retain that right and may
decline to agree to give the purchaser that right.



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                                 Date of Construction

Housing constructed before 1978 means not only that which was completed and/or
occupied before January 1, 1978, but also that for which a building permit was issued
before that date, or if no permit was required, where construction began before that
date. The Guidance issued by HUD/EPA does not directly address the question of the
agent‘s obligation to seek out information establishing the construction date of the
premises, or the extent to which the agent may rely on the seller‘s representation of that
date. The provision of the Regulations that holds an agent not liable for failing to
disclose information about lead-based paint or hazards known to but not provided by
the seller or lessor suggestions, by analogy, that the seller or lessor regarding the
construction date of the property.

                    Mobile/Manufactured Housing & Timeshares

The Regulations apply to mobile homes and manufactured housing even if it is known
or believed not to contained any paint (lead-based or otherwise) whatsoever. The
Regulations also apply to the sale or lease of timeshare units that are ―target housing‖
unless an exception (such as the exception for non-renewable leases of 100 days or
less) applies.

                   Disclosure by Seller of Lessor Representatives

A seller or lessor may authorize an agent, such as a property management agent, to
fulfill the seller‘s or lessor‘s disclosure responsibilities under the Regulations. This
includes providing any information known to the seller, lessor or agent about lead-based
paint or lead-based paint hazards on the premises, an execution of the disclosure
acknowledgement form. Such action by an authorized agent binds the lessor and the
lessor is responsible for any failure of the agent to provide all required information.

                Photocopies of Disclosure Acknowledgement Form

It is permissible to provide purchasers or lessees with a photocopy of the disclosure
form executed by lessor or seller. It is not necessary to provide to a purchaser or
lessee a form bearing the original signature or the seller or lessor.

                          Oral and Month-to-Month Leases

The Regulations apply to oral as well as written leases. The Regulations apply to the
creation of a month-to-month tenancy which automatically follows the expiration of a
stated lease term. The Regulations need not be fulfilled if any terms and conditions of
the lease are changed or if new information about lead-based paint or lead-based paint
or lead-based paint hazards comes into the possession of the owner of the property.



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                                    Common Areas

Sellers/lessors in multi-unit buildings must disclose what they know about lead-based
paint in common areas (hallways, lobbies, etc.). This includes providing test reports in
the possession of the owner describing the results of an examination of common areas,
as well as test results of building-wide evaluations even if the report does not include a
specific evaluation of the unit being leased.

The disclosure responsibilities of the Regulations are placed on the seller/lessor of
individual units of condominiums or cooperatives, rather than on the condominium
association or co-op corporation. That duty applies both with respect to information
about lead-based paint or lead-based paint hazards in the individual unit being offered
for sale or lease as well such information about the common areas. Thus, unit owners
should obtain from the association or corporation and disclose any available information
about known lead-based paint or lead-based paint hazards in common areas. Of
course, in the case where a unit being sold or leased is in fact owned by the association
or corporation, the disclosure responsibilities rest with the owner – the association or
corporation.

                               Rehabilitated Properties

HUD/EPA have indicated that they will consider amending the Regulation to exempt
residential properties from the requirements if all interior and exterior surfaces painted
prior to December 31, 1977, have been removed and replaced after that date. Unless
and until such an amendment is issued, however, no such exemption applies.

                      Lessee Refusing to Sign Disclosure Form

The Guidance issued by HUD/EPA indicates that where a lessee refuses to accept the
disclosure materials (EPA pamphlet and information about known lead-based paint or
hazards), or sign the disclosure acknowledgment form, the lessor may deliver these
materials by certified mail, return receipt requested. The lessor may also certify in
writing that a signed and dated disclosure acknowledgment form could not be obtained
due to the lessee‘s refusal. The receipt and written certification should be retained with
the lessor‘s executed disclosure acknowledgment form.

                                   Lead-Based Paint

It is vitally important to distinguish between the mere presence of lead-based paint and
lead-based hazards. The former may not present a current danger to occupants and
thus not require remedial or other action except monitoring the condition of the lead-
based paint. The latter is, by definition, hazardous and requires corrective action of
some kind, depending on the nature and extent of the problem. Similarly, there is an
important distinction between lead-based paint inspection and lead-based paint risk
assessment. The former is an examination for the presence of lead-based paint, while
the latter often involves not only a determination of whether lead-based paint is present
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but also an evaluation of the extent of the hazard, if any, presented by such paint. The
degree of hazard often depends on the particular location/s of the lead-based paint and
its condition.

15.   Unresolved Issues
                     Seller’s Acceptance of Offer Contingent on
                    Purchaser’s Receipt of Required Documents

The Regulations provide that where a seller or lessor makes the required disclosures
after the purchaser or lessor makes the required disclosures after the purchaser of
lessee has made an offer to purchase or lease, the seller or lessor may not accept that
offer until all disclosures are completed and the purchaser or lessee has an opportunity
to review the information provided and amend the offer, if desired. HUD/EPA has been
asked to confirm in writing that a seller or lessor who receives an offer before the
disclosures are completed may accept the offer contingent on (1) the purchaser or
lessee receiving the information which must be disclosed, and (2) the purchaser or
lessee retaining the right to modify or revoke the offer based on information revealed in
the disclosure materials.

                                        Auctions

HUD/EPA has provided minimal guidance on the handling to target housing sold at
auction. That advice indicates only that where a ―due diligence‖ period precedes the
auction a seller ―may give potential buyers any information on lead-based paint, allow
lead-based paint inspections, and otherwise comply with this rule.‖ NAR has requested
specific clarification of the seller‘s mandatory obligations under the Regulations.
Based on the advice provided NAR regarding the ―purchaser‘s right to test‖ issue, it
would appear that properties may be sold at auction subject to the purchaser‘s right to
have an inspection or risk assessment performed without the purchaser also having the
right to void the transaction if the inspection or assessment results are unacceptable.
That result would appear to allow auctions to be conducted effectively notwithstanding
the purchaser‘s right to test the property for lead-based paint or hazards.

                           Transaction Brokers/Facilitators

While the Regulations do not expressly address whether the Regulations apply to listing
or cooperating brokers action and ―transaction brokers‖ or ―facilitators,‖ that is, brokers
who do not have a common law or statutory agency relationship, it would appear that
such licensees are covered. EPA has been asked to provide further specific advice on
the issue as well.




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K.    WOOD DESTROYING INSECT DISCLOSURE
In 1996, the Structural Pest Control Commission approved the revised Wood Destroying
Insect Report (WDIR) and guidelines for its completion. A copy of the form is included
in this section.

1.    Information and Conditions

      a.     This report is based on observations and opinions of a Pest Control
             Operator (PCO) inspector. It must be noted that all buildings have
             structural members that are not visible or accessible for inspection. It is
             not always possible to determine the presence of infestation and/or
             damage without dismantling parts of the structure being inspected.

      b.     All inspections are made for wood destroying insects only and not leaks,
             rot or any other structural problems.

      c.     In the event the inspector reports no evidence of termites or other wood
             destroying insects in any portion of the building inspected, the inspector
             does not assume any responsibility for a condition that may exist or may
             be starting and was not visible to the representative at the time of this
             inspection. This disclaimer is necessary due to the fact that the
             inspections have been made only on accessible areas of the building and
             the possibility of infestation and/or damage exists in areas that are
             inaccessible for inspection. Due to the biology and habits of termites and
             other wood destroying insects, it is possible that infestation and/or
             damage may become visible at any time subsequent to this inspection.

      d.     All inspections and reports will be made on the basis of what is visible and
             the PCO will not render opinions covering areas that are enclosed or
             inaccessible areas of finished rooms, areas concealed by wall coverings,
             floor coverings, furniture, equipment, stored articles in attics or any portion
             of the structure in which inspection would necessitate tearing out or
             marring of finished work. The PCO does not move furniture, appliances,
             equipment, carpet tile, interior or wall coverings.

      e.     If any visible damage has been reported, the PCO does not intend for this
             inspection to determine whether or not this damage should be replaced. A
             qualified individual should be called to ascertain the soundness of these
             damaged members and the building.

      f.     If there is evidence of active infestation or past infestation of termites
             and/or other wood destroying insects, it must be assumed that there is
             some damage to the building caused by this infestation, even if the
             damage is not visible to the inspector as of the date of the inspection.
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      g.     This instrument shall carry a guarantee that the property inspected will be
             treated without charge should an infestation of wood destroying insects
             covered by this report be found within 90 days of the date of issuance as
             required by Title 7, Part XXV, Chapter 141, Section 14116 (B) of the
             Structural Pest Control regulations.

      h.     No cause for action or claim for damages shall be filed in a court of law
             until an inspection of the property has been made by an inspector of the
             Louisiana Structural Pest Control Commission to verify the fact that an
             infestation of wood destroying insects specified in this report has been
             confirmed.

2.    Terms and Definitions
      a.     ―Qualified Inspector‖ is a licensed pest control operator (PCO) or
             registered employee working under his supervision who has had training
             in wood destroying insect inspection procedures (being a Qualified
             Inspector does not indicate not include the ability to determine damage
             beyond that which is visible to the human eye).

      b.     ―Accessible Area‖ is one that an individual can physically enter and
             examine.

      c.     ―Hidden Damage‖ is damage that cannot be seen without defacing a
             surface to reveal such damage.

      e.     ―Non-Accessible Area‖ is one that cannot be reached physically with
             hands nor see with the human eye. Examples of non-accessible areas
             are ceiling joists, studs and other timbers between walls, areas behind
             solid structures such as planter boxes, masonry steps, porches, and
             chimneys and floors under attached floor coverings and immovable
             furniture.

      e.     ―Visual Inspection‖ applies to an area that an individual can physically see.

      f.     ―Defacing‖ is the removal of any surface to determine a condition that is
             not visible on the surface to the naked eye. (Since the termite inspector is
             not an owner of the structure he/she is inspecting, no defacing will be
             done except with the written instruction from the proper authority.

      g.     ―Evidence‖ is defined as present and plainly visible signs of active or
             inactive infestation.



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      h.     ―Arial Infestation‖ is the presence of a colony of subterranean termites
             (retuculiterme, heteroterms and coptotermes) which remain active free of
             visible soil contact.

      i.     ―Sounding‖ is the act of tapping a substance with a solid instrument such
             as a hammer, mallet, etc., in an effort to determine whether or not the
             substance is solid/sound (sounding will not divulge the presence of active
             termites and is not applicable in determining hidden damage).

3.    Species Which May Infest Wood
      a.     Native Subterranean Termites

A colony of subterranean termites is composed of queen, king, solider, workers and
reproducers, which may swarm each year. This colony may consist of up to 60,000
insects or more. They build mud tunnels from soil to wood. They feed on the sapwood,
taking mud with them to control temperature and moisture. They are soft, white-bodied
insects and must have moisture to live. Although subterranean in nature, these termites
may remain active when free of soil contact as long as enough moisture is present to
support an infestation. If ground contact is broken they may get moisture from leaks in
roof or plumbing pipes. These insects cause heavy damage to wood. When inspecting
for subterranean termites, your inspector will look for the mud tunnels these termites
build into a building. However, they can build their tunnels inside walls or piers where
they cannot always be found.

      b.     Formosan Subterranean Termites

The Formosan termite is more aggressive and can live on very little moisture. A colony
may exceed 250,000 insects and can damage wood much faster than our native
subterranean termites. This colony is also composed of a king and queen with the
workers and soldiers also present. The habits of the Formosan termites are very similar
to those of our native subterranean termites. They will damage a structure faster than
any other termite. These insects aggressively take advantage of structural defects such
as faulty plumbing, leaks, and dampness from drains, condensation or leaks from the
roof, etc.

      c.     Drywood Termites

A colony of drywood termites is made up of a queen, king, soldier, nymphs and
reproductives, which may swarm each year. They live in dry solid wood without
moisture and no ground contact. They cavities where they feed are cleaned and
polished and contain the drippings which are tiny pellets (frass). Their exit holes are
hard to locate. Therefore, it is very difficult for an inspector to find an infestation of
drywood termites, because there will be no visible evidence of their presence.


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       d.     Powder Post Beetles

There are several species of small beetles. The female lay eggs on the surface of the
wood or in cracks or crevices. The larva feed on wood and grow for one year or more
before emerging as adults. They make small exit holes from 1/32‖ to 1/8‖ in diameter.
An active infestation can be determined when powder droppings (frass) appear as
adults emerge. It is impossible to determine if any infestation exists until powder
appears and adult beetles are visible. It should be noted that an absence of physical
frass does not always indicate an absence of active infestation.

       e.     Old House Borer

This beetle attacks such wood as pine and fir. The female lays eggs on the surface of
the wood in cracks and crevices. The larvae continue to feed and grow for 5 to 12
years before emerging as adults. The emergence of holes are oval and about ¼‖ in
diameter. Infestations of these beetles are very difficult to locate since visible evidence
may not be present until 5 to 10 years later.

       f.     Carpenter Ants

These insects do not fee on wood. They usually cut out cavities in rotting wood for
nesting purposes. They can cause damage and may move into sound wood as the
colony matures.




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           4.        Wood Destroying Report
                                                                WOOD DESTROYING INSECT REPORT
                    LOUISIANA DEPARTMENT OF AGRICULTURE & FORESTRY

                    BOB ODOM, COMMISSIONER

                    Agriculture & Environmental Sciences, P.O. Box 91081, Baton Rouge, LA 70821-9081, (225) 925-4578, FAX (225) 925-3760



PLEASE TYPE
NAME                                                  OF                                                    FIRM:      REPORT              FOR        THE     MONTH       OF:
                    WOOD DESTROYING INSECT REPORT
ADDRESS:
                                                                                                                       PAGE                      OF
NO.    CODE                                       NAME AND ADDRESS                                                   ADDRESS OF PROPERTY                 DATE OF    CHECK IF
                                                   OF SELLER/BUYER                                                        INSPECTED                    INSPECTION   TREATED




The fee schedule is $6.00 per inspection.

I hereby certify that the above listed properties represent all properties that one of my registered technicians or myself has inspected for
wood destroying insects during the above named month. Attached hereto is a check in the amount shown below for fees due on the
number of wood destroying inspections made and listed on this report. Failure to make this payment subjects the licensee to penalties
that may be imposed by the Structural Pest Control Commission.




CODE: CONSTRUCTION TYPE                                                                                     NUMBER                         OF               INSPECTIONS


S – SLAB        P – PIER     S/P – SLAB PIER               O – OTHER


SIGNATURE OF LICENSEE                                                                                       LICENSEE                                           NUMBER




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5.     Formosan Termites
Formosan Termite Initiative

The Formosan Termite Initiative Act is designed to suppress and control the Formosan
termite in the state administered by the Commissioner of the Department of Agriculture.

One authority granted to the Commissioner through this Act is the Commissioner may
declare and enforce quarantines of any infested structure, premise or regulated article
in any parish when necessary, to prevent the spread of termites. The declaration must
contain a statement of the facts, geographical area, the date it is to being and objectives
of the quarantine. It requires that the quarantine be published within five working days
in the state journal and in the next available Louisiana Register. If the quarantine is not
published, the quarantine will expire in 21 days. The Commissioner may life the
quarantine, by publishing in the same manner as required for declaration.

The Commissioner is allowed to designate areas as Formosan termite suppression
zones. The Commissioner must define the geographic limits of the zone, establish the
effective date and state the nature of the treatment, control or suppression program. It
requires that the quarantine be published within five working days in the state journal
and in the next available Louisiana Register. If the quarantine is not published, the
quarantine will expire in 21 days. The Commissioner may lift the quarantine, by
publishing in the same manner as required for declaration.

The Commissioner is allowed to enter any dwelling, building, structure, premises or
other property in the state with reasonable notice, during reasonable hours and with the
consent of the owner. If denied entry, the Commissioner may apply to the proper court
for an order authorizing entry.

The Commissioner may impose civil penalties for violations. The fines may not exceed
$5,000. They may be imposed only based on adjudication, following an adjudicatory
hearing held in accordance with the Administrative Procedures Act.

L.     NEW HOME WARRANTY ACT
The New Home Warranty Act provides by statute certain home warranties on new
construction whether or not building code regulations are in effect or violated. La. R.S.
9:3142 et seq. The New Home Warranty Act defines ―builder‖ as a person, corporation,
partnership, limited liability company and joint venture who constructs a home or
addition thereto, including a home initially occupied by the builder as his residence.

The builder must warrant the following to an owner.


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      1)     One year following the warranty commencement date, the home will be
             free from any defect due to noncompliance with the building standards or
             due to other defects in materials or workmanship not regulated by building
             standards.

      2)     Two years following the warranty commencement date, the plumbing,
             electrical, heating, cooling, and ventilating systems exclusive of any
             appliance, fixture, and equipment will be free from any defect due to
             noncompliance with the building standards or due to other defects in
             materials or workmanship not regulated by building standards.

      3)     Five years following the warranty commencement date, the home will be
             free from major structural defects due to noncompliance with the building
             standards or due to other defects in materials or workmanship not
             regulated by building standards.

Excluded from the warranty, unless otherwise agreed to in writing by the owner and the
builder are certain items listed in the statute including:

      1)     Fences, landscaping;

      2)     Concrete floor of an attached or unattached garage that is built separate
             from the foundation;

      3)     Any loss or action which the owner has not taken timely action to
             minimize; and

      4)     Mold.

M.    AS/IS REDHIBITION
The term ―as is‖ in a Purchase Agreement or Act of Sale is also often misused when the
seller actually intends the purchaser to waive redhibitory defects. An "as-is" clause
included in purchase agreements notifies the purchaser that the property being sold is
not in perfect condition and that generally the seller does not intend to correct or fix
these defects.

Waiver of rehibition is different than selling a property ―as is‖. Under Louisiana law, a
seller generally warrants that the property sold is free of hidden or non-apparent
defects. The existence of a redhibitory defect gives to the purchaser the right to avoid
the sale on account of some vice or defect in the property sold, which renders the
property either absolutely useless, or the property‘s use so inconvenient and imperfect
that the purchaser would not have purchased the property had seller known of the
defect.


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The seller can limit the implied warranty against redhibitory defects by including in the
Purchase Agreement and Act of Sale a waiver of the warranty against redhibition. To
be effective, the waiver of warranty against redhibitory defects must satisfy three
requirements:

      (1)    be written in clear and unambiguous terms;
      (2)    be contained in the contract signed by purchaser and seller; and
      (3)    either be brought to attention of purchaser or explained to him.

A seller with knowledge of a redhibitory defect who, rather than informing the purchaser
of the defect, attempts to obtain a waiver of the warranty implied by law, commits fraud,
which nullifies the wavier because it is not made in good faith.

Waiver of any warranty of the seller, such as the warranty of redhibition or including the
―as is‖ sale language as a term of sale, must be included in the contract between the
purchaser and seller to be effective. The contract between the purchaser and seller is
generally the Purchase Agreement or Act of Sale. Usually the Property Disclosure
Document, which is required to be completed by the seller regarding the condition of the
property, is not a contract between the purchaser and seller because it is not signed
and agreed to by the purchaser. Thus an indication of the term of sale ―as is‖ on the
Property Disclosure Document is not generally sufficient to waive any warranty from the
seller or to waive redhibition.

N.    PSYCHOLOGICALLY IMPACTED PROPERTY
The Louisiana license law contains a specific provision regarding psychologically
impacted property. La. R.S. 37:1468 provides:

      The fact or suspicion that a property might be or is psychologically
      impacted, such impact being a result of facts or suspicions, including but
      not limited to:

      That an occupant of real property is, or was at any time suspected to be,
      infected, or has been infected with Human Immuno-deficiency Virus or
      diagnosed with Acquired Immune Deficiency Syndrome, or any other
      disease which has been determined by medical evidence to be highly
      unlikely to be transmitted through the occupancy of a dwelling place; or

      That the property was, or was at any time suspected to have been, the
      site of a homicide, or other felony, or a suicide; is not a material fact or
      material defect regarding the condition of real estate that must be
      disclosed in a real estate transaction.

      No cause of action shall arise against an owner of real estate or his or her
      agent for the failure to disclose to the transferee that the transferred
      property was psychologically impacted as defined in Section A.
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Pursuant to this statute, a real estate agent‘s failure to disclose that a property was
psychologically impacted as set forth in this statute shall not create a cause of action
against the real estate agent.

O.    HOMEOWNERS’ INSURANCE
1.    Louisiana Citizen’s Property Insurance Corporation
The Louisiana Citizen‘s Property Insurance Corporation was established in accordance
with the Louisiana law to operate certain insurance programs exclusively as residential
market mechanisms to provide essential property insurance for residential and
commercial property in the state. This program is for applicants who are, in good faith,
unable to procure insurance through the voluntary insurance market.

Generally, any person having an insurable interest in property is entitled to apply for
coverage through this plan. Forms are available for application for coverage through
the Department of Insurance at www.ldi.state.la.us. The rates for this program are
available as filed with the Louisiana Insurance Rating Commission. If an application is
denied or is not acted on timely within the limits prescribed by the plan, the applicant
may appeal this denial to the Louisiana Insurance Rating Commission.

2.    Comprehensive Loss Underwriting Exchange (“CLUE”)

Clue is an acronym for Comprehensive Loss Underwriting Exchange. CLUE reports are
used by the insurance industry are a type of underwriting loss history report provided by
Choice Point. These types of reports are used to verify the accuracy of the applicant‘s
prior loss information on an application. Information regarding an individual‘s CLUE
report can be obtained from the Choice Point website www.ChoiceTrust.com.
Additional information and other reporting is also available through automated property
loss underwriting system (A-+) at www.iso.com. The CLUE reports are taken from a
national insurance industry database which contains more than $40,000,000.00 in
personal property claims. The CLUE report includes all claims reported to an insurance
company for a given property over a five year period. Only business or individuals who
have a permissible purpose can access CLUE reports as they are regarded as
consumer reports as defined by the Federal Credit Reporting Act. A consumer is
entitled to obtain a copy of their own report. See FCRA 15 USC §1681(g). Further, if
adverse underwriting decision is based on information from this report the consumer is
entitled to a free copy of the consumer report directly from the reporting agency. See
FCRA – 15 USC §1681(m). The insurer must provide the name, address and telephone
number of the reporting agency.

Additional information regarding CLUE and other types of report is available on the NAR
website www.realtor.org



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XIII. PROPERTY TAXES
Property Taxes
      Frequently Asked Questions and Answers
      Important Dates for Property Owners
      Homestead Exemption
             Homestead Exemption
             Questions and Answers
             On-line database




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PROPERTY TAXES
A.    FREQUENTLY ASKED QUESTIONS AND ANSWERS
1Q.   What does the assessor do?

A.    The Louisiana Constitution requires the assessor to list a place of value on all
      property that is subject to ad valorem taxes. Ad valorem means ―according to
      value‖. The value that the assessor determines is called ―assessed value‖ and is
      a percentage of fair market value or use value as prescribed by law.

2Q.   What is fair market price?

A.    Fair market value is defined by Louisiana Revised Statute 47:2321 as ―the price
      for property which would be agreed upon between a willing and informed buyer
      and a willing and informed seller under usual and ordinary circumstances; it shall
      be the highest price estimated in terms of money which property will bring if
      exposed for sale on the open market‖ for a reasonable time.

3Q.   How is your assessment determined?

A.    First, the assessor arrives at a fair market value by using one of three nationally
      recognized appraisal methods: cost, income, or market. To do this, he must
      constantly gather information on sales and other data, which affected property
      value. He must know what ―willing sellers‖ and ―willing buyers‖ are doing in the
      marketplace and what the current cost of construction is in the parish. He must
      also be aware of any changes in zoning , financing and economic conditions that
      may affect property values. All the data he collects is then correlated into a final
      value estimate by the appraiser. Next, the assessed value is calculated as a
      percentage of the market value as provided by law.

      Property is assessed as follows:

      Land:                      10% of ―fair market value‖

      Residential Improvement: 10% of ―fair market value‖

      Commercial:                15% of ―fair market value‖

NOTE: Commercial land is assessed at 10% of ―fair market value‖ and the Louisiana
Tax Commission assesses all public service properties.




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4Q.   How are taxes calculated?

A.    Taxes are calculated by multiplying the assessed value by the tax rate set by
      various millages, bond rates, and fees voted on by registered voters in the
      different districts established by the legislature or constitution. If the property is
      your home, you may deduct a maximum of $7500.00 from the total assessed
      value under the Homestead Exemption before finding the taxable assessed
      value.

For example, if your home is valued at $100,000 and assessed at 10% or $10,000, and
you are eligible and have signed for homestead exemption, you would calculate your
taxes as follows:

10,000 (Assessed value)
-7,500 (Homestead Exemption)
 2,500 (Taxable assessed value)
   .180 X (Assumed tax rate)
$450.00 (Total Parish Tax Rate)

NOTE: The example is for parish taxes only.

Homestead Exemption does not apply to city taxes or ―extra‖ fees.

5Q.   What is the Homestead Exemption?

A.    The homestead exemption is a tax exemption on the first $75,000 of the value of
      a person‘s home. The value of your home is exempt up to $75,000 from state
      and parish property taxes. The exemption applies to all homeowners. If your
      home is worth $70,000, you are fully exempt from the payment of property taxes.
      If it is worth $90,000, you are exempt on your first $75,000 of value; and you pay
      taxes only on the remaining $15,000 of value. If your home is worth $200,000,
      you are exempt on the first $75,000 of value; and you pay taxes on the remaining
      $125,000 of value.

6Q.   When and how do I file for my Homestead Exemption?

A.    After you got to your Act of Sale, your attorney or notary will file your act in the
      Conveyance Office of the Clerk of Court in the parish where the property is
      located. A short time later you will receive a recorded copy of your title along
      with the recordation numbers, the Conveyance Office Book and page number
      (known as the C.O.B. and Folio) and the instrument number. After you receive
      the recorded copy of your sale, bring it to the C.O.B and Folio number to the
      Assessor‘s Office and file for your homestead exemption on or prior to November
      15 of any given year. You must own and occupy the property to qualify for the
      homestead exemption. The property owner must come into the Assessor‘s office
      personally to file for the exemption.
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7Q.   Must I file for the Homestead Exemption every year?

A.    Initially you must file for the Homestead Exemption in person. Each year there
      after, you will receive a renewal card in the mail. As long as you still own and
      occupy that same property as your residence, simply return the card to this
      office, and your homestead exemption will automatically be renewed for the
      following year. If you sell that property and move to another location, you must
      again appear in person at the Assessor‘s office to file a new homestead
      exemption for your new home.

8Q.   Where do I pay my property tax bill?

A.    The Assessor‘s office values real estate and personal property in your parish for
      property tax purposes. This office does not collect property taxes. The Sheriff
      and Tax Collector send your property tax bill to you at the end of each year. Any
      inquiries concerning your property tax bill should be made to the office of the
      Sheriff and Tax Collector. If you have a question regarding your property
      assessment, you should contact the local parish Assessor‘s Office.

B.    IMPORTANT DATES FOR PROPERTY OWNERS
January 1st – June 30th                      Property is assessed as to ownership
                                             during this time. Self-reporting forms for
                                             business and personal property are to be
                                             filed.

August 15th                                  Assessment books cannot be opened for
                                             taxpayers before this date.

September 15th                               Deadline    for   open   inspection   for
                                             correctness of assessment by taxpayers.

November 15th                                Tax roll must be filed by this date; tax
                                             notice usually mailed shortly thereafter.
                                             Homestead Exemptions must be filed.

December 31st                                Property taxes are due and payable by this
                                             date and become delinquent thereafter.

*Dates and procedures slightly vary on a parish by parish basis especially in Orleans
Parish. It is recommended that you contact your parish assessor‘s office to get more
accurate information.



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C.    WEBSITES FOR SOME PARISH ASSESSORS

      East Baton Rouge Parish

      http://www.ebrpa.org/index.htm

      West Baton Rouge

      http://www.wbrassessor.org/

      Jefferson Parish

      http://www.jpassessor.com/

      Caddo Parish

      http://www.caddoassessor.org/

      St. Tammany Parish

      http://www.stassessor.org/

D.    HOMESTEAD EXEMPTION
1.    Homestead Exemption
On January 1, 2005, the Amendment to Section 20(A) of Article VII of the Constitution of
Louisiana was effective (―Homestead Amendment‖). This Homestead Amendment
clarified existing practices regarding the homestead exemption from ad valorem
property taxes. Since this is a new law, the Courts have not interpreted specific cases
related to application of the Homestead Amendment. Generally, when determining
application of exemptions from taxation, the jurisprudence of this state has consistently
held that constitutional and statutory grants of exemptions from taxation must be strictly
construed in favor of the taxing body and against the person claiming the exemption.
Although this is new law and there is no certain answer from the Courts as to its
application, the following answers are the most likely interpretation of the Homestead
Amendment based on the legislative history and legislative intent of the Homestead
Amendment.




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2.    Questions And Answers
1Q.   Sam owns a house in Caddo Parish where he has claimed the homestead
      exemption. Sam buys a second house in Beauregard Parish and gives his
      son the usufruct of the house. Can Sam also qualify for the homestead
      exemption in Beauregard Parish on his second home?

A.    No, Sam can only qualify for one homestead exemption. Paragraph 8 of the
      Homestead Amendment states:             ―Notwithstanding any provision of this
      Paragraph to the contrary, in no event shall more than one homestead exemption
      extend or apply to any person in this state.‖

2Q.   Does the prior owner of a home have to be a prior occupant and have
      usufruct to qualify for a homestead exemption?

A.    Yes, paragraph 4 of the Homestead Amendment which addresses usufructuaries
      provides the homestead exemption shall apply to:

      (a)    no more than two usufructuaries;
      (b)    who were immediate prior owners of the property;
      (c)    which property was occupied by the immediate prior owners; and
      (d)    who could or did qualify for the homestead prior to the transfer.

3Q.   Husband and wife occupy a house owned by the husband as his separate
      property. The husband dies. The children get 100% of the separate
      property including the house and the wife is granted a life usufruct. Should
      the wife also get the homestead exemption on the usufruct?

A.    Yes, the wife is a usufructuary and should qualify for the homestead exemption.
      Testimony at the legislature on paragraph 2 of the Homestead Amendment was
      clear that the law was intended to protect the surviving spouse in every instance.

      Paragraph 2 states:

             The homestead exemption shall extend and apply fully to the
             surviving spouse or a former spouse when the homestead is
             occupied by the surviving spouse or a former spouse and title to it
             is in the name of (a) the surviving spouse as owner of any interest
             or either or both of the former spouses, (b) the surviving spouse as
             usufructuary, or (c) a testamentary trust established for the benefit
             of the surviving spouse and the descendants of the deceased
             spouse or surviving spouse, but not to more than one homestead
             owned by either the husband or wife, or both.



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4Q.   If property was purchased before June 23, 2004 under a bond for deed
      contract but the owner had not previously applied for and been granted the
      homestead exemption, can the bond for deed owner now apply and receive
      the homestead exemption?

A.    No, the homestead exemption must have been granted prior to June 20, 2003.

      Paragraph 7 of the Homestead Amendment provides:

             No homestead exemption shall be granted on bond for deed
             property. However, any homestead exemption granted prior to
             June 20, 2003 on any property occupied upon the effective date of
             this Paragraph by a buyer under a bond for deed contract shall
             remain valid as long as the circumstances giving rise to the
             exemption at the time the exemption was granted remain
             applicable. (emphasis supplied)

5Q.   Can an LLC, INC or LLP owning a house receive a homestead exemption?

A.    Generally, no, the homestead exemption must be granted to a natural person or
      irrevocable trust. Paragraph 5 of the Homestead Amendment provides:

             The homestead exemption shall extend only to a natural person or
             persons and to an irrevocable trust created by a natural person or
             persons, in which the beneficiaries of the trust are a natural person
             or persons provided that the provisions of this Paragraph are
             otherwise satisfied. (emphasis supplied)

3.    On-Line Database
In 2004, the Louisiana Legislature created a statewide ad valorem tax assessment
database. Participation in the program shall be required of any parish with a population
which exceeds 75,000 according to the most recent federal decennial census.

The database shall be comprised of information from assessment rolls of parishes
participating in the program. The ad valorem tax assessment database shall not include
any tax information which is deemed confidential under any other provision of law.

The Louisiana Tax Commission designed the Internet website www.latax.state.la.us in
such a manner as to facilitate the retrieval and viewing of the following information from
the assessment rolls on the database:

      1)     Location of the assessed property, including the municipal address of
             property.


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      2)     Assessed valuation of the land and any improvements thereon.

      3)     The amount of homestead exemption on the property.

      4)     Information as to any other exemptions from ad valorem tax.

      5)     The classification for the property assessed.

Many parishes have databases on line which can provide a valuable resource for
REALTORS®. The Louisiana Tax Commission Parish Tax Rolls website which is
www.latax.state.la.us/TaxRoll_ParishSelect.asp contains many of the sites. A few
direct websites for some parishes are:

            Caddo – www.caddoassessor.org
            Jefferson - www.jpassessor.com
            Lafayette – www.lafayetteassessor.com
            St. Tammany – www.stassessor.org




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XIV. WETLANDS
Background on Wetlands
      Wetland Functions
      What is a Wetland?
      Why is it Necessary to Consider Wetlands?
Recommendations
      Determining the Presence of Wetlands
      Additional Wetland Regulation
      Permitting Process Overview
          1972 SEC 404 Clean Water Act
          Permit Procedure in Louisiana
          Penalties
          How to Permit is Processed
          Louisiana Coastal Use Certification
Sample Wetlands Disclosure
Sample to Agreement to Purchase
Sample Wetlands Determination Request Letter




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A.    BACKGROUND ON WETLANDS
Approximately 54% of the country‘s original wetlands no longer exist. Wetlands have
been lost to rising sea levels, erosion, sediment deposition changes, and biotic factors
such as over grazing. Many more have been lost to land reclamation for housing and
commerce, landfills and waste disposal, navigation channels and reservoir construction,
oil and gas canals, pipelines, and strip and peat mining. Agriculture accounts for the
majority of wetland destruction, being responsible for 87% of those from the mid-1950‘s
to the mid 1970‘s. Today it is estimated that wetlands are disappearing across the
United States at a rate of 300,000 to 500,000 acres yearly.

The valuable functions of wetland ecosystems have, however, been increasingly
recognized and studied in recent years. With a growing realization of the strategic value
of these resources, wide arrays of groups have lobbied with some success to halt
wetland destruction. In the last two decades much protective legislation restricting
wetlands development and use has been issued on federal, state and local levels. The
major piece of wetland legislation enacted in 1972 is Section 404 of the Federal Clean
Water Act (33 USC 1251 et seq.), under which a permit must be obtained from the US
Army Corps of Engineers (Corps) by those interested in altering wetlands through
dredging or filling. This includes most ditching, land clearing, and land leveling
activities, and levee, dike, dam and most road construction.

Failure to determine the presence of wetland on a subject site and whether proposed
activities will require a Section 404 permit, as well as compliance with any state and
local regulations, can be disastrous. In some very rare instance, government agencies
have required existing structures to be removed and the land to be returned to its
natural state.

1.    Wetland Functions
Wetlands, having little to do with elevation, can be found in practically every county or
parish in the nation according to the EPA. Regional differences produce many forms of
wetland conditions that are difficult to categorize.

Wetlands are fragile ecosystems that perform invaluable functions such as:

     Water Quality Enhancement – Wetlands remove pollution from waters that flow
      through them, in effect, function as biological sewage treatment plants.
     Physical Protection – Wetlands protect shorelines from wave or storm erosion
      and protect downstream areas from damaging effects of floods by slowing and
      temporarily storing floodwaters.
     Climatic Influences – Wetlands participate in the global cycles of nitrogen, sulfur,
      methane and carbon dioxide and may help to control atmospheric pollution by
      removing excess nitrogen and carbon produced by human activities.


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     Water Supply – Some wetlands act as ground water recharge zones for area
      aquifers. Many store water during wet parts of the year and release it at
      relatively constant rates, helping to maintain regular stream flows.
     Wildlife Habitat – Many species of fish and wildlife, including a large proportion of
      federally listed threatened or endangered animals (45%) and plants (26%),
      depend directly or indirectly on wetlands to provide critical breeding, nesting,
      rearing, and wintering habitat.
     Food-Chain Support – Coastal and riverine wetlands produce large quantities of
      food materials that are exported to estuaries and other coastal areas where they
      support marine food webs, many of which are critical to commercial fisheries.
     Commercial Products – Wetlands serve as important sources of fish and
      shellfish, timber, forage, wild rice, cranberries, blueberries, furberries and other
      useful materials.
     Recreation and Aesthetics - Wetlands provide places for hunting, fishing, nature
      study, boating and outdoor education and are valuable simply for their natural
      beauty.

2.    What is a Wetland?
The US Army Corps of Engineers and the US Environmental Protection Agency (EPA)
jointly define wetlands as follows:

      Those areas that are inundated or saturated by surface or ground water at a
      frequency and duration sufficient to support, and that under normal
      circumstances do support a prevalence of vegetation typically adapted for life in
      saturated soil conditions. Wetlands generally include swamps, marshes, bogs,
      and similar areas.

Wetlands are areas covered by water or that have waterlogged soils for long periods
during the growing season. Plants growing in wetlands are capable of living in soils
lacking oxygen for at least part of the growing season. Wetlands, such as swamps and
marshes, are often obvious, but some wetlands are not easily recognized, often
because they are dry during part of the year or ―they just don‘t look very wet‖ from the
roadside. Some of these wetland types include, but are not limited to, many bottomland
forests, swamps, pocosins, pine savannas, bogs, marshes, wet meadows, potholes,
and wet tundra. The information presented here usually will enable you to determine
whether you might have a wetland. If you intend to place dredged or fill material in
wetland or in an area that might be a wetland, contact the local Corps of Engineers
District Office for assistance in determining if a permit is required.

3.    Why is it Necessary to Consider Wetlands?
Section 404 of the Clean Water Act requires that anyone interested in depositing
dredged or fill material into ―waters of the United States, including wetlands,‖ must apply
for and receive a permit for such activities. The Corps of Engineers has been assigned

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responsibility for administering the Section 404 permitting process. Activities in
wetlands for which permits may be required include, but are not limited to:

          Placement of fill material
          Ditching activities when the excavated material is sidecast
          Levee and dike construction
          Landclearing involving relocation of soil material
          Landleveling
          Most road construction
          Dam construction

The final determination or whether an area is a wetland and whether the activity
requires a permit must be made by the appropriate Corps District Office.

B.    RECOMMENDATIONS
1.    Determining the Presence of Wetlands
The Corps of Engineers cites the following situations as strong evidence of wetland
occurrence and recommends that their local office be contacted for a wetland
determination if:

     An area lies in a floodplain or contains low spots in which water stands at or
      above the soil surface for more than seven consecutive days during the growing
      season
     Plant communities are present that normally occur in areas having standing
      water for part of the growing season (for example, cypress-gum swamps,
      cordgrass marshes, cattail marshes, bulrush or bulltongue marshes, sphagnum
      bogs or pitcher plant, flatwoods)
     An area has soils known as peats, mucks or heavy clays
     An area is periodically flooded by tides, including strong, wind-driven, or spring
      tides

Visual inspections and maps will aid in identifying many of the nation‘s wetlands, but
numerous wetland areas are not easily recognizable as such, particularly during warm
dry weather. There is a fascinating variety in the appearance and location of wetlands,
which can be highly troublesome for those involved in real estate transactions and
development. Wetland occurrence on a property may at times be impossible for an
untrained individual to detect. Prospective buyers and developers are advised to have
property checked by a trained expert for the three wetland indicators, which, if present,
may be signs that the property is subject to permitting and development restrictions.
Wetland Vegetation, Hydric Soils, and Wetland Hydrology are the indicator categories
considered during any wetland determination. At least one indicator from each category
must normally be present for a site to be declared wet, however, under abnormal


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circumstances, or disturbed sites, the determination may be made on the basis of two or
rarely only one of the three criteria.

Those are close to 5,000 plant species that serve as wetland indicators which can live in
oxygen-lacking soil for at least a portion of the growing season. These specially
adapted plants, whose growth is encouraged by the presence of water, are termed
‗hydrophytes‘ or plants ‗growing in water or soil too waterlogged to survive‘. Some
examples are cattails, bulrushes, cordgrass, sphagnum moss, bald cypress, willows,
mangroves, sedges, rushes, arrowhead, and water plantations. Wetland vegetation
varies from region to region, so a list of plant types in a subject area should be obtained
from the local area US Fish and Wildlife Service Office.

There are nearly 2,000 hydric, or wetland, soil types in the United States. Hydric soil is
often acidic and may be quite rich in peat, which is a primarily undecomposed or only
slightly decomposed plant material. Other characteristics of hydric soil that maybe
observable are a surface layer of eight or more inches of decomposing plant material,
gray or bluish grey color to approximately one foot below the surface or a brownish
black or black dull color at that level, an odor of rotten eggs, and a sandy content with a
layer of decomposing plant material near the soil surface. The US Department of
Agriculture maintains a hydric soils list, obtainable from the local county or parish Soil
Conservation Service Office.

Wetland hydrology is defined as ‗the presence of water either at or above the soil
surface or a sufficient period of the year to significantly influence the plant types and
soils in the area‘. Examples of hydrology indicators include standing or flowing water for
seven or more consecutive days during the growing season, waterlogged soil, water-
marked trees, drift lines, debris lodged in trees, and sediment deposits on leaves and
other objects. Hydrolic indicators, and hence the periodic presence of flooding and soil
saturation, can be detected by field inspection.

There are two types of federal permits for the dredge-and-fill of wetlands: The general
permit, which is issued to the public at large on a regional and national basis for
standards activities that involve minor work; and the individual permit required for larger
projects, which involves public notice and a case-by-case evaluation of proposed
activity according to regulatory guidelines.

Under Section 404(f), the following activities are exempt from permitting regulations:

     Normal farming, silviculture, and ranching practices (as part of established
      operations)
     Maintenance, including emergency reconstruction of recently damaged parts, or
      currently serviceable structures such as dikes, dams, levees, and similar
      specified structures
     Construction or maintenance of farm or stock ponds or irrigation ditches or
      drainage ditch maintenance

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      Construction of temporary sedimentation basins on a construction site that does
       not include placement of fill material into waters of the United States
      Construction of maintenance of farm or forest roads or temporary roads for
       moving farming or mining equipment if best management practices are followed

These exemptions do not apply if the discharge is part of an activity whose purpose is to
convert an area of the water of the Untied States into a use to which it was not
previously subject. For activities that require the individual permit, a ‗pre-application
consultation‘ can give the applicant an idea of the requirements that must be fulfilled.
An individual permit application usually takes two to four months to process. Once the
application is received, a public notice will be issued, usually within 15 days. Then a 15-
30 day comment period follows, after which the application is reviewed by the Corps.
Fees for permits are usually $10.00 for noncommercial activity and $100.00 for
commercial or industrial activity. No fee is charge for a general permit.

In reviewing applications, the Corps may rely on the Fish and Wildlife Service for habitat
evaluation and other biological and the EPA for recommendations on water quality and
general environmental issues. But beyond environmental consultation, the EPA has an
important three-part role in the Section 404 regulatory process; determining Clean
Water Act jurisdiction; promulgating and policing implementation of the Section
404(b)(1) Guidelines; and enforcing Section 404. In addition, Section 404(c) gives the
EPA authority to veto permits when beds, and fishery areas (including spawning and
breeding areas), wildlife, or recreational areas.

Developed by the EPA, the section 404(b)(1) Guidelines (published at 40 CFR Part 230)
call for the Corps to conduct a ‗practical alternatives‘ analysis when determining if a
permit will be granted. They analysis hinges on the availability and feasibility of an
alternative nonwetland site for the project. Alternative siting is vastly preferred to any
level of mitigation. There is a presumption that activities that are not water-dependent
do not require development in wetlands. The guidelines state that ‗No discharge of
dredged or fill material shall be permitted if there is a practicable alternative to the
proposed discharge which would have less adverse impact on the aquatic ecosystem,
so long as the alternative does not have other significant adverse environmental
impacts.‘ In a recent federal court decision (Bersani v. EPA, 26 ERC 1678 (DC NNY
1987), site availability, for purposes of selecting an alternative, was defined at the time
the applicant enters the market-not after a final decision has been made on the permit
application.

If it is necessary to develop on the wetland site, the major consideration in permit review
is whether sufficient mitigation is proposed to offset the adverse environmental effect of
the project. There are three ways to mitigate: 1.) acquire, enhance and preserve
wetlands, 2.) restore damaged wetlands, or 3.) create new ones. Usually mitigation
involves a combination of all three and replaced at least acre for acre and type for type.
It is advisable to consult with the EPA and the Fish and Wildlife Service about
acceptable mitigation efforts before submitting a permit application in order to avoid
lengthy delays and complications. Much time and expense can be saved by addressing
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such issues prior to any development commitments. While onsite, in-kind mitigation is
normally preferred, off-site, out-of-kind mitigation can, at times, be quite acceptable and
beneficial.

The Corps receives up to 12,000 individual permit applications per year. Recently, only
5% of the applications have been denied. Reportedly, this small group is composed
primarily of applicants who refuse to change the design, timing, or location of proposed
activities. Obviously, applicants must be prepared to be flexible and work closely with
the Corps and EPA to arrive at a development and mitigation plan that meets the needs
of all parties.

2.    Additional Wetland Regulation
Wetland regulation occurs under a variety of federal laws in addition to the Clean Water
Act, including the Costal Zone Management Act (16 USC 1451-1464); Estuarine Areas
(16 USC 1301-1311); Rural Environmental Conservation Program (16 USC 1501-1510);
Migratory Bird Wildlife Coordination Action (16 USC 661-668); and Watershed
Protection and Flood Prevention Act (16 USC 1001-1009). Also, there are Executive
Orders on Wetlands Protection and Floodplain Management. It is of particular note that
permits are subject to the provisions of the National Environmental Policy Act (NEPA),
which may require environmental assessments and environmental impact studies.

Contacts for more information or assistance:

      U.S. Army Corps of Engineers
      Regulatory Branch
      P.O. Box 60267
      New Orleans, LA 70160
      Phone: 504-862-2270

Various states have also promulgated regulations designed to provide additional
protection to wetlands locates within their boundaries. Prior to undertaking any activity
with potential to impact a wetland area, the developer should review and analyze the
wetlands regulations of the state in which the property to be developed is located to
determine the extent of any additional permitting that may be required.

3.    Permitting Process Overview
      a.   1972 SEC 404 Clean Water Act

Permitting program administered by the Army Corps of Engineers ―to regulate the
discharge of dredging or filling materials into navigable waters of the U.S. including
adjacent wetland resource.‖



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In a 1988 State of the Union address by President Bush, he pledged there would be ―no
net loss‖ or wetlands while he was president. The interpretation of this statement is not
clear. The definition of the word wetland is the crucial issue.

      b. Permit Procedure in Louisiana

      i.         Application

      ii.        Drawings – Three specific types are required: Vicinity, Plan and Elevation

                   Prepared by engineering/land surveying firm indicating average low
                    and high water shorelines and referenced to mean sea level on plan
                    and cross section drawings.
                   Letter size sheets, 8.5‖ x 11‖
                   Inaccurate, freehand sketches are not acceptable

      iii.       In a coastal zone, which includes from the state line of Texas and
                 Louisiana preceding easterly through Calcasieu and Cameron south
                 through Vermilion, Iberia, St. Mary, St. Martin, Terrebonne and Lafourche.
                 North to include St. Charles, St. John the Baptist, St. James and east
                 through Livingston, Tangipahoa and St. Tammany. Also includes Orleans,
                 Jefferson, St. Bernard and Plaquemines. You must also:

                        1.     Send application and drawings to:
                               Coastal Management Division
                               Louisiana Department of Natural Resources
                               P.O. Box 44487
                               Baton Rouge, LA 70804-4487

                               Along with a Fee made payable to Coastal Management
                               Division.

                        2.     For residential uses you will be assessed a permit
                               processing fee involving more than 125 cubic yards of
                               dredged or fill material at 4 cents/cubic yard with a maximum
                               charge being $2,000 for any permit issued.

                        3.     For non-residential uses, you will be assessed a permit
                               processing fee involving more than 500 cubic yards of
                               dredged or fill material of 5 cents/cubic yard with a maximum
                               charge being $5,000 for any permit issued

      iv.        You must decide if you need a Water Quality Certification (WQC). If you
                 plan only to build a structure, dredge or place fill on any land (not wetland


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              area), you will not need a WQC. If you are filling wetland or in waterway,
              you will need WQC.

                    1.     Send permit and drawings to:

                           Office of Water Resources
                           Louisiana Department of Environmental Quality
                           P.O. Box 4314
                           Baton Rouge, LA 70821-4314
                           Phone: 225-219-3235

                    2.     Along with an application fee.

                    3.     You will also be required to publish the project in the Baton
                           Rouge Advocate bearing cost of advertising.

      v.      Other Approvals:

                    1.      Louisiana Department of Transportation and Development
                            reviews
                           and comments on navigation and flood control.
                    2.      Louisiana Department of Wildlife and Fisheries considers
                           impacts to the environment, state lease areas and refuge
                           areas.
                    3.     Louisiana Department of Health and Hospitals is interested
                           in effect on public health (225-763-5556). Contact them
                           about your waste disposal system.
                    4.     May need approval from state or local agencies in addition to
                           the Corps of Engineers Permit.

      vi.     Once permit is obtained, you must notify that you ―will start work under
              permit number _________ on ________ date.‖

      c.    Penalties

      i.   If field inspections of the work authorized by your permit show conditions
           significantly different than is shown on your drawings, it could cause legal
           action to be taken and/or your permit to be revoked.
      ii. Performing work prior to obtaining or without proper authorization may
           subject you to civil and/or criminal action for violation of Sect. 10 of the River
           and Harbor Set of 1899 and/or Act. 301 of the Clean Water Act. Legal
           Action under these statutes can result in a substantial fine and/or court order
           to restore the site to pre-project conditions.
      iii. Permit is good for only 3 years. If work cannot be completed in that time,
           you may need to go through the process again with any possible changes in
           regulations since permit was issued.
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       d. How the Permit is Processed

The Corps District either receives permit applications directly from the applicant or from
applicants through the Coastal Management Division (CMD) of the Louisiana
Department of Natural Resources. The Corps assigns the application a number and
reviews the application and drawings to verify all needed information has been
submitted. If the drawings are not acceptable or additional information is needed,
processing of the application stops until the applicant supplies the needed information.

Next, a public notice is drafted, typed, reproduced, and mailed to the individuals on the
public notice mailing list. If the work is in the Louisiana Coastal Zone, CMD normally
handles typing, reproduction, and mailing of joint Corps-CMD public notices. The public
notice gives the name and address of the applicant, indicated the location of the work,
and describes the project. The public notice includes the drawings you submit. The
work is advertised on public notice from about 2 to 4 weeks depending on the type of
work and is mailed to many Federal, state and local agencies and to the general public,
corporations, environmental groups, navigation organizations, etc. They can write the
Corps and object to the project or suggest modifications. If the Corps receives
objections, you will be given an opportunity to comment, resolve or rebut the letters if
you wish to do so. Besides allowing comments from outside the Corps, the Corps
performs in-house reviews of your project. Our environmental staff will review the
project for environmental and socioeconomic impacts. You could be requested to
modify your project to lessen environmental impacts. If the project is environmentally
sensitive, you may be required to submit information needed to prepare an
environmental assessment or environmental impact statement. If your project is on or
close to a federally maintained waterway or flood control project, our Engineering
Division will review the project to determine if navigation of flood control will be
impacted.

After the public notice comment period has expired, the application file is reviewed. If
the work is in the Louisiana Coastal Zone, the Corps must have a coastal use permit, a
consistency statement, or waiver from CMD in order to issue a permit. Similarly, if the
project includes filling or placing dredged material in a waterway or wetland, the Corps
cannot issue a permit without a water quality certification from the Office of Water
Resources. Next the Corps reviews all information, objections, comments, in-house
recommendations, etc., and makes a determination whether or not a permit should be
issued or denied. If the permit is denied, you will be sent a letter and will be told why
your project was denied. If the Corps determines you should be issued a permit, you
will receive two typed copies of your permit by mail. You then are given the opportunity
to review the permit. If you are willing to accept the permit with all the conditions of the
approval, you sign and date both copies and return them to the Corps with a processing
fee.

After you return both signed copies of your permit and the processing fee, an official of
the Corps will sign both permit copies. One copy will be mailed to you and one copy will
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be retained as a Corps file copy. You may not begin your project until you receive a
copy of the permit signed by an official of the Corps nor before you obtain any required
state or local permits or approvals.

After you receive your permit, you have 3 years from the date of issuance to complete
your project. Should you not be able to finish your work in the time allowed by the
permit, you can request a permit time extension. Depending on the type of work, how
much is complete, and possible changes in regulations since the permit was issued, you
may be granted an extension without the necessity of entirely reprocessing your
application. Otherwise your time extension will be processed with a new public notice,
need for a new water quality and coastal use certifications and a new evaluation of your
project. It is possible that, as a result of the new evaluation, your request for additional
time to complete your project could be denied. If you are granted a time extension
without fully reprocessing and additional time extension requests will be fully
reprocessed to include a new public notice and reevaluation.

If your permit authorization includes maintenance dredging, dredging to maintain a
water bottom evaluation is authorized for 10 years from the date of permit issuance.

When you begin your project, you are required to notify the Regulatory Functions
Branch of the Corps by letter of the date you will start work. This can be in the form of a
simple statement such as ―This is to notify you that I will start work under permit
LMNOD-SP (Bayou Blue) 14 on January 13, 1984.‖ You are also required to notify the
Corps when you have completed your project so that your file may be closed.

Performing work prior to obtaining or without proper authorization may subject your to
civil and/or criminal action for violation of Section 10 of the River and Harbor Act of 1899
and/or Section 301 of the Clean Water Act. Legal action under these statutes can result
in a substantial fine and/or a court order to restore the site to pre-project conditions.

       e.   Louisiana Coastal Use Certification

Applicants for Department of the Army permits will be required to obtain certification
from the Coastal Management Division of the Louisiana Department of Natural
Resources (CMD/DNR), for work in the State‘s coastal zone program that the proposed
activity will comply with the State‘s coastal zone program. Applicants, therefore, should
send their permit applications for work in the coastal zone to CMD/DNR with the $20
application fee.

No Corps permit will be issued unless CMD/DNR certification that the proposed activity
complies with the Louisiana coastal zone management program has been provided.
Department of Army regulation 33 CFR 325.2 states that applicants for a Corps permit
in a State‘s coastal zone shall submit a statement to the Corps that the proposed project
is consistent with the approved state coastal zone management program. This
statement should accompany or be included on the permit application.

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A sample of such a statement would be ―I hereby certify that the proposed activity
described in this permit application complies with and will be conducted in a manner
that is consistent with the Coastal Resources Program of the State of Louisiana.

Individuals needing CMD/DNR certification or assistance should contact:

           Louisiana Department of Natural Resources
           Coastal Management Division
           P.O. Box 44487
           Baton Rouge, LA 70804-4487
           Phone: 225-342-7591

The coastal zone boundary for Louisiana begins at the state line of Texas and Louisiana
proceeds easterly through the parishes of Calcasieu and Cameron then south through
Vermillion, Iberia, St. Mary, St. Martin, Terrebonne, and Lafourche. The boundary then
turns to the north to include the parishes of St. Charles, St. John the Baptist, St. James
and east through Livingston, Tangipahoa and St. Tammany parishes. The parishes of
Orleans, Jefferson, St. Bernard, and Plaquemines are also with the boundary. The
seaward boundary of the coastal areas is the outer limit of the United States Territorial
area.

Processing of an applicant‘s Corps permit and CMD/DNR certification will be performed
concurrently. Issuance of a CMD/DNR certification does not replace or guarantee
approval of a Corps permit.




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C.    SAMPLE WETLANDS DISCLOSURE
RE: ________________________________________________________________
                                (Address)

The U.S. Army Corps of Engineers has recently commenced active enforcement of
Section 404 of the Clean Water Act. Under this federal law, designed to project the
wetlands of the United States, certain permit requirements must be met for altering or
building upon property that is determined to be wetlands as defined by the Corps.

A fee may be charged by the Corps for making the determination.

I hereby acknowledge receipt of the above.

______________________________________
____________________________
Purchaser                             Date

______________________________________
      ____________________________
Purchaser                             Date




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D.    SAMPLE TO AGREEMENT TO PURCHASE
               Property Address:                  _______________________________
                                                  _______________________________
                                                  _______________________________

Wetlands Disclosure:

This property may be subject to Federal Corp. of Engineers Wetlands jurisdiction
inspection and permitting prior to development. A fee for this inspection and
determination may be required by the U.S. Army Corps of Engineers and such fee may
be paid by either buyer of seller prior to inspection. Inspection must be in accordance
with the Corps of Engineers Wetlands permit requirements as set forth in Section 404.

Purchasers:                                Sellers:
_________________________                  _________________________
_________________________                  _________________________

Date:                                      Date:
_________________________                  _________________________




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E.     SAMPLE           WETLANDS              DETERMINATION                   REQUEST
       LETTER
U.S. Army Corps of Engineers                      U.S. Army Corps of Engineers
New Orleans District                              P.O. Box 60
P.O. Box 60267                                    Vicksburg, MS 39180-0060
New Orleans, LA 70160

Dear _________________________:

This letter will serve as our request for a Wetlands Determination letter on the following
property:
___________________________________________________________________

I have attached the information that I believe will be helpful to you in making this
determination.

If you should need any further information, please do not hesitate to call.

Sincerely,

_________________________                  _________________________
Owner                                      Agent/Company

_________________________                  _________________________
_________________________                  _________________________
Address                                    Address

_________________________                  _________________________
Telephone                                  Telephone

Attachments:     Map of Parish showing location
                 Subdivision plot and restrictions
                 Copy of appraisal with statistical information and/or any other
                 information that would be useful to the Corps.
                 Anything you can provide will help speed this along




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XV. DO NOT CALL
Federal Do Not Call
State Do Not Call




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A.     FEDERAL DO NOT CALL
On June 26, 2003, the Federal Communications Commission (FCC) issued Final Rules
and Regulations Implementing the Telephone Consumer Protection Act of 1991 (the
―FCC Rules‖). Earlier, in January of this year, the Federal Trade Commission (FTC)
had issued the Final Telemarketing Sales Rule, which addressed some of the same
issues, but only applied to interstate telephone calls. These FTC rules called for the
adoption of a National Do Not Call Registry, among other things. Because the FCC has
broader regulatory authority, the rules and regulations recently issued by the FCC apply
to both interstate calls (calls from one state to another state) and intrastate call (calls
from and to the same state). This means that the FCC Rules, including establishment
of a National Do Not Call Registry, apply to telephone solicitations that are initiated from
Louisiana and made to consumers either within or outside the state of Louisiana.

Some of the major provisions of the FCC Rules are as follows:

1.    Telemarketers may continue to call individuals who have not placed their
numbers on the Do Not Call List and those with whom they have an established
business relationship. Under the established business relationship rule a telemarketer
may contact a customer for 18 months after a business transactions and 3 months after
an inquiry or application.

2.      Consumers not on the National Do Not Call List can place their names on
company-specific Do Not Call Lists. Once a consumer does this, the company may not
call the consumer again regardless of whether the consumer continues to do business
with the company. The retention period for records of consumers requesting not to be
called has been reduced from ten years to five years. Telemarketers are required to
honor a company specific do no call request within thirty days of the date that the
request is made.

3.     Consumers may register their cellular phone numbers on the National Do Not
Call List. Each consumer can register up to three numbers.

4.    Consumers who register on the National Do Not Call List will be able to provide
express written permission to any companies from which they wish to receive
telemarketing calls. The written permission must include the telephone number the
consumer wishes to be contacted at and must be signed by the consumer.

5.    The FTC will provide the National Do Not Call List to telemarketers. The list will
be organized by area code. There will be no cost for telemarketers to access up to five
area codes. Additional area codes will be assessed a fee up to a maximum of $7,200.

6.     There are also new rules on call abandonment, prerecorded messages,
unauthorized billing, transmission of caller identification information (all companies are
required to transmit caller identification information, when available, and are prohibited
from blocking such information), unsolicited faxes (discussed more fully below), etc.
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7.     Telemarketers must still comply with the following provisions: (1) call consumers
only between the hours of 8:00 a.m. and 9:00 p.m.; (2) promptly identify themselves as
a seller and explain that they are making a sales call before pitching a product or
service; (3) disclose all material information about the goods or services they are
offering and the terms of the sale.

8.      There is a ―safe harbor‖ that protects telemarketers who have made a good faith
effort to comply with the FCC Rules if the following requirements are met: (1) they have
implemented written procedures to comply with the Do Not Call Rules; (2) they have
trained their personnel in the aforementioned procedures; (3) they have maintained a
list of telephone numbers they cannot contact; (4) they use a process to prevent
telemarketing to any phone number on a list established pursuant to the Do Not Call
Rules (employing a version of the list that is no more than three months old); and (5)
any subsequent call otherwise violating the Do Not Call Rules was made in error.

B.    STATE DO NOT CALL

In 2004, Louisiana Legislature passed a bill to make three significant changes to the
Louisiana ―do not call‖ law. First, by January 1, 2006, the Louisiana Public Service
Commission shall establish a single ―do not call‖ list that includes Louisiana consumers
as well as the consumers listed on the National Do not call Registry. Currently, a
telephone solicitor in Louisiana must review both the National Do not call Registry,
updated monthly, and the Louisiana ―do not call‖ list, updated quarterly, in order to
ensure that the telephone solicitor does not call a consumer who does not wish to be
called. This single ―do not call‖ list will be updated no less than quarterly commencing
January 1, 2006.

Second, the registration fees and the ―do not call‖ list fees paid to the Public Service
Commission are changed. Each independent solicitor registration shall be an annual
payment of four hundred dollars while each principal solicitor registration shall be an
annual payment of eight hundred dollars. The permit issued shall be good for a period
of one calendar year beginning January 1 and ending December 31 unless otherwise
revoked. The cost to purchase the ―do not call‖ list is four hundred dollars annually for
all telephone solicitors, with the exception of dependent solicitors. Important to note is
that solicitors are required to purchase the list directly from the Public Service
Commission.

Third, the Federal law ―Safe Harbor‖ provisions are now included in the Louisiana ―do
not call‖ law. The safe harbor is intended to provide that a telephone solicitor who has
set forth a procedure to avoid making calls to consumers registered with the list, and
inadvertently or accidentally calls such a consumer, are not penalized in the same
manner as a telephone solicitor who disregards the law or has not set up a system to
avoid making unwanted calls.


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XVI. DO NOT FAX
Do Not Fax
      Old Rules
      New Rules
      Identification Requirements
      Recent Enforcement Actions
      Junk Fax Prevention




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DO NOT FAX
The telephonic provisions of the FCC rules that went into effect on October 1, 2003 also
address and make changes to rules and regulations relating to unsolicited facsimile
advertisements.

A.     OLD RULES
The Telephone Consumer Protection Act (TPCA), enacted in 1991, prohibits the use of
any telephone facsimile machine, computer or other device to send an unsolicited
advertisement to a telephone facsimile machine. An unsolicited advertisement is
defined as any material advertising the commercial availability or quality of any property,
goods or services that is transmitted to any person without the persons prior express
permission or invitation. The TPCA also requires those sending messages via
telephone facsimile machines to identify themselves to message recipients. Under the
TPCA facsimile transmissions from persons or entities that have an established
business relationship with the recipient were considered invited or permitted by the
recipient.

B.     NEW RULES
The FCC solicited comments on the TPCA rules and made some changes based on
those comments. Most notably, the new FCC rules eliminate the established business
relationship rule. Originally under the new rules, as of October 1, 2003, an established
business relationship would no longer be sufficient to show that an individual or
business has given their express permission to receive unsolicited facsimile
advertisements. Rather, the prior express invitation or permission of the recipient would
be required before transmitting an unsolicited fax advertisement. This express invitation
or permission must be in writing and include the recipient‘s signature. The recipient
must clearly indicate that he or she consents to receiving such fax advertisements from
the company to which permission is given and must also provide the individual or
business‘s fax number to which faxes may be sent.

On August 18, 2003, the FCC extended the effective date for its new rule that
established business relationships did not constitute express permission to receive
unsolicited faxes. The new effective date is January 1, 2005. This means that until
January 1, 2005, unsolicited fax advertisements may be sent to individuals and
businesses with whom the sender has an established business relationship without the
necessity of obtaining express written consent from the recipient. It should be noted
that this extension of effective date only applies to the rules regarding established
business relationships. Thus, regardless of the extension, fax transmitters must still
obtain the prior express written permission from fax recipients with whom they do not
have an established business relationship.



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In enacting the new fax rules, the FCC noted that one of Congress‘s primary concerns
in enacting the TPCA was to protect the public from bearing the costs of unwanted
advertising. The FCC cited the following costs as reasons for making changes to the
existing rules: the cost of the paper used by recipients of faxed advertisements; the
cost associated with the use of the facsimile machine; the costs associated with the
time spent receiving a facsimile advertisement during which the machine cannot be
used by its owner to send or receive other facsimile transmissions; increased labor
costs attributed to time spent reading and disposing of faxes; and the intrusiveness of
faxes transmitted at inconvenient times.

The FCC also noted that unlike the Do Not Call List for telemarketing calls, Congress
provided no mechanism for opting out of unwanted facsimile advertisements.
Therefore, companies that wish to fax unsolicited advertisements to customers must
obtain their express written permission to do so before transmitting any faxes to them.
Advertisers may obtain consent for their faxes through such means as direct mail,
websites and direct interaction with customers.

Permission to send faxes cannot be in the form of a negative option. For example, a
facsimile advertisement containing a telephone number and an instruction to call if the
recipient no longer wishes to receive such faxes would constitute a negative option and
would not be permissible. It is permissible for a company to request a fax number on an
application form and also include a clear statement indicating that by providing such fax
number the individual or business agrees to receive facsimile advertisements from that
company. The application would also have to include the signature of the recipient.

C.    IDENTIFICATION REQUIREMENTS
The FCC has maintained the rules that require that any message sent via facsimile
machine contain the date and time it is sent and an identification of the business, other
entity or individual sending the message, as well as the telephone number of the
sending machine or of such business, other entity or individual. The FCC has now also
determined that if a fax broadcaster is responsible for the content of the message or for
determining the destination of the message (i.e., supplying the list of facsimile numbers
to which the faxes are sent), such fax broadcaster should be identified on the facsimile,
along with the entity whose products are advertised. Now if a fax broadcaster has a
high degree of involvement in the transmission of a facsimile message they must also
be identified on the facsimile, along with the identification of the sender, in order to
permit consumers to hold fax broadcasters accountable for unlawful faxes over which
they have a high degree of involvement.

D.    RECENT ENFORCEMENT ACTIONS
The FCC recently announced a record find of more than $5.3 million against Fax.com,
Inc. for faxing unsolicited advertisements on behalf of its clients to consumers in
violation of the TPCA and FCC Rules. This fine consisted of an $11,000 fine for each of

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489 separated violations. The FCC Chairman Michael K. Powell stated, ―We will not
rest until consumers find peace from unwanted intrusions – whether from telemarketing
or junk faxes.‖

E.    JUNK FAX PREVENTION

On July 9, 2005 President Bush signed a Bill entitled the ―Junk Fax Prevention Act of
2005‖ which contains the exception to the rules on faxing for an established business
relationship in the federal laws governing facsimile communications. Pursuant to the
new law, a fax transmission can be sent to any party with whom the sender has an
established business relationship so long as the sender received the fax number
voluntarily or had received the fax number prior to the enactment of the Junk Fax
Prevention Act of 2005. To comply with this Act, brokers should document all fax
numbers in their possession from those individuals, clients, members, firms and/or MLS
participants with whom they had an established business relationship as of July 9, 2005.
The three requirements that apply to sending unsolicited advertising fax are as follows:

       1)    The sender must have an established business relationship with the
             recipient;
       2)    The sender must have attained the customer‘s fax number through
             methods described in the legislation; and
       3)    The sender must provide an opt out mechanism that meets the Act‘s
             requirements.

An established business relationship includes a prior or existing relationship formed by
a voluntary two-way communication between a person or entity and a . . . subscriber
with or without an exchange of consideration on the basis of inquiry, application,
purchase or transaction by the . . . subscriber regarding products or services offered by
such person or entity which relationship has not been previously terminated by either
party according to earlier FCC Rules. According to NAR, a business has an established
business relationship with anyone (i) with whom it has had a transaction or (ii) with
someone who made an inquiry to the business. The NAR website contains more
detailed information on the Junk Fax Prevention Act www.realtor.org




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XVII. ANTI-SPAM REGULATION
State
Federal




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A.     STATE ANTI-SPAM REGULATION
During the 2003 Regular Session, Louisiana enacted legislation aimed at reducing and
regulating unsolicited electronic mail. Act 1275 applies to commercial electronic mail
messages which are defined as any electronic message initiated for the primary
purpose of advertising or promoting the lease, sale, rental, gift offer or other disposition
of any property, goods, services or extension of credit. Unsolicited commercial
electronic mail messages are defined as commercial electronic mail messages sent
without the consent of the recipient, by a person with whom the recipient does not have
a pre-existing or current business relationship (hereinafter referred to as ―unsolicited
commercial e-mail ads‖).

Act 1275 requires senders of unsolicited e-mails to do all of the following:

             Maintain a functioning return e-mail address to which a recipient may reply
              to indicate that they no longer wish to receive any further unsolicited mail.
             Maintain a functioning website at which a recipient may request removal
              from the sender‘s mailing list.
             Clearly disclose in the advertisement that the recipient has the right to
              decline to receive further unsolicited advertisements and that the recipient
              may decline to receive such e-mail by sending a message via the
              functioning return e-mail address.
             Include the characters ―ADV:‖ in the subject line.

In addition, Act 1275 prohibits anyone from knowingly transmitting unsolicited e-mail
ads under certain circumstances including, but not limited to, the following:

             The ad does not contain the notices required and discussed above.
             The recipient has informed the sender that they no longer wish to receive
              further unsolicited ads from such sender and 21 days has passed sine
              such notification.

In addition, Act 1275 prohibits persons from selling or providing a list of e-mail
addresses to be used to initiate the transmission of unsolicited commercial e-mail ads.
Act 1275 also makes it unlawful for an unsolicited commercial e-mail to contain a
subject line that is intended to mislead the public about the contents of the
advertisement.

Act 1275 provides that any person whose property or person is injured by reason of
violation of any provision of Act 1275 may recover damages sustained and costs of the
lawsuit. In addition, if the injury arises from the transmission of unsolicited commercial
e-mail ads, the injured person may also recover attorney fees and costs. The injured
person may also elect, in lieu of actual damages, to recover the lesser of $10 for each
unsolicited commercial e-mail ad transmitted or $25,000 per day.

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B.     FEDERAL ANTI-SPAM REGULATION
On December 16, 2003 President Bush signed Federal anti-span legislation meant to
define acceptable commercial e-mail practices. The new law does not ban unsolicited
commercial e-mails, but rather identifies practices that must be observed by senders of
commercial e-mail. In particular, the new law requires senders of commercial e-mail to:

             Include a legitimate return e-mail and physical address.
             Include a functioning opt-out mechanism and clear and conspicuous
              notice of the opportunity to opt-out.
             To comply with opt out requests within ten (10) business days after receipt
              of such requests.
             Include a clear and conspicuous notice that the message is an
              advertisement or solicitation.

The new legislation also prohibits senders from falsifying or disguising their true identity
and bans the use of incorrect, misleading or fraudulent subject lines. The new
legislations also requires the Federal Trade Commission (FTC) to report to the Senate
and House on a plan and timetable for establishing a nationwide Do-Not-E-mail registry,
as well as practical, technical, security, privacy, enforceability or other concerns that the
FTC has regarding such a registry.

The new legislation generally supersedes state laws the expressly regulate the use of
electronic mail to send commercial messages. However, the new legislation does note
supercede state laws: (1) that prohibit falsity or deception in any portion of a commercial
electronic message or information attached thereto; (2) not specific to electronic mail
(i.e., trespass, contract or tort law); or (3) that related to acts of fraud or computer
crimes.

The new law also empowers the FTC to prevent violations though injunctions and cease
and desist orders. The new legislation also permits state officials to bring civil actions on
behalf of residents of their states. The new legislation sets forth statutory damages of
up to $250 for each unlawful message received or addressed, with maximum damages
capped at Two Million Dollars. The new legislation allows courts to increase damages
awards up to three times the otherwise allowable amount in case of willful, knowing or
aggravating violations. Courts are also allowed to reduce otherwise available damages
if the violator has established and implemented commercially reasonable practices and
procedures designed to prevent violations and made reasonable efforts to comply with
those practices and procedures. Courts are granted the discretion to also award
attorney fees for successful actions. The new legislation contains provisions that limit
state actions where federal action is pending.




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XVIII.              FAIR HOUSING
Equal Housing Opportunity Act




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                                     Equal Housing




                                     It's Your Right!

The Equal Housing Opportunity Act (La. R.S. 51:2601-2614) prohibits
discrimination because of:

Housing discrimination can occur in a variety of ways. Listed below are some of the
warning signs of discrimination based on race, national origin, religion, sex, familial
status or handicap.

             Race or color

             National origin

             Religion

             Sex

             Familial status (including children under the age of 18 living with parents
              or legal custodians; pregnant women and people securing custody of
              children under 18)

             Handicap

The Equal Housing Opportunity Act covers most housing. In some circumstances, the
Act exempts owner-occupied buildings with no more than four units, single-family
housing sold or rented without the use of a broker and housing operated by
organizations and private clubs that limit occupancy to members.




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In the Sale and Rental of Housing: No one may take any of the following actions
based on race, color, national origin, religion, sex, familial status or handicap:

      Refusal to rent or sell housing

      Refusal to negotiate for housing

      Make housing unavailable

      Deny a dwelling

      Set different terms, conditions or privileges for sale or rental of a dwelling

      Provide different housing services or facilities

      Falsely deny that housing is available for inspection, sale or rental

      For profit, persuade owners to sell or rent (blockbusting) or

      Deny anyone access to or membership in a facility or service (such as a multiple
       listing service) related to the sale or rental of housing.

In Mortgage Lending: no one may take any of the following actions based on
race, color, national origin, religion, sex, familial status or handicap:

      Refusal to make a mortgage loan

      Refusal to provide information regarding loans

      Impose different terms or conditions on a loan

      Discrimination in appraising property

      Set different terms or conditions for purchasing a loan.




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In Addition, it is illegal for anyone to:

              Threaten, coerce, intimidate or interfere with anyone exercising a fair housing
               right or assisting others who exercise that right.

              Advertise or make any statement that indicates a limitation or preference
               based on race, color, national origin, religion, sex, familial status or handicap.
               This prohibition against discriminatory advertising applies to single-family and
               owner-occupied housing that is otherwise exempt from the Equal Housing
               Opportunity Act.




There is additional protection if you have a disability. If

you or someone associated with you:

              Has a physical or mental disability (including hearing mobility and visual
               impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS Related
               Complex and mental retardation) that substantially limits one or more major
               life activities

              Has a record of such a disability or

              Is regarded as having such a disability

Your landlord may not:

                Refuse to let you make reasonable modifications to your dwelling or
                 common use areas, at your expense, if necessary for the handicapped
                 person to use the housing. (Where reasonable, the landlord may permit
                 changes only if you agree to restore the property to its original condition
                 when you move.)

                Refusal to make reasonable accommodations in rules, policies, practices or
                 services if necessary for the handicapped person to use the housing.

Example: A building with a "no pets" policy must allow a visually impaired tenant to
keep a guide dog.
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Example: An apartment complex that offers tenants ample, unassigned parking must
honor a request from a mobility impaired tenant for a reserved space near her
apartment if necessary to assure that she can have access to her apartment.

However, housing need not be made available to a person who is a direct threat to the
health or safety of others or who currently uses illegal drugs.

Requirements for New Buildings: In buildings that are ready for first occupancy
after March 13, 1991, and have an elevator and four or more units:

      Public and common areas must be accessible to persons with disabilities
       and

      Doors and hallways must be wide enough for wheelchairs.

All units must have:
      An accessible route into and through the unit

      Accessible light switches,       electrical   outlets,   thermostats   and    other
       environmental controls

      Reinforced bathroom walls to allow later installation of grab bars and

      Kitchens and bathrooms that can be used by people in wheelchairs.

If a building with four or more units has no elevator and will be ready for first occupancy
after March 31, 1991, these standards apply to ground floor units.




Housing Opportunities for families

Unless a building or community qualifies as housing for older persons, it may not
discriminate based on familial status. That is, it may not discriminate against families in
which one or more children under 18 live with

      A parent

      A person who has legal custody of the child or children or


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      The designee of the parent or legal custodian (with the parent or custodian's
       written permission).

Familial status protection also applies to pregnant women and anyone securing legal
custody of a child under 18.

Exemptions: Housing for older persons is exempt from the prohibition against familial
status discrimination if:

      The Attorney General has determined that it is specifically designed for and
       occupied by elderly persons under a federal, state or local government program
       or

      It is occupied solely by persons who are 62 or older or

      It houses at least one person who is 55 or older in at least 80 percent of the
       occupied units; has significant services and facilities for older persons; and
       adheres to a published policy statement that demonstrates an intent to house
       persons who are 55 or older. The requirement for significant services and
       facilities is waived if providing them is not feasible and the housing is necessary
       to provide important housing opportunities for older persons.

A transition period permits residents on or before September 13, 1988, to continue living
in the housing regardless of their age without interfering with the exemption.




The Department of Justice is ready to help with any problems related to housing
discrimination. If you think your rights have been violated, write us a letter or telephone
our hotline. We will be happy to mail or FAX you a complaint form. You have one year
after an alleged violation to file a complaint with us, so you should file it as soon as
possible.




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What to Tell Us

      Your name and address

      The name and address of the person your complaint is against (the
       respondent)

      The address or other identification of the housing involved

      A short description of the alleged violation (the event that caused you to believe
       your rights were violated)

      The date(s) of the alleged violation

Where to Write:

Louisiana Department of Justice
Public Protection Division
P.O. Box 94095
Baton Rouge, Louisiana 70804-9095

Where to call: If you wish, you may use the toll-free hotline number at 1-800-273-5718.




The Department of Justice will notify you when it receives your complaint. Normally we
will also:

      Notify the alleged violator of your complaint and permit that person to submit an
       answer
      Investigate your complaint and determine whether there is reasonable cause to
       believe the Equal Housing Opportunity Act has been violated

      Notify you if we cannot complete an investigation within 100 days of receiving
       your complaint

Conciliation: We will try to reach an agreement with the person your complaint is
against (the respondent). A conciliation agreement must protect both you and the public
interest. If an agreement is signed, we will take no further action on your complaint.
However, if we have reasonable cause to believe that a conciliation agreement is
breached, the Attorney General may file suit.
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After a Complaint Investigation: If, after investigating your complaint, the department
finds reasonable cause to believe that discrimination occurred, we will inform you. The
Attorney General's Office will then file a lawsuit on your behalf in state court; however,
there is no cost to you. The court can order relief, and award actual and punitive
damages, attorney fees and costs.




If you need immediate help to stop a serious problem that is being caused by an Equal
Housing Opportunity Act violation, the Department of Justice may be able to assist you
as soon as you file a complaint. The Attorney General may go to court to seek
temporary or preliminary relief, pending the outcome of your complaint, if:

      irreparable harm is likely to occur without our intervention

      There is substantial evidence that a violation of the Equal Housing
       Opportunity Act occurred

Example: A builder agrees to sell a house but after learning the buyer is African-
American, fails to keep the agreement. The buyer files a complaint with us. The
Attorney General may go to court to prevent a sale to any other buyer until we
investigate the complaint.




You may file suit, at your expense, in federal district court or state court within two years
of an alleged violation. If you cannot afford an attorney, the court may appoint one for
you. You may bring suit even after filing a complaint, if you have not signed a
conciliation agreement. A court may award actual and punitive damages in addition to
attorney's fees and costs.

For further information regarding your rights, contact:
Louisiana Department of Justice
Public Protection Division
P.O. Box 94095
Baton Rouge, Louisiana 70804-9095
(225) 342-7900 or 1-800-273-5718
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XIX. EMINENT DOMAIN/EXPROPRIATION
             Kelo, et al. v. City of New London et al.
             Louisiana‘s Constitution




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Kelo, et al v. City of New London, et al

The Supreme Court recently issued a controversial opinion regarding a city‘s right of
eminent domain or expropriation. The Supreme Court found that a city could ―take‖
land belonging to a private individual so long as the landowner was fairly compensated
and the taking of the land was for a public use and in the public interest, which might
include economic development. The details of the case at issue are as follows.

Facts:         After falling on hard economic times in the 1990‘s, the City of New
London, Connecticut, in an attempt to revitalize an economically depressed portion of
the city, sought to implement a development plan in an area of its downtown. The
proposed development plan required the acquisition of numerous properties, the
majority of which were privately owned. While many of the private landowners agreed
to sell their properties to the city‘s development agent, the New London Development
Corporation, some of the other property owners refused. The city attempted to proceed
with its plans by power of eminent domain (expropriation) in order to acquire the
entirety of those properties which it argued were necessary for the successful
implementation of the city‘s development plan. The city‘s plan proposed to redevelop
approximately 90 acres of economically depressed area into seven new parcels made
up of various office, retail, and other commercial space. Several private property
owners brought action in the New London Superior Court alleging that the city‘s attempt
to acquire their property through eminent domain was in violation of their Fifth
Amendment rights because such takings did not constitute takings for a ―public use‖ as
required by the Fifth Amendment to the United States Constitution.

Direct History: The New London Superior Court found portions of the property sought
to be acquired by the city violated the requirement that property to be expropriated
must be acquired for a ―public use‖. On appeal, the Supreme Court of Connecticut held
that all of the proposed takings were indeed valid, holding that the taking of land as part
of an economic development project is a ―public use‖ and in the public interest. The
United States Supreme Court granted certiorari in order to determine whether or not a
city‘s decision to ―take‖ private property for the purpose of economic development
constitutes a ―public use‖ as required by the Fifth Amendment to the United States
Constitution.

United States Supreme Court Holding and Analysis: This United States Supreme
Court, upheld the City‘s taking as a valid implementation of the City‘s power of eminent
domain. While the Court, undeniably recognized that a governmental entity is
prohibited from taking ―private property for the purpose of conferring a private benefit
on a particular private party‖, the Court, nevertheless confirmed its agreement with
what the Court stated to be long standing precedent, that the ―public use‖ test be
disregarded in favor of a more broad ―public purpose‖ test.          The Supreme Court
reasoned that the ―public purpose‖ test better fits the ever-evolving needs of society. In
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the Supreme Court‘s opinion, the Court declined to adopt the property owners
contentions that the properties to be acquired be considered on an individual basis.
Rather, the Court felt the redevelopment plan must be considered as a whole and since
the plan as a whole intended to provide such benefits as increased jobs and increased
revenue, the redevelopment plan and the expropriation of private land served a public
purpose. The Court further declined to address whether the redevelopment plan was
well conceived, likely to succeed, or whether the area in question was indeed actually
economically depressed, stating that once a ―public purpose‖ is determined to exist for
a proposed property taking, deference must be given to the governing officials of the
entity attempting to carry out such public purpose.

Issues in light of Kelo, et al v. City of New London, et al: While the Supreme Court
failed to view its holding in Kelo, et al v. City of New London, et al, as a departure from
prior precedence, the Kelo case represents the expropriation of private property for
purposes other than those which are commonly viewed to be beneficial to the public in
general, such as parks, airports, stadiums, roadways, bridges, etc. The case
represents the first time the Supreme Court has addressed a large scale taking by a
governmental entity based upon the broadly stated purpose of ―economic
development‖. The Kelo holding raises questions as to whether or not governmental
entities may expropriate property at their leisure simply by stating such expropriation is
for the public purpose of economic development and whether or not there is any bright-
line rule determinative of when such a taking would be prohibited.

Louisiana’s Constitution

In response to the Kelo case, a Constitutional Amendment was passed to amend
Louisiana‘s Constitution to narrow the Government‘s ability to expropriate property. The
Constitution was amended to state:

Article I, Section 4 of the Constitution of Louisiana

                                       *      *         *

               (H)(1) Except for leases or operation agreements for port facilities,
       highways, qualified transportation facilities or airports, the state or its
       political subdivisions shall not sell or lease property which has been
       expropriated and held for not more than thirty years without first offering
       the property to the original owner or his heir, or, if there is no heir, to the
       successor in title to the owner at the time of expropriation at the current
       fair market value, after which the property can only be transferred by
       competitive bid open to the general public. After thirty years have passed
       from the date the property was expropriated, the state or political
       subdivision may sell or otherwise transfer the property as provided by law.



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             (2) Within one year after the completion of the project for which the
      property was expropriated, the state or its political subdivision which
      expropriated the property shall identify all property which is not necessary
      for the public purpose of the project and declare the property as surplus
      property.

              (3) All expropriated property identified as surplus property shall be
      offered for sale to the original owner or his heir, or, if there is no heir, to
      the successor in title to the owner at the time of expropriation at the
      current fair market value, within two years after completion of the project.
       If the original owner, heir, or other successor in title refuses or fails to
      purchase the surplus property within three years from completion of the
      project, then the surplus property may be offered for sale to the general
      public by competitive bid.

              (4) After one year from the completion of the project for which
      property was expropriated, the original owner or his heir, or, if there is no
      heir, the successor in title to the owner at the time of expropriation may
      petition the state or its political subdivision which expropriated the property
      to have all or any portion of his property declared surplus. If the state or
      its political subdivision refuses or fails to identify all or any portion of the
      expropriated property as surplus, the original owner or the successor in
      title may petition any court of competent jurisdiction to have the property
      declared surplus.




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XX. ELECTRONIC FILING
      Louisiana adopted the "Louisiana Uniform Electronic Transactions Act" (―LA -
      UETA‖) in 2001. La. R.S. 9:2601 et seq. LA-UETA was merely an overlay
      between consenting parties, "each of which has agreed to conduct
      transactions by electronic means." La. R.S. 9:2605 (B)(1).

      Article 258 of the La. Code of Civil Procedure allows for electronic recording,
      initially of mortgage releases only, but ultimately for all real estate acts and
      contracts. After July 1, 2006 all real estate documents under certain parameters
      may be electronically filed with the clerks who agree to participate in electronic
      filing. To reassure the general public and specific filers as to the stability of real
      estate records requires the sender/filer to certify that the original paper
      document was in the sender‘s/filer‘s actual possession at the time of electronic
      filing. This certification takes the form of a contract between filer and clerk,
      perhaps backed by a bond. After the filing is completed, and the new ―original‖
      is established and the filer can dispose of the paper.




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XXI. FORECLOSURE
If a lender is the holder of the promissory note secured by a mortgage on real property
and the borrower fails to make payments on the promissory note, the lender may
institute foreclosure to seize the lender‘s interest in the real property or collateral. A
judicial foreclosure may be commenced by the lender upon default of the note and
mortgage by two methods. The first method is ordinary process foreclosure and the
second method is executory process foreclosure.

Ordinary Process Foreclosure

Foreclosure by ordinary process is a civil suit against the borrower asking the court to
recognize the mortgage held by the lender and for a money judgment against the
borrower for the amount due on the loan. The borrower is entitled to the normal delays
for answering any civil suit. If a judgment against the borrower is granted by the judge,
there is an approximately sixty day delay thereafter for time to expire for the borrower to
appeal the judgment to the Court of Appeals. Once the appeal periods have expired,
the lender may request that the mortgaged property be sold at judicial sale. Prior to
sale, the property will be advertised twice in the newspaper and then sold at public
auction usually as an all cash sale.

Executory Process Foreclosure

Executory process is a procedure to foreclose on collateral by a lender that is generally
faster than the ordinary process procedure. In executory process foreclosure, a money
judgment is not obtained against the borrower. The lender immediately goes to sale of
the property subject to the mortgage. Once the borrower is served with a copy of the
executory process suit, the sheriff advertises the property for sale. Again the property is
advertised in the newspaper at least twice prior to the judicial sale.

The delays to foreclose either by ordinary process or executory process can vary by
parish. While a foreclosure suit is pending, often the property cannot be sold without
the consent of the lender.




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XXII. PRESCRIPTIVE  PERIOD   ON   CONTRACTS                                             TO
      PURCHASE AND SELL IMMOVABLE PROPERTY

In 2006, a statute was passed providing for a one year prescriptive period for actions
involving certain contracts to purchase or sell immovable property. This law requires
that a suit to enforce a contract to purchase or sell immovable property which is
recorded in the Mortgage and Conveyance records of the parish in which the property is
located shall be filed within one year of the closing date provided in the contract, or
within one year of any recorded extension of the closing date.

LA R.S. 9§5609

Contracts to buy or sell; peremption of the effect of recordation; prescription for actions

       A. The effect of recording in the conveyance records of a contract to buy or sell
an immovable shall cease one year from the date of its recordation, unless prior thereto
one of the parties to the contract causes it to be reinscribed in the same manner as the
reinscription of a mortgage as provided by Article 3362 of the Civil Code. Such a
reinscription shall continue the effect of recordation for one year and its effect may be
renewed from time to time thereafter in the same manner. Except as provided in
Paragraph B, the effect of recordation shall thereafter cease upon the lapse of any
continuous twelve-month period during which the contract is not reinscribed.

       B. The filing of a notice of lis pendens of a suit to enforce a recorded contract to
buy or sell the immovable that is then effective as provided in Paragraph A shall
continue the effect of recordation in the manner and to the extent prescribed by Articles
3751 through 3753 of the Code of Civil Procedure, and reinscription of the contract shall
thereafter not be required or have effect.

        C. A contract recorded pursuant to Paragraph A shall be canceled from the
records by the recorder upon the written request of any person after the effect of its
inscription has ceased as herein provided or as provided by Article 3753 of the Code of
Civil Procedure.

LA R.S. 9§5645. Prescription of actions involving contract to sell or transfer immovable
property

      An action for the breach or other failure to perform a contract for the sale,
exchange, or other transfer of an immovable is prescribed in five years.




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XXIII.              MINERAL RIGHTS/USE OF SURFACE RIGHTS
In 2006, a statute was passed by the Legislature addressing the reservation of mineral
rights which requires that certain information regarding the use of the surface by the
owner of the mineral rights is included in a reservation of mineral rights.

LA R.S. 31§11. Correlative rights of landowner and owner of a mineral right and
between owners of mineral rights

       A. The owner of land burdened by a mineral right or rights and the owner of a
mineral right must exercise their respective rights with reasonable regard for those of
the other. Similarly the owners of separate mineral rights in the same land must
exercise their respective rights with reasonable regard for the rights of other owners.

       B.     (1) A reservation of mineral rights in an instrument transferring ownership
of land must include mention of surface rights in the exercise of the mineral rights
reserved, if not otherwise expressly provided by the parties.

               (2) In the absence of particular provisions in the instrument regulating the
extent, location and nature of the rights of the mineral owner to conduct operations on
the property, the requirements of this Subsection are satisfied by inclusion of the
following language in the reservation of mineral rights: "The transferor (Seller) shall
exercise the mineral rights herein reserved with reasonable regard to the rights of the
landowner, and shall use only so much of the land, including the surface, as is
reasonably necessary to conduct his operations. Such exercise of mineral rights shall
be subject to the provisions of Articles 11 and 22 of the Louisiana Mineral Code. The
transferee (Buyer) recognizes that by virtue of the mineral reservation herein made, the
mineral owner shall have the right to use so much of the land, including the surface, as
is reasonably necessary to explore for, mine and produce the minerals."




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XXIV.         CONDOMINIUM ASSOCIATION LIENS
This new law allows condominium associations to accelerate condominium fees due for
routine expenditures if certain conditions are met.

LA R.S. 9§1123.115. Privilege on immovables

       A.(1) The association shall have a privilege on a condominium parcel for all
unpaid or accelerated sums assessed by the association and interest thereon at the
rate provided in the condominium declaration or, in the absence thereof, at the legal
interest rate. This privilege shall also secure reasonable attorney fees incurred by the
association incident to the collection of the assessment or enforcement of the privilege.
 Further, if the unit owner fails to timely pay the assessments for common elements for
a period of six months or more during any eight-month period and notice to the
delinquent unit owner is provided as set forth in Paragraph (3) of this Subsection, the
association may accelerate the assessment on the common elements for a twelve-
month period and file a privilege for the accelerated sums. Assessments for common
elements are those assessments that are collected on a regular basis by the
association for routine expenditures associated with the property.

        (2) To be preserved, the privilege shall be evidenced by a claim of privilege,
signed and verified by affidavit of an officer or agent of the association, and shall be
filed for registry in the mortgage records in the parish in which the condominium is
located. The claim of privilege shall include a description of the condominium parcel,
the name of its record owner, the amount of delinquent or accelerated assessment, and
the date on which said assessment became delinquent.

        (3) The association shall, at least seven days prior to the filing for registry of the
privilege, serve upon the delinquent unit owner a sworn detailed statement of its claim
for the delinquent or accelerated assessment that includes the date said assessment
became delinquent or accelerated, which service shall be effected by personal service,
or registered or certified mail.

         B. A claim of privilege recorded, as set forth in Subsection A of this Section,
shall preserve the privilege against the condominium parcel for a period of one year
from the date of recordation. The effect of recordation shall cease and the privilege
preserved by this recordation shall perempt unless a notice of filing of suit, giving the
name of the court, the title and number of the proceedings and date of filing, a
description of the condominium parcel and the name of the unit owner, on said claim is
recorded within one year from the date of the recordation of the inscription of the said
claim. Such notice of filing suit shall preserve the privilege until the court in which the
suit is filed shall order the cancellation of the inscription of the said claim and the notice
of filing of suit on said claim or until the claimant authorizes the clerk of court or recorder
of mortgages to cancel the said inscriptions.

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        C. A privilege under this Section is superior to all other liens and encumbrances
on a unit except (1) privileges, mortgages, and encumbrances recorded before the
recordation of the declaration, (2) privileges, mortgages, and encumbrances on the unit
recorded before the recordation of the privilege as provided in Subsection B of this
Section, (3) immovable property taxes, and (4) governmental assessments in which the
unit is specifically described.




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XXV.         TRADEMARK
The National Association of REALTORS® provides excellent materials explaining the
uses and limitation of uses of the trademark for the National Association of
REALTORS® and correspondingly the Louisiana REALTORS®.             The National
Association of REALTORS® holds the trademark on the following:

      REALTOR®
      REALTOR-ASSOCIATE®
      REALTORS®
      the REALTOR® Logo
      The Block ―R‖ mark


The information regarding these marks may be found at the National Association of
REALTORS® website at http://www.realtor.org/letterlw.nsf/pages/mmmpartone

These marks identify Members of the National Association and distinguish them from
nonmembers or general licensees under the Louisiana Real Estate Act. The National
Association of REALTORS® has a comprehensive protection program designed to
ensure that the marks are used only by or in reference to members and member boards
of the National Association and that all uses of the marks are in proper form and
context. Questions regarding the use of the marks may be addressed to the National
Association of REALTORS®.




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XXVI.        LEGAL ACTION FUND
Legal Action Fund
      Application Procedures
      Forms
             National Association of REALTORS Legal Action Request Application
             Addendum to Application for Assistance from the Legal Action Fund of
             the Louisiana REALTORS




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LEGAL ACTION FUND
The Louisiana REALTORS adopted a revised Legal Action Fund in 2005. The
purpose of the fund is to assist members when the Louisiana REALTORS feel that it
will be beneficial to the industry as a whole, to the member boards, and to the individual
members of the member boards, either to intervene in litigation as a friend of the court
or to assist its member boards or individual members of member boards, under certain
circumstances with both or either legal assistance and financial assistance. The Legal
Action Fund therefore is for the benefit of (1) member boards (2) individual members or
(3) the association itself.

The Legal Action Fund is financed from special dues paid by member boards and the
individual members of the Louisiana REALTORS.

      A.     APPLICATION PROCEDURES
                          Procedure for Individual Member:


      1.     Any individual member of any Member Board, who becomes a litigant in
             any litigation or threatened litigation under the provisions of the Civil
             Rights Act, Federal Anti-trust laws, or any other state or federal legislation
             containing provisions directed at real estate brokers or the real estate
             industry as a whole, (hereinafter sometimes referred to as a ―Claim‖), and
             who desires financial assistance to represent itself or himself, may make
             application for such assistance as an Individual Member. The request for
             legal assistance shall be made on the form required by the National
             Association of REALTORS® (―NAR Application form‖) with the Addendum
             required by Louisiana REALTORS®. This request for assistance should
             be accompanied by a copy of the civil suit record, if litigation is pending,
             and should set forth in writing all the pertinent details concerning the
             matter. The statement may be prepared by the Individual Member‘s
             attorney. The statement must contain an estimate of the cost of the
             pending litigation and applicable insurance coverage.

      2.     When such application for financial assistance is received by the
             Louisiana REALTORS®, it shall be reviewed by the Board of Directors of
             such board and by the Louisiana REALTORS® ‘s attorney.

      3.     A notice of the application for assistance shall be sent by the Louisiana
             Realtors® to the Member Board of the Individual Member.




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             Procedure for Member Board

      In those instances where the Member Board itself is threatened with litigation, or
      has been made a party to litigation, it shall follow the same procedures set forth
      for Individual Members of Member Boards, except that no action is necessary
      other than a written request from the Member Board for assistance with
      accompanying required NAR Application form, Addendum data, legal documents,
      cost estimate and insurance coverage availability.




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      B.      FORMS

              1.     National Association of Realtors® Legal Action
                     Request Application

                      NATIONAL ASSOCIATION OF REALTORS®

                        Legal Action Committee Request Form

Case Title:

1.    Identify all parties to the case, the role (plaintiff, defendant, amicus, other) of each, and
      the jurisdiction and court or agency where the case is or was brought:




2.    Identify the party to be assisted by this request, the firm or attorney representing said
      party, and the party bringing this request:




3.    Provide a summary of the proceedings to date as well as those anticipated through the
      conclusion of the litigation.




4.    Describe the legal issues raised by this case, including reasons why these issues are of
      national precedential significance to the real estate business, real estate professionals in
      general or private property rights.




5.    Is the case covered by the NAR Blanket Errors and Omissions Insurance Policy?           Yes
      No

      If so, specify all payments made to date by any parties covered by said insurance and by
      the insurance carrier, including deductible and insured participation amounts.




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6.    Does your State Association have a legal action fund?      Yes       No
      If yes, has legal action support been requested from the State Association?
           Yes       No

      If yes, specify the support awarded.
      If not, why not?



7.    Has legal action support been requested from any local Boards?
         Yes      No

      If yes, identify the Board(s) and the support awarded.
      If not, why not?



8.    Is any other organization providing financial or other support?
          Yes     No

      If yes, please identify the organization and indicate the amount of support being
      provided.



9.    Provide an estimate (or the exact amount, if known) of the legal expenses incurred to
      date or expected to be incurred by the party to be supported, through the conclusion of
      the litigation:

                                     Expenses incurred to date

                                     Total expenses anticipated to conclusion


10.   Amount requested from NAR Legal Action Fund (specify amount):



11.   Number of members in State Association:
      Number of members in appropriate local Board(s) or REALTORS® (identify Board(s):



12.   Other comments relevant to the Committee's consideration:




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2.    Addendum to Application for Assistance from the Legal Action
      Fund of the Louisiana Realtors®
Instructions: Complete in ink or type. Applicant may reproduce this application
and expand space under each item number as necessary or attach additional
sheets.

1. Applicant

      Name:

      Address:

      Telephone:

      E-mail:

      Facsimilie:

2. Applicant’s Attorney

      Name:

      Firm:

      Address:

      Telephone:

      E-mail:

      Facsimilie:

3. Case

      Style:

      Court:

      Cause No.:

      Anticipated Trial Date:

      Status:


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4. Summary of Legal Issues

Plaintiff’s Theory of Recovery:
(What is the Plaintiff’s complaint? What damages has the Plaintiff alleged he is
owed?)



Defendant’s Theory of Defense:
(What is the defense to Plaintiff’s claim?)


5. Evaluation of Applicant’s Chances of Prevailing

      Attorney for Applicant:



6. Required Information to Include with Application

This application will not be considered complete without copies of the following
information attached:

      (a)    Plaintiff’s Original or Last Amended Petition;
      (b)    Defendant’s Answer;
      (c)    any relevant information related to the facts of the case such as
             contracts, leases, listing agreements, briefs and the like;
      (d)    all invoices from applicant’s attorney itemizing fees incurred to date;
      (e)    cancelled checks paid to applicant’s attorney showing attorney fees
             paid to date.

7. Certification

We certify that all statements in this application, to the best of my knowledge, are
true and correct.


________________________________                 ______________________________
     Applicant                                   Applicant’s Attorney

Date Application Signed:




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XXVII.       HOTLINE PROGRAM
Hotline Program
       Summaries of Hotline Questions Received in 2005, 2006 through July, 2007




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HOTLINE PROGRAM
The Louisiana REALTORS provides a hotline services to its member boards and
members. The purpose of the hotline service is to provide general legal principals on
questions affecting the real estate industry as a whole. The purpose of the hotline is not
to render personal legal advice regarding specific questions about specific situations or
to provide legal advice when actual litigation is involved. A broker or member board
requesting advice through the hotline service may submit a written question to the
Louisiana REALTORS via e-mail, www.larealtors.org or facsimile, 225-926-5922. This
request will be forwarded on to the attorney‘s for the Louisiana REALTORS.
Generally, a written response will generally be provided within 48 –72 hours.




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Summary of Hotline Questions Received in 2005

The HOTLINE can provide general legal principles on questions affecting the industry
as a whole, but cannot render personal legal advice regarding specific questions about
specific situations or provide legal advice when actual litigation is involved. Therefore,
the HOTLINE cannot provide specific legal advice as to your situation, but we do
provide the following general discussion of issues which are of interest.

AFTER THE FACT REFERRAL FEES
QUESTION:

I need guidance in dealing with an After the Fact Referral Fee negotiation with
Relocation Company A.

I was referred by a previous client to Ms. Jane Smith who owns a home at Bunkie,
Louisiana. We met with him on a Friday and did a presentation and priced his
home. I informed him I am very familiar with all the Relocation Company A’s
paperwork and will work with them concerning any necessary forms, disclosures,
etc.

He also met with an agent referred by Relocation Company A.

Ms. Smith chose our company to list her home.

When she called Agent A with Relocation Company A she was informed that I
was not a preferred REALTOR® with Relocation Company A. But I could become
one if I would agree to a 35% referral fee. If I did not pay this fee, they would
decrease his bonus for managing the sale of his home from 3% to 1% by using
me.

He called me and explained this to me. I explained to him that maybe this
division of Relocation Company A did not realize that this is against Louisiana
Law. He asked me to call Agent A direct.

I called Agent A. He explained that it did not matter. That if I did not agree to the
35%, he would reduce Ms. Smith’s bonus at closing.

Could you please help me with this asap.

ANSWER:

Section 1447 of the Louisiana Real Estate License Law states that ―it is unlawful for any
person including but not limited to a relocation company, to directly or indirectly solicit or
request a referral fee or similar payment for the referral of a buyer or seller unless the
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person seeking the referral fee has reasonable cause‖. Reasonable cause is defined as
the following:

      a)      the person seeking the referral fee introduced the client to the licensee or
              registrant from whom the referral fee is being sought: or

      b)      the person seeking the referral fee has a written contractual relationship
              with the licensee or registrant for a referral fee or similar payment; and

      c)      the licensee or registrant has received the client referral prior to the client
              contracting to buy or list real estate with the licensee or registrant.

Section 1447 furthermore declares that it is unlawful to demand a referral fee from a
licensee or registrant when reasonable cause, as defined above, does not exist. The
demand for a referral fee when reasonable cause does not exist constitutes interference
with a real estate brokerage relationship, and a threat to reduce re-location benefits in
order to generate a referral fee from the licensee when reasonable cause does not exist
is specifically prohibited.

Any party seeking damages for a violation of Section 1447 may be awarded actual
damages plus attorneys‘ fees if they prevail.

Additionally, even if a referral fee is warranted under the circumstances you have
described, several applicable rules and regulations of the Louisiana Real Estate
Commission should be examined.

Under §6303 of the Rules and Regulations of the Louisiana Real Estate Commission, a
licensed Louisiana broker can divide or share a real estate commission with a broker
licensed in another jurisdiction whenever the broker licensed in the other jurisdiction
acts only as a referral agent who is not involved in actual negotiations, execution of
documents, collections of rent, management of property, or other real estate activity
unless the activity involves more than the mere referral of a client or customer to a
licensed Louisiana broker.

§5102 of the Rules and Regulations of the Louisiana Real Estate Commission
addresses circumstances under which a Louisiana broker may cooperate with a
licensed broker of another state in the sale, lease, management, or auction of real
property located in Louisiana. Some of the conditions include: that the sale be handled
under the direct supervision and control of the Louisiana broker, monies collected be
held in the Louisiana broker‘s sales account, a copy of the cooperating agreement must
be filed with the real estate commission prior to any activity with respect thereto and all
fees and commissions received from the cooperative transaction must be paid to the
Louisiana broker who in turn compensates the out of state broker. §6302 provides that
percentage of fees or commissions to be received by the Louisiana broker and the out
of state broker shall be negotiated between the two parties and shall be agreed upon in
writing by the parties in their cooperative agreement.
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CLIENT LISTS
QUESTION:

Is there a law governing the ownership of an agent’s database? Is the agent’s
client list their own legal property or will it become the property of the Broker?

ANSWER:

The Louisiana Real Estate Commission Rules and Regulations Chapter 17, Section
1703 provides:

§1703. Relinquishment of Business Related Data

      Upon termination of a business relationship with a sponsoring broker,
      every sales person or associate broker shall immediately turn over to the
      sponsoring broker all listing information, contracts, agency forms, and
      other business or agency-related information, data, or documents
      obtained or provided by the sponsoring broker or agency for use by the
      licensee during the business relationship. (emphasis supplied)

Generally, applying this rule, the ―client data‖ or ―client list‖ would seem to be the
property of the sponsoring broker. Employment contracts with the agent addressing this
issue might vary this result.

QUESTION:

According to the MLS Rules and Regulations, all listings are in the name of the
broker, due to the fact that the Broker/Principal is the only person authorized to
office subagency to another real estate firm.

If an agent has a client manager software to manage clients, who owns the client
data base, and are they allowed to take it with them when they leave the firm?

ANSWER:

The Louisiana Real Estate Commission Rules and Regulations Chapter 17, Section
1703 provides:

§1703. Relinquishment of Business Related Data

      Upon termination of a business relationship with a sponsoring broker,
      every sales person or associate broker shall immediately turn over to the
      sponsoring broker all listing information, contracts, agency forms, and

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      other business or agency-related information, data, or documents
      obtained or provided by the sponsoring broker or agency for use by the
      licensee during the business relationship. (emphasis supplied)

Generally, applying this rule, the ―client data‖ would seem to be the property of the
sponsoring broker. Employment contracts with the agent addressing this issue might
vary this result.

COMMISSIONS
QUESTION:

About six weeks ago, the executor of an estate property I have listed, informed
me that she was going to buy the property for herself. Her attorney and the heirs
have told me that the executor does not want to pay any real estate commission
in her purchase. Her heirs just want this ordeal over but did not think it fair to me
not to be paid for my marketing efforts. The executor has issued a letter asking
us to cancel the listing and refuses to let me show the home. The listing expires
January 15, 2006. What can legally be done to protect the commission?

ANSWER:

Louisiana Code of Civil Procedure Article 3286 provides that:

      A succession representative who desires to list succession property for
      sale shall file a petition to which shall be annexed the proposed listing
      agreement, which shall contain a provision that any offer to purchase
      submitted under such agreement to the succession representative shall be
      subject to the suspensive condition that the court approve the proposed
      sale. The court shall render an order, ex parte, authorizing the execution
      of the listing agreement by the succession representative when it
      considers such agreement to be in the best interests of the succession.

Article 3191 of the Louisiana Code of Civil Procedures provides that:

      A succession representative is a fiduciary with respect to the succession,
      and shall have the duty of collecting, preserving, and managing the
      property of the succession in accordance with law. He shall act at all
      times as a prudent administrator, and shall be personally responsible for
      all damages resulting from his failure so to act…

Article 3194 of the Louisiana Code of Civil Procedure provides that:

      A succession representative cannot in his personal capacity or as
      representative of any other person make any contracts with the

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      succession of which he is a representative. He cannot acquire any
      property of the succession, or interest therein, personally or by means of
      third persons, except as provided in Article 3195.

      All contracts prohibited by this Article are voidable and the succession
      representative shall be liable to the succession for all damages resulting
      therefrom.

Article 3195 provides:

      The provisions of Article 3194 shall not apply when a testament provides
      otherwise or to a succession representative who is:

      1.     the surviving spouse of the deceased;
      2.     A partner of the deceased, with respect to the assets and business
             of the partnership;
      3.     A co-owner with the deceased, with respect to the property owned
             in common;
      4.     An heir or legatee of the deceased; or
      5.     A mortgage creditor or holder of vendor‘s privilege, with respect to
             the property subject to the mortgage or privilege.

As provided in these articles, the succession representative may execute a listing
agreement as authorized by the court and further made buy property of the succession
if certain circumstances are met. Whether or not a commission is due if the succession
representative herself buys the property, will in part be determined by the contractual
provisions of the listing agreement. Further, we suggest you hire private legal counsel
to review the listing agreement and the actions of the succession representative to
determine if under these circumstances a commission will be due. An intervention into
the succession proceedings or objection to the Motion by the succession representative
to purchase the property may be appropriate.

QUESTION:

A long-term friend (Mr. Jones) had been working with an agent (“Agent”) who
showed him property as well as wrote offers that were not accepted. I have
spoken with the agent on several occasions giving information and suggestions
as she is a relatively new agent. Mr. Jones wanted us to meet so that I can assist
her with any questions that she might have about his transactions and questions
in general as she is a friend of his also.

The agent wrote an offer on Mr. Jones’ behalf and the owner countered. The
agent did not get the response to the owner’s agent as outlined in the counter
and the owner accepted another offer.

Mr. Jones no longer wants to use this agent.
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The contract fell through and the property is now available again. I have gone to
the property with him to view it again and give my opinion. He now wants me to
write an offer on this property.

Question: Because the other agent initially showed the property to Mr. Jones but
there was a break in his initial contract/acceptance (counter expired) and the fact
that Mr. Jones no longer wants to work with the other agent, would the other
agent be considered as the “procuring cause” and due a commission?

Question:    Can I legally work with Mr. Jones in a contract on this particular
house?

ANSWER:

Generally, a REALTOR® has a claim to commission if he or she was the procuring
cause of sale. ―Procuring cause‖ is judicially defined as a cause originating or setting in
motion a series of events which, without a break in continuity, results in the
accomplishment of the objective of the employment of the broker (i.e., sale of property)
and ultimate agreement between the principal and prospective contracting party, or the
procurement of a purchaser who is ready, willing and able to buy on the principal‘s
terms.

The question of procuring cause is almost always problematic. It is intensely factual,
always requiring a detailed analysis of all underlying facts and circumstances
surrounding the matter, including the prior course of contact of all parties vis-à-vis their
relations to one another with respect to the property at issue. Some of the questions
which should be considered in determining if the initial broker is entitled to a
commission include the following:

1.     Who first introduced the purchaser to the property?
2.     When was the first introduction made?
3.     How was the first introduction made?
4.     Did the broker who made the initial introduction to the property engage in
       conduct, which caused purchaser to utilize the services of another broker?
5.     Did the cooperating broker initiate a separate series of events, unrelated to and
       not dependant on any other broker‘s efforts which led to the successful
       transaction- that is, did the broker perform services which assisted the buyer in
       making his decision to purchase?
6.     How did the efforts of one broker compare to the efforts of another?
7.     What was the length of time between the initial broker‘s efforts and the final sales
       agreement?
8.     Did the broker who made the initial introduction to the property maintain contact
       with the purchaser?
9.     Did the seller act in bad faith to deprive the initial broker of his commission?

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There are hundreds of cases on procuring cause. No two are exactly alike. No doubt
cases can be found both for and against the argument that Agent A might be a
procuring cause for the sale in this instance. We cannot, in this HOTLINE, opine as to
the likelihood of success on the merits of a case as to whether Agent A might be a
procuring cause for the sale.

You also asked whether you can work with Mr. Jones or his agent. If any agency
agreement between Mr. Jones and Agent A has terminated (the agreement could have
a reservations clause regarding homes shown by Agent A) than Mr. Jones would
seemingly be free to work with the agent of his choice.

DEPOSITS
QUESTION:

Can we give back purchaser’s deposits without going through the formal
Louisiana Real Estate Commission procedures (certified letters to parties, waiting
periods, notices to other agents & brokers, etc.) if the property is destroyed or if
closing dates have expired?

ANSWER:

Hurricane Katrina and the ensuing natural disaster have brought havoc upon Southeast
Louisiana. However, the unfortunate circumstances surrounding Hurricane Katrina‘s
landfall has not relieved real estate agents and their brokers from their duties regarding
the safeguarding of escrow deposits.

Regulation 2721 of the Louisiana Real Estate Commission continues to govern the
withdrawal and disbursement of escrow deposits from a real estate broker‘s sales
escrow account. Despite the fact that properties under contract may have been
destroyed by the storm, and/or closing dates may have passed without the completion
of a sale, deposits should not be disbursed to the purchaser without complying with one
of the requirements of Louisiana Real Estate Commission Regulation 2721. Among
other things, Louisiana Real Estate Commission Regulation 2721 permits the return of a
deposit to the prospective purchaser upon 1) the mutual consent of all parties, 2) a court
order or 3) an order of the Louisiana Real Estate Commission.

If a real estate broker becomes aware of a dispute among the parties as to whom an
escrow deposit should be disbursed, he or she should comply with the requirements of
Louisiana Real Estate Commission Regulation 2901 within 90 days by:

1)    disbursing the disputed funds based upon the written mutual consent of all
      parties;



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2)    disbursing the disputed funds based upon a reasonable interpretation of the
      contract between the parties and providing all parties and licensees 10 days
      written notice of his/her intention to disburse such funds;
3)    depositing the funds into a court of competent jurisdiction and requesting a
      concursus proceeding be instituted;
4)    depositing the funds with the LREC, along with a request that an escrow
      disbursement order be issued; or
5)    disbursing the funds upon an order of a court of competent jurisdiction.

QUESTION:

What is the proper way to write a deposit check from my escrow account. In New
Orleans the Title Companies tell me to make the checks payable to them. In
Baton Rouge and Lafayette the attorneys tell me to make them out exactly like the
names on the deposit check even if is not the buyer’s name on it.

ANSWER:

The proper way to disburse a deposit from your escrow account is governed by Section
2721 of the Louisiana Real Estate Commission Rules and Regulations. Section 2721
provides that such deposit shall not be withdrawn except under certain circumstances,
including:

1.    Upon mutual written consent of all parties having an interest in the funds;
2.    …
3.    …
7.    For the purpose of returning the funds to a buyer at the time of closing;

In accordance with the aforementioned rule, you are permitted to make your checks
disbursing the deposits, payable directly to the title companies, provided you have
obtained the mutual written consent of both the purchaser and seller prior to doing so.
This consent may be contained through the terms of the purchase agreement itself or
some other written agreement between the parties. It appears that unless there is
written agreement otherwise, the deposit should be returned to the buyer upon the
occurrence of closing.

QUESTION:

Many times agents require that an offer on a property be accompanied by a letter
of pre-approval. The purpose of this is to help ensure to the seller that the
potential purchaser will be able to obtain the loan necessary for the purchase.

There are many mortgage brokers who can and do issue these letters, many of
whom may not be known to any particular agent or seller. Since a pre-approval
letter is only as good as the company that issues it, it is important that the seller
feel comfort in the issuer of the letter.
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In this regard, would it be legal to do the following:

1.    Is the contract considered nonbinding on the seller if the deposit is not
      received?

2.    Is the contract considered nonbinding on the seller if the deposit is not
      received immediately?

3.    What constitutes immediately?

4.    Is it necessary to get a cancellation on the first contract if it is not binding?

5.    Can we declare the first contract null and void if the deposit comes in five
      (5) days after acceptance when agent represented that it would be
      expressed in?

In the event that none of these alternatives would be acceptable, would you
please offer a legal alternative that would accomplish the intended purpose?

ANSWER:

1.    This answer specifically is controlled by the language of the contract itself. Many
      purchase agreements specifically provide that if the deposit is not received the
      contract is nonbinding or void. Other purchase agreements provide failure to
      make the deposit will not void the contract but will be a breach of the contract. In
      this instance, if the buyer is ready to buy the property, appears at the act of sale
      and tenders the purchase price, then the seller cannot refuse to deliver title on
      the grounds that the buyer did not make the initial deposit (Membreno v. Ponder,
      417 So.2d 1257 (La. Ct. App. 1st Cir. 1982).

2.    Again, the answer to this question is controlled specifically by the terms of the
      contract itself. Often contracts state that the contract is effective upon the receipt
      of the deposit. If the contract does not contain a provision it is void if the deposit
      is not made, the seller may have the remedy of dissolution if the deposit is not
      received.

3.    If the word ―immediately‖ is not defined within the contract itself, Louisiana courts
      will generally impose a definition by considering what the ―reasonable man‖
      would believe to be ―immediately.‖ Time is generally of the essence in real
      estate contracts. Therefore, ―immediately‖ is generally a very short timeline.
      Factors to consider in determining what constitutes ―immediate‖ are when are the
      proposed closing dates, as well as the offer and acceptance timeline used in the
      contract.


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4.    If a purchase agreement is not binding, there is no requirement to get it cancelled
      prior to executing a second binding contract. Licensees should be very careful
      though in obtaining multiple contracts, since of course, there is a risk that a
      contract is actually binding when the agent feels that it is nonbinding and a
      dispute could arise over which buyer has executed a valid purchase agreement
      for the home.

5.    Again, this answer will depend upon the exact language of the contract. Often
      the contract says that the terms thereof cannot be modified except in a writing
      signed by the parties. In this case, the agent‘s representation that the deposit
      would be ―expressed‖ is not going to alter the exact language of the contract. So
      whether or not the contract is valid until the deposit is received or has expired on
      its own terms with the deposit being late, will be determined in part by the exact
      wording of the contract. If a contract is not being accepted because the deposit
      was not received in a timely fashion, a licensee would be well served to make a
      record in writing forwarded to the other agent that the deposit was not timely
      received.

QUESTION:

I have escrow funds in the amount of $500.00 deposit for a purchase agreement
dated 9/3/2005. The sale was to take place on September 23, 2005. Lake Charles
was under a mandatory evacuation order on September 22, 2005, the closing was
cancelled, no extension was signed. The buyer’s agent to date has not been able
to contact or locate buyer. I am unsure as to how to handle the release of the
funds. It has been 10 weeks and I feel the buyer did not follow all terms and
conditions of the contract, therefore is in breach of contract.

ANSWER:

Hurricanes Katrina and Rita brought havoc to southwest Louisiana. Katrina and Rita‘s
landfall, however, does not relieve real estate agents and their brokers from abiding by
the rules regarding escrow deposits. There has been no change in the deposit rules by
the Louisiana Real Estate Commission since Hurricanes Katrina and Rita.

Section 2721 of the Louisiana Real Estate Commission Rules governs the withdrawal
and disbursement of escrow deposits from a real estate broker‘s escrow accounts.
Even though a property under a purchase agreement may have been destroyed by the
storm and/or the closing date may have passed without completion of the sale, deposits
should be disbursed by real estate brokers in compliance with the Louisiana Real Estate
Commission Rules. LREC Rule 2721 permits the return of the deposit to a perspective
purchaser upon:

1)    the mutual consent of all parties,
2)    a court order, or
3)    an order of the Louisiana Real Estate Commission.
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If a real estate broker becomes aware of the dispute among the parties as to whom an
escrow deposit should be disbursed, he or she should comply with the requirements of
Louisiana Real Estate Commission Regulation 2901 within ninety (90) days by:

1)    disbursing the disputed funds based upon the written mutual consent of all
      parties;
2)    disbursing the disputed funds based upon a reasonable interpretation of the
      contract between the parties and providing all parties and licensees ten (10) days
      written notice of his or her intentions to disburse funds;
3)    depositing the funds into a court of competent jurisdiction and requesting a
      concursus proceeding to be instituted;
4)    depositing the funds with the Louisiana Real Estate Commission, along with a
      request that an escrow disbursement order be issued; or
5)    disbursing the funds upon an order of a court of competent jurisdiction.

QUESTION:

Please advise me as to your opinion regarding this escrow dispute. A buyer in
Shreveport entered into a sales contract to purchase a home with a corporate
seller in Oregon. The seller’s contract addendum was attached to our local sales
agreement.

Ultimately the buyer’s loan was denied due to several reasons including credit
issues and not being able to find a source who would finance manufactured
homes. A letter of denial was issued by the lender and forwarded to the
corporate seller.

The corporate seller is asking for the purchaser’s deposit (per their corporate
addendum) whereas the buyer is referring to our local contract and asking that
their deposit be returned to them.

The seller is also making note that the sales contract had actually “expired” and
therefore the financing contingency was subsequently not valid any more. The
seller was made aware of the delays in processing the loan and knew that we
would not be closing on time.

ANSWER:

In the absence of a dispute as to the proper disbursement of the deposit, the broker
should disburse the deposit in accordance with the written instructions of the parties.
However, when a real estate transaction fails to close, the parties may dispute the
cause of the failure, and thereafter, to whom the deposit should be delivered.

If the broker acting as escrow agent becomes aware of a dispute as to the ownership of
the funds constituting the deposit, and an agreement cannot be reached between the
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buyer and seller as to how to disburse the deposit, in accordance with Section 2901 of
the rules and regulations of the Louisiana Real Estate Commission, the broker must do
one of the following within ninety (90) days from the date of the scheduled closing or the
date upon which the broker became aware of the dispute in question, which ever occurs
first:

i)     Disburse the funds in accordance with the broker‘s reasonable interpretation of
       the contract allocating the deposit to broker as escrow agent. (Broker shall not
       disburse until 10 days have passed since broker provided notice of his/her intent
       to disburse such funds.)
ii)    Deposit the funds into the registry of a court of competent jurisdiction and proper
       venue and invoke a concursus proceeding.
iii)   Deposit the disputed funds with the Louisiana Real Estate Commission and
       request that they make an escrow disbursement order.

Options ii) and iii) above are recommended should there be any uncertainty in the mind
of the broker as to the proper disbursement of the deposit.

ERRORS AND OMMISSIONS
QUESTION:

Given: Sale closed by an attorney in 2004. Instructions by buyer and seller were:
“All prior year property taxes must be paid by seller.” “Closing attorney shall
certify title at transfer to be free and clear of all liens, mortgages, leases,
encumbrances …” 2002 taxes have been found to be unpaid, clearly identified in
the records.

Is the attorney obligated to perform curative measures for errors and omissions
under state law and or legal requirement?

ANSWER:

The duty of an attorney in a real estate transaction is governed by the general rules for
all attorneys‘ duties to their clients. One question here is, whether the closing attorney
represented the buyer, the seller, the lender, or all of the above. An attorney is
obligated to exercise the degree of care and diligence which is exercised by prudent
practicing attorneys in his or her locality. Under Louisiana law, an expressed
agreement between the parties is required in order to establish an attorney/client
relationship. Thus, the attorney for one party to a transaction drafting all of the
purchase documents for both parties does not generally render the attorney liable for
malpractice to the other party even if the attorneys agree to share the fees and
commissions for the title premiums. See Bergman v. New England Insurance
Company, 874 F.2d 672 (5th Cir. 1989). Louisiana follows the majority rule that absent
fraud, collusion, or privity of contract, an attorney cannot be held liable to a non-client

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for malpractice. Therefore, determining who the attorney represented, if indeed there
was malpractice, is paramount.

Other questions to ask in considering this transaction, is whether or not the HUD
Statement or settlement statement reflected taxes prorated for any taxing year. Also,
whether the Act of Sale certified that taxes for previous years had been paid. Whether
the attorney actually gave a title opinion, certifying title transfer to be free and clear of all
liens, mortgages, leases and encumbrances as set forth in the question. All of these
will affect whether a malpractice claim can be made.

HOMESTEAD EXEMPTION/USUFRUCT
QUESTION:

Does Homestead Exemption apply to a decedent’s friend who has usufruct of the
decedent’s home.

ANSWER:

The Homestead constitutional amendment passed in 2004 provides the homestead
exemption will apply fully to:

1)     a surviving spouse or former spouse (separated or divorced) when either one
       occupies the home and title is held in the name of the surviving spouse and/or
       former spouse, the surviving spouse who has a usufruct to use the homestead,
       or a testamentary trust for the surviving spouse and descendants of the
       deceased or surviving spouse;

2)     otherwise eligible property placed in an irrevocable trust by the prior owner and
       current occupant who is also the principal beneficiary and settlor;

3)     property where one or two prior owners have usufruct and one is the current
       occupant;

4)     property owned in indivision (shared ownership), limited to the pro-rata share
       owned by the occupant(s);

We are not sure from your question who is currently the owner of the house. The
general rule is though the owner of the house must also occupy the house to receive
the homestead exemption, unless one of the exceptions shown above applies.




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INSPECTION REPORTS
QUESTION:

I am a licensed home inspector in the state of Louisiana. I recently inspected a
house for a buyer that decided to not buy the house. The buyers’ agent then
offered to sell the report to the listing agent for future use. The money was going
to be given back to the buyer to offset his expenses.

The contract between the buyer (my client) and myself states that the report is for
the sole and exclusive use of the client and his agent only.

I believe:

Any agent who buys or sells a copy of the report to other parties has just become
a party to any liability from errors and omissions. An unsuspecting third party
who relies on the report (that may be outdated) to buy a house and later becomes
unhappy with the purchase could sue all parties involved. The inspector’s
liability should be only to the client but because of actions by real estate agents
he could be liable to multiple parties for years to come. Appraisals are only
transferable by the appraiser. Are inspection reports different?

ANSWER:

You have stated your belief that real estate appraisals ―are only transferable by the
appraiser‖. We are unaware of any statute or court authority which prohibits real estate
appraisals from being transferred by their intended beneficiaries to third parties to whom
such appraisals may prove useful absent a contractual prohibition. Your belief that
appraisals are transferable by the appraiser alone may stem from the fact that transfer
prohibition clauses are commonly placed in contracts procuring appraisals or within the
appraisals themselves. From your inquiry, it appears that a similar provision is
contained in your contract with the buyer to perform the home inspection in question.

As you are probably aware, Louisiana law has long provided and protected parties
freedom to contract about that which is lawful and not prohibited by public policy. We
are not aware of any public policy prohibition prohibiting licensed home inspectors from
limiting the use of home inspection reports to their intended beneficiaries. The inclusion
of such a provision in any contract to perform an inspection would at the very least
serve as an added measure of protection as to the claims of any third parties who later
attempt to rely upon such an inspection report.

While Louisiana jurisprudence has recognized, in some circumstances, the rights of
third parties to recover damages they have sustained due to their reliance upon similar
reports despite the absence of a contract between the recovering parties and the
inspector who negligently misrepresented facts contained within his report, (see Barrie

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v. VP Exterminators, Inc., 625 So. 2d 1007 (La. 1993) (the purchasers‘ right of action
against a termite inspection company for negligent misrepresentation was upheld
despite the termite company having been procured by the sellers of the termite infected
residence. The holding was in part based upon fact that termite inspector knew the
report would be given to prospective purchasers), we are not aware of any Louisiana
jurisprudence holding home inspectors or those similarly situated, liable when the
contract procuring such work has been specifically limited to the use of particular
beneficiaries, but only general information on this topic.

INSURANCE
QUESTION:

I have a couple of questions and I am forwarding a form that we created and I
mentioned to you regarding liability for over priced homes as well as entering
damaged properties.

1.    We are experiencing difficulty closing sales where there is even minor
      damage where the insurance carriers are demanding that all repairs be
      made PRIOR to the closing. In the past, these same carriers would
      oftentimes permit escrowing 1.5% the estimated amount of repairs and
      then closing the sale. After the closing, the repairs would be made and the
      closing attorney would pay the repair company and give the seller
      whatever is left. Apparently they are no longer doing that. Is there a
      remedy?

2.    Where can I get more information regarding the Fair & Coastal Insurance
      Plan?

ANSWER:

1.    Unfortunately, there is most likely not a remedy that would require insurance
      carriers to allow repairs to be made post-closing. Although this was commonly a
      practice prior to Hurricane Katrina, with the concerns regarding the delays in
      making repairs and the possibility of further damage discovered upon repair,
      many insurance carriers are not allowing any repairs post-closing. We are not
      aware of any insurance commission order requiring this practice one way or the
      other.

2.    The Louisiana Citizen‘s Property Insurance Corporation formerly the Fair &
      Coastal Insurance Plan, was established in accordance with the Louisiana law to
      operate certain insurance programs exclusively as residential market
      mechanisms to provide essential property insurance for residential and
      commercial property in the state. This program is for applicants who are, in good
      faith, unable to procure insurance through the voluntary insurance market.

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Generally, any person having an insurable interest in property is entitled to apply for
coverage through this plan. Forms are available for application for coverage through
the Department of Insurance at www.ldi.state.la.us. The rates for this program are
available as filed with the Louisiana Insurance Rating Commission. If an application is
denied or is not acted on timely within the limits prescribed by the plan, the applicant
may appeal this denial to the Louisiana Insurance Rating Commission.

LEASES
QUESTION:

A single Buy/Sell Contract covering three tracts of land was executed. A liquor
store with video poker is located on one tract of land. After the execution of the
Agreement, the Seller delivered a copy of the lease. When the lease was
delivered the Seller informed us that the Lessee had a right of first refusal to
purchase the leased premises. According to our title opinion, the lease is
unrecorded. We did record the Buy/Sell Contract.

The Lease term was 5 years with one option to renew for 5 years at a rate of
$2,700. per month. In order for the Lessee to exercise the renewal option, they
must provide written notice 6 months prior to the expiration of the initial term (we
do not know if this notice was provided). The initial term ended October, 2004.
According to the Seller, during negotiations for the Buy/Sell Contract, the Lessee
did not renew the lease, was paying on a month to month basis pending the
outcome of our negotiations, and was paying an amount less than $2,700 per
month.

We have the following questions:

1.    Is the Seller bound by the terms of the original Lease Agreement: Was the
      Lease Agreement reconstituted by the acceptance of rental payments after
      the expiration of the initial term?

2.    If the Seller does recognize the Lessee’s right of first refusal, is the Seller
      obligated to offer all three tracts of land to the Lessee. Our Contract is for
      the acre plus two additional tracts of land. In other words, can the Seller
      offer the Lessee only the store? According to your legal archives, “Except
      as otherwise provided in the right of first refusal, the grantee must accept
      the offer on the same terms as presented by the third party.”

3.    What recourse do we have if the store is sold to the Lessee?

4.    If the store can be separated and sold to the Lessee, what input do we have
      on the sales price?

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ANSWER:

1.    Generally when a landlord sells property during the term of a recorded lease, the
      purchaser, in the absence of a contrary stipulation in the lease, is bound by the
      obligations of the landlord. La. Civil Code Article 2711; Prados vs. South Central
      Bell Telephone Co., 329 So. 744 (La. 1975) (on rehearing). The purchaser
      generally occupies the position of the original landlord, if the lease is recorded.
      The purchaser is also entitled to all proceeds of the lease after the sale in the
      absence of a contrary stipulation in the sale. See Coyle vs. Geoghegan, 187 La.
      308, 174 So. 366 (1937). However, usually if the lease is not recorded, the
      purchaser is not bound by the terms of the lease. See La. Civil Code Art. 2712.

      Whether or not the lease agreement is reconstituted by the acceptance of rental
      payments after expiration of the initial term will most likely be controlled by the
      terms of the lease itself. Some leases do provide that if the tenant ―holds over‖
      and continues to occupy the premises and pay rental, the lease is renewed for a
      period of time. Further, written notice is provided in other leases such as the
      terms you describe in your question, which or may not have been properly given.
      The Louisiana courts generally require strict compliance with the notice provision
      of the lease. Generally, if the tenant remains in possession after the expiration of
      the lease after it has failed to give a notice of renewal or if it has an untimely
      notice, the continued possession is not considered a tacit acknowledgement of
      the right to renew a waiver of notice but merely a tacit reconstruction of a lease
      on a month to month basis. See Jackson Brewing Company vs. Wagner, 117
      La. 875, 42 So. 356 (1906) and Southern Ventures Corp. vs. Texaco Inc., 372
      So. 2nd 1228 (La. 1979). See also Benchabbat vs. Fidelity Acceptance Corp. 441
      So. 2nd 398 (La. 1983)

      An unrecorded lease is generally not effective as to third persons, so if a
      purchaser purchases subject to an unrecorded, lease the purchaser may evict a
      tenant of an unrecorded lease even if the purchaser has actual knowledge of the
      unrecorded lease. See Civil Code Article 2712. This result may be altered if the
      property is purchased with an agreement to assume the lease, if the purchase is
      subject to the lease or if the purchaser of the leased premises has in some way
      ratified the lease. In some cases it has also been held that a purchaser of the
      leased premises and the lessee ratify the lease if the purchaser accepts rent
      from the lessee and the lessee remains in possession after the sale even if the
      lease is unrecorded. See Pirkle and Williams vs. Shreveport Jitney Jungle, 19
      La. App. 729, 140 So. 837 (2nd Circuit 1932). See also Cambe Geological
      Services, Inc. v. Baronne Development LLC., 2000 WL 377821 (E.D.LA.2000)
      and Army Surplus & Co., Inc. v. 6.D. & G. 635 So. 2nd 1217 (La. App. 5th Cir.
      1994). The result in the Pirkle case was dependant on the terms of the lease
      and the facts and circumstances applicable. The lease was recorded minutes
      after the sale and the sale was subject to the lease. We have attached a copy of
      the case for your review.
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2.    La. Civil Code Article 2625 states that a party may agree that he will not sell a
      certain thing without first offering it to a certain person. This is generally referred
      to as the right of first refusal. Article 2626 of the La. Civil Code provides that the
      grantor of the right of first refusal may not sell to another person unless he has
      offered to sell the thing to the holder of the right on the same terms, or on those
      specified when the right was granted if the parties have so agreed. Again, the
      terms itself of the right of first refusal would need to be reviewed to directly
      answer the question.

3.    A right of first refusal is not effective against third parties unless it is recorded in
      the public records. See Civil Code Article 2629. If recorded and the party holding
      the right of first refusal purchases the property, the proposed buyer who does not
      get to purchase the property will have the remedies/damages, if any, provided for
      in the purchase agreement between the proposed buyer and seller.

4.    Again the sales price itself may be directed by the terms of the right of first
      refusal.

QUESTION:

We own and manage rental units in Louisiana. Only a few of our tenants have
returned this date to their apartments. None of our tenants have paid the
September 2005 rent.

All of our properties are currently leased to and in the possession of tenants who
have been or chose to relocate to other areas. Most of these tenants have not
contacted us about when they will return or pay rent for the use of our property to
store their personal belongings. The tenants who have returned, state, “that they
don’t have to pay rent for September 2005 per Louisiana Governor Blanco.”

Also, all of my apartments now in the possession of relocated tenants have
refrigerators full of rotting food contents, creating unsanitary conditions, flies,
roaches, rats and unbearable stench.

Please advise me on the following questions:

1.    At what point does an apartment become abandoned when the property
      owner neither receives rent nor correspondence from the lessee?

2.    Can an owner remove the tenant’s refrigerator to protect the property from
      the effects of rotting food, flies, roaches, rats and an unbearable stench?

3.    What if the refrigerator and/or freezer is the property of the tenant and said
      tenant later claims he or she had valuables or cash money hidden in said

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      refrigerator that owner removed without permission or authority just to
      protect his real estate?

4.    Some of the tenants owed rent for August 2005 before both hurricanes
      Katrina and Rita were labeled as a threat. The August 2005 rent has not
      been collected from these tenants nor has September 2005 rent been
      collected on the remaining tenants, making a total of sixty apartments
      either occupied or abandoned without rental income for the month of
      September 2005. My question is the rent still due and payable, even
      though the tenant has relocated temporarily and may or may not return, yet
      all or most of their belongings are in my apartment?

5.    In order to gain possession to apartments deemed abandoned and/or
      looted with the windows broken or doors kicked in, must I file a legal
      eviction on each of these tenants even though they are not living in the
      property or paying rent for the use of the property?

6.    What other legal avenue may I take to regain control and possession of
      each apartment for nonpayment of rent short of filing an eviction with the
      court of jurisdiction?

7.    Did Louisiana Governor Blanco issue a proclamation and if so, is it binding
      to the extent that property owners cannot force tenants to pay rent and for
      what period of time must a property owner allow his or her property to be
      rent free to hurricane victims?

ANSWER:

1.    Many apartment leases contain clauses regarding abandonment of the premises
      which may set forth the landlord may enter and relet the property if the leased
      premises are ―abandoned‖ by the tenant. Some leases define abandonment as
      ―voluntary absence‖ for a certain number of days. Louisiana Code of Civil
      Procedure Article 4731(B) provides that:

                    B.    After the required notice has been given, the lessor
             (landlord) or owner, or agent therefore, may lawfully take
             possession of the premises without further judicial process, upon a
             reasonable belief that the lessee (tenant) or occupant has
             abandoned the premises. Indicia of abandonment include a
             cessation of business activity or residential occupancy, returning
             keys to the premises, and removal of equipment, furnishings, or
             other movables from the premises (explanation supplied).

      There are very few cases wherein courts have interpreted ―abandonment‖
      pursuant to this Code Article. This Code Article does require that a notice to

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      vacate be given to the tenant unless the right to a notice to vacate was release
      by a written waiver contained in the lease.

      Further, it is at least arguable that the abandonment during the State of
      Emergency declared by the Governor and particularly during the mandatory
      evacuation order was not voluntary and therefore, even the terms of the lease
      contract should not consider the failure of the tenant to occupy the property a
      voluntary abandonment.

      2 & 3. Most apartment leases contain a provision regarding the landlord‘s right to
      enter the property for repairs, as well as health and safety reasons. Further, the
      Louisiana Civil Code provides the landlord has the right to make repair even if it
      causes the tenant inconvenience. See Louisiana Civil Code Article 2693.
      Certainly it is arguable that removable of a potential health problem causing
      rodents and insects to the building is the landlord‘s duty as a prudent operator of
      the apartment building for the health and safety of the other tenants.

      If landlord intends to enter the leased property for repair, the landlord should
      make every effort to contact the tenant to advise that the landlord is entering the
      property to make repair and remedy health and safety concerns, by such means
      for example, as regular letter, certified mail, e-mail, a notice on the landlord‘s
      website, telephone calls, publications in newspapers, etc. and the landlord
      should document all efforts to locate and advise the tenant. Further, to assist in
      avoiding later potential issues, documentation should also include a video or
      photograph of the condition of the leased property, prior to the landlord‘s removal
      of any property of the tenant and an inventory of an item removed if this is
      practical. If it is practical to store the items removed, (if there is any question that
      these are items of any value and not molded debris), a landlord should certainly
      consider this. Further, it would also be advisable for the landlord to send at least
      two maintenance workers in the apartment together to do the removal and
      cleaning.

4.    The Governor‘s Executive Order does not specifically release a tenant from the
      obligation to pay rent. Whether the obligation to pay rent is still required when
      there is the mandatory evacuation will in part be determined by the lease contract
      itself, the condition of the property (was it habitable) and when return to the
      leased property was practicable. There is no Louisiana case law yet on this
      issue.

5.    As stated above in #1, the procedure for a landlord declaring an apartment
      voluntarily abandoned by a tenant requires notice to the tenant unless waived in
      the lease. However, the filing of a legal eviction may not be possible due to the
      Governor‘s Executive Order, depending on which parish the property is located.
      Therefore, the landlord may wish to employ the steps to repair the property as
      set forth in Question #3 above until an eviction can be filed.

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6.    See response to Question #2.

7.    Attached is a copy of the Governor‘s two proclamations regarding extension of
      deadlines for legal proceedings. Further, many courts are still not accepting new
      filings particularly eviction proceedings. Again, the Governor‘s orders do not
      expressly deal with rental issues. Many legal scholars believe that rent will still
      be owed by tenants even during the time that occupancy was lost, but again this
      depends on the terms of the lease itself and the conditions of the property.

LISTING AGREEMENTS
QUESTION:

1.    When one Real Estate Company purchases another Real Estate Company
      do the listing contracts with the one company being sold have to be
      honored by the purchasing company?

2.    What about the clients of the selling company, do they have a legitimate
      reason to end the listing?

ANSWER:

1.    The issue you have presented is generally one of contract law. The purchasing
      real estate company may or may not provide the listing contracts of the company
      it purchases based upon the terms of the agreement of sale which it has
      negotiated with the selling real estate company. The selling real estate company
      may be selling only part of its assets for example excluding the listing agreement.
      Furthermore, each individual listing contract may or may not be assignable based
      upon its own terms. Provided such listing contracts are assignable, the
      purchasing real estate company may wish to have them assigned to it and
      thereafter should honor them. If the terms of the sale agreement between the
      two real estate companies provide that the purchasing real estate company does
      not intend to assume some or all listing contracts, then the selling real estate
      company must consider its rights and obligations under its current listing
      contracts which will not be assigned and determine how to legally fulfill such
      rights and obligations and/or legally terminate the listing contracts not being
      assumed.

2.    Under Louisiana‘s general contract law provisions, contracts are assignable
      unless their terms otherwise prohibit such assignment. Each individual listing
      contract must be examined in order to determine whether or not it contains any
      provision prohibiting its assignment to another real estate company. The
      existence of such a prohibition would provide the clients of the selling company
      with a legitimate reason to terminate their listing.


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QUESTION:

1.    Based on the MLS Listing Price, we have had a few recent changes
      (upward) on some of our listing on the MLS and some owners feel this is an
      unfair assessment because it is not based on a sale price. One owner
      wants us to take his property out of the MLS because of his fear of a higher
      assessment.

2.    If a recent assessment was made based on a current MLS asking price,
      what recourse does the owner have after his appeal to the local assessor?

3.    What state agency and what would be the procedure?

ANSWER:

1.    You may remove property from the MLS at the request of your client if you so
      desire. Most listing agreements contain a provision in which the client/owner
      permits or else withholds permission from his or her listing agent to list his or her
      property upon the MLS. If your client originally granted permission to have his or
      her property listed upon the MLS and now wishes to withdraw such permission,
      you are free to comply with his or her wish as you see fit.

2.    An owner who has appealed his assessment to his local assessor is entitled
      thereafter to file a written or oral complaint with his or her local board of review,
      which in most cases is the local parish governing authority. (Parish Council, or in
      the case of Orleans Parish, the New Orleans City Council.) Any determination by
      the board of review as to the appropriateness of such assessment shall be final
      unless such determination is appealed to the Louisiana Tax Commission. See
      La. Rev. Stat. 47:1992. All decisions by the Louisiana Tax Commission shall be
      final unless appealed to the local district court where such property is located
      within thirty (30) days from rendering of a decision by the Louisiana Tax
      Commission. Any further appeals must be made up the chain of command
      through the Louisiana state judicial system.

3.    Please see answer to question number 2 above.

QUESTION:

Can we add the following statement to our MLS Contract?

In the event the purchaser fails to close the sale for any reason, not caused by
the Seller, the Purchaser and Seller authorize the listing broker to pay the cost of
the abstract and wood infestation report from the deposit.



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Will this suffice to satisfy the licensing laws to where if a complaint is filed the
listing broker is protected if he has paid the updated abstract or wood infestation
report from the deposit?

ANSWER:

General Louisiana contract law provides that unless the purchaser and seller have both
agreed in writing to pay the cost of the abstract and the wood infestation report from the
forfeited deposit, this term may not be enforceable and a dispute may arise if the
deposit funds are used by the broker to pay these costs. Perhaps a better place for this
provision would be in the Purchase Agreement between the purchaser and the seller.
Generally, most Purchase Agreements provide that the deposit will be used for partial
payment of the purchase price except in the event of default by the purchaser, wherein
the deposit may be retained by the seller, if the seller was not in default. The Purchase
Agreement could provide as you suggest that a forfeited deposit retained by a seller in a
default could be applied first to the payment of abstract cost and termite reports.
Further, this provision if included in the MLS, may violate NAR‘s MLS rules.

MOLD
QUESTION:

If a homeowner does not get a Certificate by a licensed specialist, stating that
their house was treated for Mold or Mildew, will they not be able to sell their home
at fair market price in the future?

ANSWER:

Due to the recent inundation of large areas of Southern Louisiana with standing and/or
wind driven water as a result of hurricanes Katrina and Rita, a large number of the
buildings in the affected areas are likely to experience some degree of mold intrusion. It
is important to note, however, that there are currently no United States Environmental
Protection Agency (―EPA‖) regulations or standards for airborne mold contaminants.
Therefore, there is no established ―unsafe‖ level for human exposure to mold or mold
spores at this time.

The state of Louisiana passed legislation (R.S. 37:2181-2192), which became effective
on July 1, 2004, that requires that persons/entities providing mold remediation services
within the state obtain a license from the State Licensing Board for Contractors prior to
conducting any mold remediation activities within the state. Mold remediators who do
are not licensed are operating illegally. Section six (6) of the Informational Statement for
Louisiana Residential Property Disclosure requires that a Seller disclose, to the best of
his/her knowledge, the existence of mold/mildew and/or toxic mold impacting the
property being sold. In the event a property owner believes his property has been
impacted by mold, he will first need to have the property inspected by a mold

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assessment professional and then remediated by a state licensed mold remediation
contractor. After the remediation is completed, the remediation professional will provide
the property owner with a certification of the completion of the remediation (note that
this is not a certification that the property is completely free of mold).

In the event a home sustained water damage in the hurricanes, there is certainly a
possibility that the home may have some mold growth. If a seller of such a home does
not have a mold assessment conducted on his/her water impacted home, he/she may
not be aware of the extent, if any, of mold intrusion. A homeowner may put a home on
the market without conducting a mold assessment, but there is certainly a likelihood that
a potential buyer will inquire as to the existence of mold on the property. There is a
possibility that a seller‘s failure to pursue at least a basic mold assessment may
negatively impact the sale price of his/her property. It does not, however, necessarily
mean that the sale price of the property will be negatively impacted.

NEW CONSTRUCTION
QUESTION:

If a new house is built upon an existing slab from a previous house destroyed by
fire or was just torn down considered new construction. Please reply as soon as
possible.

ANSWER:

Whether or not a house is considered ―new construction‖ will depend upon the context
in which the question is asked. Although there is no case interpreting this question in
regard to the new residential property disclosure form, the conservative view is to
consider the property not ―new construction‖ and obtain a completed property disclosure
form. For purposes of the building permit, etc., whether or not a property is considered
―new construction‖ will vary by district to district. In most instances, because the slab
was existing, the political subdivision will not consider the property new construction. In
some instances, the rules will consider a property new construction if it is more than a
certain percentage a new building.

NON-COMPETE AGREEMENTS
QUESTION:

Is the following paragraph legally binding for an independent contractor as well
as an employee in an employment agreement?

Non-compete Independent Contractor agrees that during his association with
Broker, and for a period of two (2) years after the ending of that employment (for
any reason), or for as long as Broker carries on any real estate services business

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(as an employee, owner, director, officer, consultant, independent contractor, or
agent) that he will not be employed in a similar capacity by a real estate services
business similar to that of Broker, that he will not engage in the types of work
customarily undertaken or provided in connection with a real estate services
business in the parish of                          , Louisiana, and any other
parishes where Broker carries on a real estate business.

Independent Contractor acknowledges and agrees that the restrictions contained
in this agreement, are reasonable and no greater than necessary for the
protection of the business interest of Broker. Independent Contractor further
represents and agrees that the enforcement of this Agreement and the
specifically listed sections will not cause him under hardship nor will it
unreasonably interfere with his ability to earn a livelihood.

ANSWER:

Generally in response to your inquiry, La. R.S. 23:921 was passed by the legislature in
2003 providing revisions to the non-compete provisions of Louisiana law. Pursuant to
this statute,

      Any person, including a corporation and the individual shareholders of
      such corporation, who is employed as an agent, servant, or employee may
      agree with his employer to refrain from carrying on or engaging in a
      business similar to that of the employer and/or from soliciting customers of
      the employer within a specific parish or parishes, municipality or
      municipalities, or parts thereof, so long as the employer carries on a like
      business therein, not to exceed a period of two years from termination of
      employment. An independent contractor, whose work is performed
      pursuant to a written contract, may enter into an agreement to refrain from
      carrying on or engaging to a business similar to the business of the person
      with whom the independent contractor has contracted, on the same basis
      as if the independent contractor were an employee, for a period not to
      exceed two years from the date of the last work performed under the
      written contract. (emphasis supplied)

Therefore, generally an independent contractor may be bound by a non-compete clause
in a contract as well as an employee pursuant to this statute.

OFFERS
QUESTION:

A listing agreement specifies the seller requires a minimum of two weeks for an
answer to any offer (He works offshore). A buyer submits an offer through
another agent with another agency giving four days for a response. After the

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seller has been informed the offer exists (over the phone) but before the offer can
be presented, it expires on it’s face, the selling agent does not submit an
extension as requested by the listing agent, and two days after that the seller
withdraws the property from the market, refusing to respond to any offers.

1.    Is the listing agent still obligated to attempt to present the expired offer? Is
      it legal to present an offer the buyer has not extended?

2.    What is the listing agent’s obligation when the seller refuses to respond,
      reject, counter, initial, or accept any written offers?

ANSWER:

1.    The regulations issued in connection with Louisiana‘s License Law for Real
      Estate provide Chapter 39 § 3901:

             A.     All written offers and counter offers for the purchase of real
                    estate shall be presented to all buyers and/or sellers for their
                    consideration and decision immediately, without delay.
             B.     The licensee who prepares an offer or counter offer in a real
                    estate transaction shall ensure that the time of day and date
                    the offer or counter offer was signed by the offering party are
                    included in the document.
             C.     The licensee who presents an offer or counter offer in a real
                    estate transaction shall ensure that the time of day and date
                    the offer or counter offer was accepted, rejected or
                    countered are included in the document.

Section 3907 provides:

      A.      All written offers and counter offers presented to a seller and/or
      buyer and not accepted shall be clearly marked as rejected and signed by
      the seller and/or buyer. In any circumstances in which a seller and/or
      buyer refuses to sign a rejected offer or counter offer, the licensee making
      the presentation of the offer or counter offer shall annotate this fact
      indicating the time of day and date of the rejection of the offer or counter
      offer by the seller and/or buyer. A copy of the rejected offer or counter
      offer signed by the seller and/or buyer, or a copy of the rejected offer or
      counter offer bearing the annotation of the licensee, shall be provided to
      the buyer and/or seller, and the rejected offer or counter offer shall be
      returned to the prospective buyer and/or seller within five days after the
      signature or annotation is affixed to the document.




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And, Section 3909 provides:

       In the event the owner (seller) is not available and grants authority to the
       listing broker to reject an offer or counter offer, the listing broker or a
       licensee designated by the listing broker shall mark the offer or counter
       offer as rejected and sign the offer or counter offer as such in lieu of the
       owner (seller), but the listing broker or licensee designated by the listing
       broker shall nevertheless forward a copy of the rejected written offer or
       counter offer to the owner (seller) for his signature acknowledging the
       rejection of the offer or counter offer. The copy of the rejected offer or
       counter offer signed by the owner (seller) shall be retained in the files of
       the listing broker.     In the case of a cooperative transaction, the
       cooperating listing broker shall provide a copy of the rejected offer or
       counter offer bearing the signature of the owner to the cooperating selling
       broker within five days after the signed rejection is received from the
       owner.

Although none of these three articles specifically address an expired offer, it appears
the intent of these articles is that all offers expired or not shall be presented to the seller.
However, pursuant to Louisiana Contract Law an offer that has expired is no longer an
offer that may be accepted by the seller. Therefore, the only option is to mark the offer
as ―rejected‖. A seller who fails to accept an offer in a timely fashion is permitted to
extend an offer to sell back to the prospective purchaser, if he so desires. Of course,
since the original offer has expired, the purchaser would have to formally accept such
an offer to sell, in order for a binding purchase agreement to be reached.

2.     If the seller refuses to respond, reject, counter, initial, or accept any written
       offers, the licensee should carefully review the listing agreement with the seller.
       Most listing agreements require the cooperation of the seller during the term of
       the listing. The licensee may consider termination of the listing agreement, if the
       seller continues to refuse to cooperate. Further, pursuant to Section 3907, if the
       seller refuses to sign a rejected offer or counter offer, the licensee making the
       presentation of the offer shall annotate this fact indicating the time of day and
       date of the rejection of the offer by the seller. A copy of the rejected offer bearing
       the annotation of the licensee shall be provided to the buyer within five days.

QUESTION:

There is an offer that was accepted by the sellers on two adjacent abandoned
lots.

There were a number of heirs and one person did not agree to sell.

The lawyer for the sellers has stated that the judge had to have an offer to
proceed with the succession. Now the succession has cleared and my client
offers to buy the property.
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It is my understanding that the judge is over viewing and functioning for the
succession because of the party that didn’t want to sign. The lawyer for the
sellers is okay in getting out of this now and letting me continue with the offer
and contract process.

Is it okay to buy the property?.

ANSWER:

Generally property being sold from a succession under administration requires court
approval for sale. La.C.C.P. Art. 3261, et seq. The succession representative, either
an administrator or executor, who desires to sell succession real property at private
sale, must first file a petition setting forth the description of the property, the price and
conditions, and the reason for the proposed sale. La.C.C.P. Art. 3281. Advertisement
of the proposed sale must be made at least twice. La.C.C.P. Art. 3282. The
requirements for the sale of succession property are mandatory and the failure to
comply with them gives rise to an action to anull the sale. See Succession of Doll, 190
So.2d 342 (La. App. 2 Cir. 1967). In Hamilton v. McKee, 371 F.2d 1115 (La. 1979), the
Supreme Court of Louisiana held that under the Code of Civil Procedure the succession
representative must also obtain court approval to execute the initial agreement to
purchase or sell the property. Therefore a REALTOR® dealing with succession
property at a minimum should review a copy of the order authorizing the signing of the
purchase agreement and subsequent Act of Sale and should also consider obtaining
independent legal advice on proceeding with the sale of the property.

QUESTION:

Here is the situation. One of my associates writes an offer to purchase on a
cooperative broker’s listing where it clearly states the Buyer will pay for the
closing. The offer is returned with a counter offer attached stating the Seller
accepts the offer provided a specific title company is used but the counter offer
does NOT change “who is paying for the closing” meaning the Seller choose the
title company and the Buyer pays the cost.

First, that is like asking the Buyer to sign a blank check because there is no
guarantee that the “cost” will be reasonable. Second, and far more important, the
cooperative agent/broker is going to receive compensation for directing the
closing to their affiliate title company. I have no problem with people making
money but this is done without any form of disclosure by the cooperative agent
(listing agent) that the agent/broker is going to receive compensation for using
their title company. The cooperative agent/broker is also encouraging Sellers to
write in a change to the contract that directly benefits them the agent/broker.
Imagine if that is the ONLY change to the contract and then the Buyer because
the Buyer can, rejects the counter offer and the contract falls through because of

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the agent/broker’s desire to be compensated by the title company. I ask, in
whose best interest is the listing agent/broker working when that occurs?

ANSWER:

Article 7 of the Code of Ethics of the National Association of REALTORS® provides:

      In a transaction, REALTORS® shall not accept compensation from more
      than one party, even if permitted by law, without disclosure to all parties
      and the informed consent of the REALTOR®‘s client or clients.

Similarly, Section 3301 of the Rules and Regulations of the Louisiana Real Estate
Commission provides:

      A licensee shall not accept compensation from more than one party
      without the written acknowledgement of all parties to the transaction. If, in
      fact, an agent was receiving compensation from both a title company and
      their client, the real estate agent must disclose and obtain the form
      consent of the client.

Furthermore, Article 6 of the Code of Ethics states:

      REALTORS® shall not accept any commission, rebate, or profit on
      expenditures made for their client, without the client‘s knowledge and
      consent.

      When recommending real estate products or services (e.g.: homeowners
      insurance, warranty programs, mortgage financing, title insurance, etc.),
      REALTORS® shall disclose to the client or customer to whom the
      recommendation is made any financial benefits or fees, other than the real
      estate referral fees, that REALTOR® or REALTOR®‘s firm may receive as a
      direct result of such recommendation.

Clearly, pursuant to the Code of Ethics, as well as state law, accepting compensation
without full and complete disclosure is prohibited.

OWNER/AGENT DISCLOSURE
QUESTION:

Can an agent offer their personal property for sale by owner, only disclosing
owner agent on the sign? As I understand LREC rules regarding advertising, an
agent must disclose on all advertising the brokers name, phone number, etc. In
the case of a FSBO sign or an ad with owner agent on it, is this a violation?


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ANSWER:

Article 12 of the National Association of REALTORS® Code of Ethics provides:

      REALTORS® shall be careful at all times to present a true picture in their
      advertising and representations to the public. REALTORS® shall also
      ensure that their professional status (e.g., broker, appraiser, property
      manager, etc.) or status as REALTORS® is clearly identifiable in such
      advertising.

The LREC Section 2511 provides:

      A. A licensed broker or salesperson who offers property in which he or
      she owns any interest as being for sale or rent shall state in any
      advertising, and on any sign placed on the property, that he or she is a
      licensed real estate agent.

      B.   …

      C. Including the term ―licensed real estate agent‖ in any advertising or on
      any sign shall be sufficient to satisfy this requirement.

LREC Section 2501.A. provides:

      All advertising by any licensee shall include the phone number and the
      identity of the listing broker or firm through the use of the identical name
      under which the listing broker or firm is licensed or a registered trade
      name that is a clearly identifiable entity which will distinguish the listing
      broker or firm from other licensees, registrants, or certificate holders.
      (emphasis supplied)

If the licensee owns the property being advertised and does not list the property, only
the designation of ―licensed real estate agent‖ on any advertisement or sign must be
included. If the licensee lists the property with a broker or firm, Section 2501.A applies
and the phone number and identity of the listing broker or firm must be included.

PAYMENT OF BONUSES
QUESTION:

REALTOR® A is representing the buyer, during the transaction, it is noticed to
REALTOR® A through the listing information that on the $500,000 home the seller
will pay to REALTOR® A that a selling bonus of $5,000 will be paid to REALTOR®
A. As a representative to the buyer, should this be disclosed to the buyer prior to
the closing?

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Have their been a conflict with the agency relationship between REALTOR® A
and the buyer?

ANSWER:

Article 7 of the Code of Ethics of the National Association of REALTORS® provides:

      In a transaction, REALTORS® shall not accept compensation from more
      than one party, even if it is permitted by law, without disclosure to all
      parties and the informed consent of the REALTOR®‘s client or clients.

Similarly, Section 3301 of the Rules and Regulations of the Louisiana Real Estate
Commission provides:

      A licensee shall not accept compensation from more than one party
      without the written acknowledgement of all parties to the transaction.

The selling bonus of $5,000 paid to REALTOR® A as compensation from the seller
must be disclosed to the buyer and written acknowledgement of all parties. The
payment of a selling bonus to the buyer‘s agent will not necessarily cause a conflict with
the agency relationship with the buyer absent other facts that create a conflict.

PROPERTY DISCLOSURE
QUESTION:

We have a home listed and under contract. The property went under contract
pre-Katrina. Our client is objecting to providing a new disclosures or subject the
property to re-inspection.

Is it possible for you to produce something in writing that will give credibility to
our request?

ANSWER:

Generally though, La. P.S. 9:3196 addresses the duty of the seller to deliver property
disclosure documents. The seller has an obligation to complete the property disclosure
document in good faith to the best of the seller‘s knowledge and belief as of the date the
disclosure is completed and signed by seller.

If information disclosed in accordance with the property disclosure document becomes
inaccurate as a result of any action, occurrence or agreement after delivery of the
disclosure document, the resulting inaccuracy does not constitute a violation of this
Chapter. La. R. S. 9:3198(C).


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Section E of the statute provides the seller shall not be liable for any error, inaccuracy,
or omission of any information required to be delivered to the purchase in a property
disclosure document if either of the following conditions exists:

1)    The error, inaccuracy, or omission was not a willful misrepresentation according
      to the best of the seller‘s information, knowledge, and belief; and

2)    The error, inaccuracy, or omission was based on information provided by a public
      body or by another person with a professional license or special knowledge who
      provided a written or oral report or opinion that the seller reasonably believed to
      be correct and which was transmitted by the seller to the purchaser.

La. R. S. §3199 provided a real estate licensee representing a seller of residential real
property shall inform the seller of the duties and rights under this Chapter…a person
representing a seller in the transaction is not liable under this Chapter for any error,
inaccuracy, or omission in a property disclosure document, unless a person has actual
knowledge of the error, inaccuracy or omission by the seller.

Therefore, applying these statues, it is likely that if the property disclosure document
was completed and delivered to the buyer prior to Hurricane Katrina, there is no duty
pursuant to La. R.S. 3198(C) to deliver an updated property disclosure document to the
buyer by the seller. Nothing in the Chapter regarding the property disclosure document
is intended to substitute for any inspection or warranty that the purchaser or seller may
obtain and certainly does not preclude the rights or duties of the purchaser to inspect
the physical condition of the property.

QUESTION:

If a property has been “diagnosed” with toxic mold and the condition is
remediated according to EPA standards, etc., does the Seller (or any future
Sellers) have to disclose the previous but now non-existent condition on Property
Disclosure Forms?

Do you have any other information/insights to share regarding this issue?

ANSWER:

The Louisiana Residential Property Disclosure Form requires the disclosure of ―known
defects‖ which are:

      A known defect is a condition found within the property that was actually
      known by the seller and that results in one or all of the following:

      a.     It has substantial adverse affect on the value of the property.
      b.     It significantly impairs the health or safety of future occupants of the
             premises.
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      c.     If not repaired, removed, or replaced, significantly shortens the
             normal life of the premises.

The property disclosure statement on page 8 of 9 provides

Question (35) Does the property or any structures contain any of the following? Check
all of those that apply and provide the nature and frequency at the end of the section.

             Mold/Mildew    Y      N       NK

It is certainly arguable that since the mold was remediated according to EPA standards
according to your question, that it is no longer a defect within the definition of ―known
defect‖. However, the conservative view is when in doubt, list the potential known
defect and provide the information that the defect was remedied. This will help to
eliminate after closing the purchaser having a disagreement with the seller regarding
the failure to include this information prior to the sale.

QUESTION:

1.    Should an agent disclose to a customer or client that a registered sex
      offender lives one block down from the listing they are considering
      purchasing? (She is the Listing Agent and lives in the neighborhood.)

2.    Is it advisable to disclose in the newsletter for the association that the sex
      offender lives at a particular address?

ANSWER:

1.    In 2002, the Louisiana legislature passed La. R.S. 37 §1469 which provides as
      follows:

      A.     Every written lease or rental agreement executed by any licensee
      for residential immovable property and every written contract for sale of
      residential movable property shall contain a notice of the availability to the
      public of access to a statewide database disclosing the locations of
      individuals required to register pursuant to R.S. 15:540 et seq. The notice
      shall include the telephone number and Internet site for the statewide
      database.

      B.     Upon delivery of the notice to the lessee or transferee of the
      residential immovable property, the lessor, seller, broker, or licensee is not
      required to provide any information in addition to that contained in the
      notice regarding the proximity of registered sex offenders.               The
      information in the notice shall be deemed to be adequate to inform the
      lessee or transferee about the existence of the statewide database of the

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      locations of registered sex offenders and information from the database
      regarding those locations. The information in the notice that shall not give
      rise to any cause of action against the disclosing party by a registered sex
      offender or other parties to the transaction.

This statute does not specifically address the question presented on whether or not an
agent who is aware of a registered sex offender must disclose the information or may
merely provide the notice of the availability to the public of the statewide database. The
Statute does state that the licensee upon delivery of the Notice is not required to
provide any information other than that contained in the Notice. However, a court may
find that an agent who intentionally withholds information regarding a sex offender living
in a neighborhood may be withholding material information. Again, this issue has not
been considered by a Louisiana court. A court might also find that compliance with the
above-described mandatory disclosure is sufficient, even in the case of actual
knowledge on the part of the agent. I spoke with a representative of the Louisiana Real
Estate Commission who stated that to their knowledge the Louisiana Real Estate
Commission has never considered this particular issue. We suggest that the agent
discuss this issue with his/her client and with independent legal counsel to determine
the risks on each side of this issue if the seller does not agree to the release of this
information.

2.    We cannot opine in the hotline services as to the duties of the Association for the
      subdivision.   However, the information contained within the sex offender
      database is not confidential information. It is available to the public and therefore
      may be provided to any party desiring the information.

QUESTION:

“I am the listing agent and a property goes under contract. The buyer is supplied
a copy of the LREC Property Condition Disclosure.               Buyer obtains an
independent inspection of the property which shows several problem areas. . . .
Wiring not up to code, gas connections, copper instead of stainless which is
required by gas company, air conditioner requires servicing or replacement, etc.
A copy of the inspection is delivered to the seller and seller refuses to do any
repairs and the contract falls through. I am instructed to find a new buyer for the
property.”

1.    Is the seller required to complete a new Property Condition Disclosure
      showing all the deficiencies as reported on the inspection?

2.    If the seller refuses to fill out a new Property Condition Disclosure, and
      instructs me not to reveal the contents of the inspection, in what legal
      position does this place me?

3.    What position does this place the seller by not revealing known defects in
      the property?
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ANSWER:

1.    LSA R.S. 9:3195-3199 requires the seller of residential real property to complete
      a Property Condition Disclosure no later than the time the purchaser makes an
      offer to purchase. The property disclosure document is not considered a
      warranty by the seller or a substitute for any inspections or warranties that the
      purchaser or seller may obtain but is to include all known defects. A ―known
      defect‖ is defined as a condition found within the property that was actually
      known by the seller and results in one of the following.

             A.     It has substantial adverse affect on the value of the property.
             B.     It significantly impairs the health or safety future occupants of the
                    premises.
             C.     If not repaired, removed or replaced, significantly shortens the
                    expected normal life of the premises.

The form is to be completed in good faith to the best of the seller‘s belief and knowledge
as of the time it is signed. Further the disclosure law provides that the real estate
licensee shall inform their clients of those clients‘ duties and rights in connection with
the Property Disclosure Document. The failure to inform the client could subject the
licensee to censure or suspension or to revocation of their license, as well as fines. The
licensee is not liable for any error inaccuracy or omission in a Property Disclosure
Document, unless the person has actual knowledge of the error, inaccuracy, or
omission by the seller. Further, pursuant to the license law, the failure to disclose to a
buyer a known material defect regarding the condition of the real estate of which a
broker, sales person or timeshare or interest sales person has knowledge is a cause for
censure, suspension or revocation of license. There are no reported court decisions yet
further explaining the requirements under the new property condition disclosure law.
Therefore, the conservative view is that the seller should complete a new Property
Disclosure Document reflecting the deficiencies reported on the property condition
inspection received by the seller from the previous proposed buyer. This is of course
unless the seller has a legitimate reason to believe that the Condition Inspection Report
is inaccurate. The Property Disclosure Document should be filled out close in time to
the actual offer being made.

2.    Considering the discussion above, the broker takes a risk if the known defects
      are considered to be material defects with the property in not communicating the
      information to the buyer. If the seller refuses to allow the broker to communicate
      the known material defects, the conservative view is that the broker should
      withdraw from the representation.

3.    If the seller refuses to properly complete the Property Condition Disclosure or to
      disclose known material defects regarding the property, the seller is taking a risk
      that a suit for redhibition or rescinding the sale may be brought by a subsequent
      buyer for withholding known facts about the condition of the property.
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QUESTION:

Are heirs who inherit residential property through a succession (judgment of
possession) required to complete a property disclosure statement? If so, do they
all have to complete one?

ANSWER:

No. La. R.S. 9:3195 et seq exempts certain types of transfers from the requirement to
provide a property disclosure document. These exemptions include:

      1)     Transfers by a fiduciary in the course of administration of a decedent‘s
             estate, guardianship, conservatorship or trust; and

      2)     Transfers pursuant to a testate or intestate succession.

QUESTION:

“I have the following questions associated with the leasing of property:

1.    What is the legal obligation of a lessor and the lessor’s agent to disclose
      known material defects in a property (other than the mandated “Lead-
      Based Paint Disclosure”) to a lease applicant/lessee? Is it identical to
      disclosure involving the sale of property?

2.    Is any kind of written property disclosure required by a lessor or is it just
      recommended as a means of proving disclosure was made?

3.    Although it is not necessary to have a lessor or lessee sign either the
      agency disclosure brochure (i.e., agency disclosure is not necessary) or
      the consent to dual agency form when a lease is for less than 3 years and
      there is no sale of the property to the lessee predicted, does this mean that
      agency itself does not exist-meaning that in this case both the lessor and
      lessee are simply customers of the agent(s) involved rather than clients
      and subsequently no fiduciary responsibility is due either lessor or lessee?

4.    If there is indeed no agency involved in the above case, then wouldn’t it be
      improper to call any of the agents involved in that lease transaction
      “Designated Agents” since that would imply agency?

      If you don’t call the “Designated Agents”, then what should the agent
      working for the lessor & the agent working for the lessee be called
      (especially in documents such as the listing agreement, lease applications,
      etc.)

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      What should the respective brokers be called?

5.    What is the exact criteria for when agency disclosure & consent to dual
      agency are NOT required? Is it when the lease is LESS than 3 years or
      when the lease is for 3 years or less? Meaning, if a lease is for 3 years- is
      agency disclosure & consent to dual agency required?

6.    If a lease has an option to renew the primary term of three lease, is the
      length of this option period added to the primary term to determine whether
      or not agency disclosure and consent to dual agency is required?

ANSWER:

1.    A lessor of property has a legal obligation to deliver the thing to be leased in a
      good condition suitable for the purpose for which is was leased. If the known
      material defect in the property causes the property not to be suitable for living,
      the lessor is bound to repair such known material defect prior to the delivery of
      the premises to the lessee. Generally, under the real estate license law, the
      duties to disclose a material defect are the same for a lessor‘s agent. La R.S.
      37:1455(27) provides a licensee may be censured or suspended for failure to
      disclose a material defect to a ―buyer‖. ―Buyer‖ is defined in the license law to
      include ―lessee‖. All licensees are required to act honestly and fairly when
      representing a client in a real estate transaction and shall be liable to customers
      for providing false information if such agent had actual knowledge that the
      information was false.

2.    A written property disclosure is not required to be given by a lessor of property,
      unless the proposed lease contains an option to purchase. Lessors of property
      under leases which do contain options to purchase are required to provide their
      prospective tenants with written property disclosures identical to those which a
      seller must provide his or her purchaser. The written property disclosure
      document must be in the form prescribed by the Louisiana Real Estate
      Commission, or a substantially similar form containing the minimum language
      described by the Commission.

3.    While agency disclosure is not required to be made by an agent to a lessor or
      lessee when the agent is assisting in the negotiation of a lease which is under a
      term of 3 years and under which no sale of the property to the lessee is
      contemplated, this does not relieve the agent of his fiduciary duty to his or her
      clients. In fact, the agent is still very likely to be considered as having a client-
      agent relationship with either the lessee or the lessor or both. Under the
      Louisiana Real Estate Agency laws, the term ―agency‖ means ―a relationship in
      which a real estate broker or licensee represents a client by the client‘s consent,
      whether expressed or implied, in an immovable property transaction‖. There
      need not be a written agreement of agency in order for a real estate agent to

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      have initiated an agent-client relationship and thus owe a fiduciary duty to his or
      her client.

4.    If you don‘t call the ―Designated Agents‖, then what should the agent working for
      the lessor & the agent working for the lessee be called (especially in documents
      such as the listing agreement, lease applications, etc.)

      As stated in paragraph (3) above, the fact that agency disclosure is not required
      to be made to clients in some leasing situations, does not necessarily mean that
      an agency relationship does not exist. The term ―agent‖ may be used in any
      situation where a relationship between a client and a real estate broker or
      licensee exists and the broker or licensee has been asked to assist in an
      immovable property transaction. The term ―broker‖ may be used to define any
      person licensed by the Louisiana Real Estate Commission as a real estate
      broker.

5.    Agency disclosure or dual agency disclosure is not required to be made by an
      agent assisting in the negotiation of a lease which does not exceed a term of 3
      years and which also does not contemplate the sale of the subject property to the
      lessee. Thus, agency disclosure is not required unless the lease term is for 3
      years and 1 second, or 1 minute, 1 day or any period of time in excess of 3
      years.

6.    Louisiana jurisprudence does not offer guidance as to whether or not additional
      lease or option terms should be added to the primary term in order to determine
      whether or not a lease exceeds 3 years, for purposes of determining whether or
      not agency disclosure is required. Therefore, the conservative view is that a 3
      year lease with 2 one-year options to renew, for instance, would meet the
      standards provided by Louisiana Revised Statute 9:3893 (F) or 9:3897(6) and in
      such situations agents should deliver agency disclosure pamphlets to their
      clients.

QUESTION:

If an agent becomes aware that a potential buyer is a sex offender, should this be
disclosed to the seller?

ANSWER:

Our response is as follows:

The Louisiana Real Estate License Law (―License Law‖) provides that the Louisiana
Real Estate Commission (―Commission‖) may censure a licensee, or suspend or revoke
any license, if a licensee fails to disclose to a buyer a material defect regarding the
condition of real estate, if the agent has knowledge of such defect. The Commission‘s
examination staff has previously informed us that this issue has not been addressed by
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the Commission but most likely it does not consider the location of the convicted child
molester to be a ―material defect‖ in this context which would require disclosure.
Therefore, at least with respect to the License Law and the agent for the seller of the
property, disclosure is probably not necessary.

However, the License Law has little to do with potential civil liability and other agency
duties. There are no Louisiana cases addressing this issue, but the Louisiana Civil
Code provides that one is liable for every act (which would include an act by omission,
such as failure to disclose) that cause damage to another. At least three possible
agency scenarios arise from this question.

An agent, who solely represents a seller in a real estate transaction, owes several
duties to his client which result out of the real estate agent-client relationship. Among
various other duties, the selling agent owes a duty to promote the best interest of the
client by ―seeking a transaction at the price and terms acceptable to the client.‖ La. R.S.
9:3893(2)(a). If the selling agent knows the potential buyer is a registered sex offender,
the agent may need to disclose this fact to his or her seller if the agent knows or
believes that such fact would be unacceptable to his or her client. An agent
representing the seller alone, also has a duty to treat a buyer honestly and fairly during
the course of his or her representation of the seller. La. R.S. 9:3894. There are no
guidelines regarding whether this type of disclosure falls within this duty.

If the real estate agent represents only the potential buyer, whom the agent knows to be
a registered sex offender, the agent arguably may not be able to disclose the fact that
the buyer is a registered sex offender to the seller, as such disclosure would represent a
failure on the part of the agent to promote the best interest of his client.

An agent serving as a dual agent to both the seller is not permitted to disclose
confidential information regarding either of the clients to the opposite. La. R.S.
9:3897(B). However, the definition of confidential information as provided by La. R.S.
9:3891 excludes from the definition of ―confidential information‖, which becomes public
from a source other than the licensee. The designation of a person as a convicted child
molester is available from a public source, the state database.

An agent, who becomes aware that a potential buyer is a registered sex offender,
should verify and confirm the buyer‘s status as such by reference to the statewide
database providing public notice as to the identity of such offenders. Once such
confirmation is obtained, it is our recommendation that agent approach the buyer and
seek written permission from the buyer to make the disclosure. Although based on the
fact that such disclosure does not constitute a disclosure of ―confidential information‖,
most likely no cause of action will be sustained on behalf of the buyer against an agent
for making disclosures allowed or required by law (La. R.S. 9:3897), it is the best
approach to seek written permission from the buyer to make the disclosure.

QUESTION:

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Do “Lessors” have to fill out Property Disclosure Form?

ANSWER:

The Residential Property Disclosure Law contained in La RS 9:3196 describes real
estate contract to include any agreement entered into prior to the perfection of the
contract of sale or contract of lease or otherwise with an option to purchase, which
relates to the sale, offer for sale, purchase, offer to purchase, lease with option to
purchase, offer to lease with option to purchase, any other option to purchase, or other
offer which includes an option to purchase any residential real property and
improvements thereon.

In response to the question, Lessors, or Landlords, have to complete a property
disclosure form if the lease contains an option to purchase the residential real property.

QUESTION:

On the informational sheet that goes with the Property Disclosure under other
Provisions of the Law the statement is made “A Property Disclosure Document”
is for disclosure purposes only; it is not intended to be part of any contract
between the seller and the purchaser.”        Our Purchase Agreement states
“PROPERTY CONDITION DISCLOSURE FORM: PURCHASER AND SELLER
acknowledge they have read understand and agree to the Property Condition
Disclosure Form attached to this contract. This contract is not complete without
the Sellers Property Condition Disclosure Form attached hereto and signed by all
parties. SELLER shall maintain the property in substantially the same or better
condition, as it was when this agreement was executed. SELLER agrees to
remove all refuse and personal property from the premises before the date of
occupancy.” The disclosure language says “it is not intended to be a part of the
contract”, does this preclude us from making it so as our contract states. What
do you think?

ANSWER:

The Property Disclosure Document is not intended to be considered a contract between
the purchaser and the seller. Under Louisiana law, the formation of a valid and
enforceable contract requires capacity, consent, a certain object, and a lawful cause.
The court must find there was a meeting of the minds of the parties to constitute the
requirement of consent. As is indicated on the disclosure form, the signature of the
prospective purchaser is only required to indicate receipt of the Property Disclosure
Document, and not to indicate an acceptance or agreement as to the condition of the
home. Further, the recent legislation defines a ―real estate contract‖, in part, as a
written agreement. As the disclosure does not require a meeting of the minds of the
parties, it is not an ―agreement‖, and the disclosure, by itself, is not considered a
contract.

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The purpose of the Property Disclosure Document is to put the potential purchaser of
the property on notice of defects in the property that are known to the seller. The seller
is to complete this form in good faith and to the best of his knowledge as of the date of
the disclosure.3 Further, the statute provides:

          A Property Disclosure Document shall not be considered as a warranty by
          the seller. The information contained within the property disclosure
          document is for disclosure purposes only and is not intended to be a part
          of any contract between the purchaser and seller.4 (emphasis supplied)

Although it is not the intent that the Property Disclosure Document be a contract but just
an informational disclosure, a party could revise the language to try to make the
Property Disclosure Form a contract between the parties as with the clause you suggest
which requires the seller to maintain the property in substantial or better condition prior
to completion of the sale. An unhappy party (buyer or seller) could argue if litigation
were to develop, that because of the clear intent of the statute, the Property Disclosure
Form cannot be a contract between the parties. A Judge would consider the primary
parts of a contract as outlined above and may determine a contract has been formed.
There has not yet been a test of this theory as this is a new statute.

PROPERTY MANAGEMENT
QUESTION:

1.        Where can I obtain information with respect to whom can legally manage a
          house, apartment complex or condominium association?                As an
          Appraiser/REALTOR® I have seen different management situations. It is
          my understanding that an individual can manage their own property(ies)
          but only a “Broker,” not an agent, relative or other individual can manage
          properties owned by others.

2.        I have seen a condo association have a contract with a Broker’s company
          but was actually managed by an “agent” of that company and not by a
          “broker associate” member of that company. Is this legal?

3.        I have seen another condo complex managed by an offsite individual that
          handles no real estate functions of that complex and has a contract
          reflecting that situation. Is this legal? I don’t know if that contract allows
          this individual to be an independent contractor to manage the daily
          operations of the complex only.




3
    LSA-R.S. 9:3198(B)(1).
4
    LSA-R.S. 9:3198(D)(1).
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4.     I have seen an apartment complex owned by a broker but managed by a
       family member agent. Is this legal?

5.     Another situation where a “condo association” has hired an individual to
       manage the daily operations of the complex as an “employee of the
       association” but do no real estate activity. Is this legal?

ANSWER:

1.     Pursuant to the Louisiana License Law the relevant statutes are as follows:

La. R.S. 37 § 1431(20) defines a ―real estate transaction‖ as:

       the selling, offering for sale, buying, offering to buy, soliciting for
       perspective purchasers, managing, offering to manage, leasing, offering to
       lease, renting, or offering to rent any real estate or improvements thereon,
       or any business or entity whose assets include real estate or leases of real
       estate. ( emphasis added)

La. R.S. 37 § 1431 (7) in part defines ― real estate activity‖ as:

       any activity relating to any portion of a real estate transaction performed
       for another by any person, partnership, limited liability company,
       association, or corporation for and/or domestic, whether pursuant to a
       power of attorney or otherwise, who for a fee, commission, or other
       valuable consideration or with the intention, in the expectation, or upon the
       promise of receiving or collecting a fee, commission, or other valuable
       consideration:

       A. sells, exchanges, purchases, manages, rents, or leases or negotiates
       the sale, exchange, purchase, rental, or leasing of real estate. (emphasis
       added)

La. R.S. 37 § 1438 provides in part:

       The provisions of the License Law shall not apply to . . .

       (5) Any individual, corporation, partnership, trust, limited liability, company,
       joint venture, or other entity which sells, exchanges, leases or manages its
       own property, except persons, corporations, partnerships, trusts, limited
       liability companies, joint ventures and other entities who are in the
       business of selling timeshare interests.

       (6) Any salaried person employed by a licensed real estate broker for and
       on behalf of the owner of any real estate which the licensed broker has

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      contracted to manage for the owner, if the salaried employee is limited in
      his employment to:

      Delivering a lease application, a lease, or any amendment thereof to any
      person.

      Receiving a lease application, lease, or amendment thereof, a security
      deposit, rental payment, or related payment for delivery to and made
      payable to the property manager or owner.

      Showing a rental unit to any person, as long as the employee is acting
      under the direct instructions of the broker, including the execution of
      leases or rental agreements, provided the broker is responsible for the
      actions of his employees.

      Providing information about a rental unit, lease, an application for lease, or
      the status of a security deposit or the payment of rent to any person.

      Assisting in the performance of property management functions by
      carrying out administrative, clerical, or maintenance tasks. (emphasis
      supplied)

La. R.S. 37 § 1436(B) provides:

      It shall be unlawful for any person, or entity, directly or indirectly, to
      engage in or conduct, or to advertise or hold himself out as engaging in or
      conducting the business, or acting in the capacity, of a real estate broker,
      or real estate sales person within the state without first obtaining a license
      as a broker or sales person, and being classified as an active licensee as
      provided in this Chapter, unless he is exempted from obtaining a license
      as specified herein.

These statutes all impact who may manage a house, apartment complex or
condominium association. Generally, the rules provide that in order to provide
management services for other than your own property, you must have a license or be
a salaried employee working for a broker and provide only the limited functions set out
in La. R.S. 37 § 1438(6).

2.     We know of no distinction requiring a ―broker‖ to manage property, so long as the
person holds a real estate license. However, please remember that all real estate
salespersons must be properly sponsored by sponsoring real estate brokers, and such
salespersons are not to conduct any activities requiring a real estate license, including
the management of real estate, unless their properly issued license is in the custody of
their sponsoring broker. See La. R.S. § 1439(F).


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3.      Again, if the activities by the management include those defined as ―real estate
activity‖ then there may be a license issue. The non-licensed manager employed by a
licensed broker may perform those functions set out in La. R.S. 37 § 1438(6).

4.    If the agent is licensed than there generally is not a distinction between the
broker and the agent managing the complex pursuant to the statute we have
addressed.

5.      If the employee is not providing any functions which are ―real estate activity or
real estate transactions‖ as defined by the license law then there is not impediment per
the license law. Further, if the condo association is the owner of the property, then this
may be another exception to the general rule.

PURCHASE AGREEMENT
QUESTION:

Please look at this contract and tell me what we, as REALTORS®, need to do to
comply with real estate law when selling this builder’s houses. In their system,
when we take them the customer, they (one of the builder’s representatives) write
the contract using this form. My concern is our responsibility to the buyer such
as closing date, acceptance time, no deadline for acceptance, required notice of
registry of location of certain sex offenders and anything else required by the real
estate law. If we need to attach addenda or whatever we must do, please advise.
Or, if we don’t need to do anything, please advise.

ANSWER:

We assume by your question that the REALTOR® is representing the buyer in this
transaction and is not a dual agent on behalf of both the buyer and the seller.

The REALTOR® owes fiduciary duties to the buyer, including but not limited to insuring
the purchase agreement complies with minimum requirements. These minimum
provisions in the license law and the Louisiana Revised Statutes include but are not
limited to:

      1)     La. R.S. 37:1449
             a.    Licensees acting in the capacity of an agent or subagent,
                   and registrants shall insure that their respective principal
                   party signing any document in a real estate transaction is
                   provided a copy of the document immediately after signing
                   the document.
             b.    Licensees and registrants shall insure that persons signing
                   any document in a real estate transaction which pertains to
                   more than one party are provided with a copy of the

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                     completed document bearing the signatures of all parties to
                     the transaction within 5 days after the final signature is
                     affixed to the document.
              c.     Written agreements for the sale or management of real
                     estate shall specify a definite expiration date, which shall not
                     be subject to qualifying terms or conditions.

       2)     La. R.S. 37:1455 provides in part that a licensee may be
       suspended, censured or license revoked for (Sec. 33) failure to provide a
       buyer or seller with a written property disclosure form for sales and certain
       leases involving residential real property pursuant to La. R.S. 9:3196 et
       seq. (the property disclosure form).

       3)     La. R.S. 37:1469 provides that:
              a.    Every written lease or rental agreement executed by any
                    licensee for residential immovable property and every written
                    contract for sale of residential immovable property sale
                    contain of notice of the availability to the public of access to
                    a statewide database disclosing the location of individuals
                    required to register pursuant to R.S. 15:540 et seq. The
                    notice shall include the telephone number and internet site
                    for the statewide database.

Additionally, the Rules and Regulations of the Louisiana Real Estate Commission
require that real estate agents or licensees in the course of their representation of
clients, present to their respective clients, all written offers and counter offers received
on their behalf, ―immediately, without delay‖. An agent representing a party who offers
to sell or buy a piece of property shall ensure that the time of day and date that such
offer was made are included in the offer. Likewise, an agent representing the party to
whom such an offer is made, must ensure that the time of day and date that such offer
was accepted, rejected or countered are included in the response to such offer. See
Rule 3901 of the Louisiana Real Estate Commission. There is no requirement that
offers to buy or sell property include a time within which to accept such offer, and an
offer with no such time for acceptance must only be accepted within a reasonable time.
Louisiana Civil Code arts. 1928-1931.

Your responsibility to the buyer should include adding an addendum or otherwise
conforming the purchase agreements that do not meet these minimum requirements.




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QUESTION:

Seller wants to remain in the house a few days after closing and give the buyers a
Hold Harmless Letter. We represent the Buyer. Is it typically okay for a buyer to
accept a Hold Harmless agreement from the seller?

ANSWER:

It is not all that uncommon that a seller will wish to postpone the delivery of possession
of the home being sold for a few days or weeks after the actual closing takes place.
Often times such an arrangement is negotiated up front, within the terms of the
purchase agreement.

However, sometimes, unexpected events arise after the execution of a purchase
agreement, which may cause the seller to seek to hold over the property for a few days
after the closing. Whether the buyer is willing to allow such holding over depends on
the individual buyer, and the facts and circumstances surrounding the sales transaction.
When a buyer is amenable to allowing the seller to remain in the property for a few
added days, it is typical, and generally advisable that some sort of ―hold harmless‖ or
other agreement be executed by the buyer and seller, governing the terms and
obligations of the parties during such holdover period.

Whether or not such agreement is ―okay‖ for a buyer to accept from a seller, is also
dependent upon the specific terms of such an agreement, as well as the individual
buyer‘s specific needs or desire to be protected. The risk is of course that the property
will not be in the same condition as the last inspection of the buyer. Also homeowner‘s
insurance issues and mortgage loan issues may arise if someone other than the buyer
is occupying the property. If the hold over period is beyond a few days, the buyer may
consider a lease back to seller of the property.

QUESTION:

When a fully executed purchase contract’s terms and deadlines are within the
contractual term and time frame and the act of sale date has not passed; buyer
terminates the agreement due to the sellers’ refusal to remedy the list of
deficiencies; seller refuses to release the deposit monies; deposit dispute is
entered into a concursus proceeding; question:

Can the seller legally enter into another purchase contract prior to the resolution
of the deposit dispute, given the stated conditions above and considering that the
buyer, until deeded, has an equitable right of interest in the property being
purchased.




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ANSWER:

Assuming that the seller has not or does not intend to sue the purchaser for specific
performance of the contract, i.e. requiring the buyer to go forward with the contract and
purchase the property, most likely the seller can enter into another purchase agreement
prior to resolution of the deposit issue. We are not aware of any Louisiana obligations
articles which would require the seller to hold the property off of the market until the
deposit dispute is resolved once the buyer has requested termination of the agreement
and declares that he/she will not purchase the property.

QUESTION:

Company X listed a property on August 15, 2005 from the sellers. The list price
was $145,000. On August 17, 2005 REALTOR® A wrote a purchase agreement for
the purchaser for $145,000 to close September 9, 2005. It was predicated upon
financing but was accepted by the sellers, on August 17, 2005. I presented the
offer to them as well as dual agency disclosure. I explained that I would be
working with them and REALTOR® A would be working with the purchaser but
that we were still dual agents. The offer was accepted. Inspections were
completed on August 26 and I dropped them off to the sellers with purchasers
request for repairs. Of course, the day their response was due was the day
Katrina hit one week after Katrina, Company B opened its doors to whomever
needed help. We had no power or phones but maintained a list of people looking
for rentals, etc. One other thing we did was make a list of all our clients, buyers
and sellers and tried to contact all of them. It was not until the following week
that the sellers contacted us. They said their home was damaged and would
need repairs prior to closing. Several large branches had fallen on the house and
made large holes through the roof. The sheetrock was wet, floors wet, etc. At
this time they indicated they still wanted to the sell the property to the purchaser
and would keep us posted on the repairs. On 9-27, the seller came into our office
and requested a copy of all documents and indicated that there were going to
request a release. They had several displaced family members who were begging
them to use the house as soon as it could be repaired. On 9-28, I called the seller
to check on the status. She asked me to draw upon the papers for the release
from the contract with the purchaser and the deposit would be returned to the
purchaser.

The release has not been signed yet so we have not contacted the purchaser to
let her know of the status of the situation. REALTOR® A feels that this is not fair
and they should be held to their original agreement. No extensions have been
signed to date. Please let us know how to proceed.

ANSWER:

Whether or not the purchaser can enforce specific performance to require the seller to
close this transaction will depend on the exact wording of the purchase agreement.
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Generally, Louisiana Civil Code Article 2467 provides that the risk of loss of the thing
(property) sold because of a fortuitous event is transferred from the seller to the buyer at
the time of delivery of the thing (property). Thus, the house remains at the risk of the
seller until the act of sale is passed. Any loss caused by a fortuitous event, such as a
hurricane, is usually born by the seller in the absence of a contrary agreement. If the
property was totally destroyed between the time of the purchase agreement was signed
and the time the act of sale has passed, generally the sale is null. If the property was
only partially destroyed, the purchaser has the option of either abandoning the sale or
retaining the preserved part by having the reduced price determined by appraisement.
See Williams v. Bell, 329 So.2nd (La. Ct. App. 4th Cir. 1976), writ issued, 332 So.2nd 482
(La. 1976) and writ issued 3/2 So.2nd 483 (La. 1976) and decision reversed, 339 So.2 nd
748 (La. 1976). See also, Reff v. Comeaux, 237 So.2nd 720 (La. Ct. App. 4th Cir. 1970)
wherein the court provided that after a purchase agreement was signed and thereafter
the property was heavily damaged by the flood waters of Hurricane Betsy, the
purchaser had the right to withdraw from the sale if the purchaser so desired. Some
courts have held that if the property is partially damaged between the execution of the
purchase agreement and the act of sale, the purchaser did not have the right to require
the seller to repair the property and restore it to the condition that existed prior to
casualty but the seller could require reduction in purchase price and continue with the
sale.

If the purchaser wishes to go forward with the purchase agreement, you should suggest
to the purchaser they obtain independent legal advice to review the purchase
agreement and to attempt to enforce specific performance. If the purchaser and the
seller disagree as to retention of deposit, the rules regarding disputed deposits have not
changed since Hurricane Katrina. The rules regarding disputed deposit are as follows:

Louisiana Real Estate Commission Rule 2721 permits the return of the deposit to a
perspective purchaser upon:

       1)     the mutual consent of all parties,
       2)     a court order, or
       3)     an order of the Louisiana Real Estate Commission.

If a real estate broker becomes aware of the dispute among the parties as to whom an
escrow deposit should be disbursed, he or she should comply with the requirements of
Louisiana Real Estate Commission Regulation 2901 within ninety (90) days by:

       1)     disbursing the disputed funds based upon the written mutual consent of all
              parties;
       2)     disbursing the disputed funds based upon a reasonable interpretation of
              the contract between the parties and providing all parties and licensees
              ten (10) days written notice of his or her intentions to disburse funds;
       3)     depositing the funds into a court of competent jurisdiction and requesting a
              concursus proceeding to be instituted;

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       4)     depositing the funds with the Louisiana Real Estate Commission, along
              with a request that an escrow disbursement order be issued; or
       5)     disbursing the funds upon an order of a court of competent jurisdiction.

QUESTION:

I have a listing under contract with another agency’s client. My seller did a total
recondition of the home. The purchaser wrote a contract on the home prior to it
being finished and made some changes to the home. We negotiated a dollar
figure for the changes which was agreed by all parties to be paid at closing by the
seller and the buyer would pay for all new materials. Some of the materials are
not what I would consider natural materials that a new purchaser would like and
definitely something the seller would not purchase. He has spent labor installing
the new fixtures, etc. Now of course the purchaser said they do not want the
house. Are they still in contract if it did not expire? Does the seller have to pay
them for the fixtures he did not want to install? Can he charge them labor to
remove them and give them back to her? or can we just enforce specific
performance on the purchaser?

ANSWER:

Generally, like all other contracts, a purchase agreement is formed by the consent of
the parties through offer and acceptance. La.C.C. art. 1927. A sale of real estate must
be in writing. Interpretation of a purchase agreement is generally subject to the same
rules regarding other contract interpretation.

Whether or not the purchase agreement is enforceable or the buyer may terminate the
contract will depend on the exact wording of the contract. If the buyer is in breach of the
purchase agreement, the purchase agreement may provide for specific performance or
may provide for specified damages. If the contract does not provide for specified
damages, then the general Louisiana law pertaining to either specific performance or
damages will apply.

QUESTION:

1.     What is all installed and/or built-in appliances as included in the purchase
       agreement? Does this now include washer and dryer? Refrigerator,
       anything plugged in? In the past it said “permanently installed appliances.

2.     Yesterday we received a counter offer from Company X on the counter
       offer form, nothing more. This means we had a small piece of paper that
       changed the price of the unknown contract. It also means that the seller
       never signed that he accepted all of the terms of the contract. When we
       asked the agent to send the contract with the seller’s signature the agent
       said there was no place for the seller to sign. We had to suggest that the
       “accepted” be crossed out and marked “countered”. The contract should
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      also have the statement “countered, see attached addendum”, which we
      never see. Seems to me it would be easier to cross out the price, put new
      price and have that initialed and the seller signs the contract as countered.

ANSWER:

1.    The Louisiana Supreme Court issued a ruling in the case of Willis-Knighton
      Medical Center vs. Caddo-Shreveport Sales & Use Tax Commission, 2005 WL
      737 481 (La. 2005) on April 1st, 2005 which calls in question when it‘s a definition
      of a ―movable‖ or an ―immovable‖ property. The former language used in most
      purchase agreements which described ―permanently‖ attached items, is probably
      misleading in most regards. For an item to be ―permanently attached‖ according
      to the Willis-Knighton decision, it must be installed such that it cannot be
      removed without substantial damage to either itself or the immovable. Therefore,
      built-in dishwasher or refrigerator would not be ―permanently‖ attached. Our
      recommendation is that purchase agreements be as descriptive as possible as to
      what property is being sold by the seller to the buyer. This includes listing all
      property formerly considered ―component parts‖ of the immovable such as
      dishwashers, cabinets and carpet. If a seller wishes to exclude items such as
      washer, dryer and refrigerator from the sale, we suggest that the purchase
      agreement clearly states that these items are excluded from the sale.

2.    A acceptance of an offer that is not in accordance with the terms of the original
      offer is deemed to be a counter offer. Therefore, the counter offer should include
      the original offer with a statement that the counter offer incorporates the original
      offer except changes the term of price for example with a signature line to sign by
      both buyer and seller, or the counter offer should be rewritten as a new purchase
      offer.

QUESTION:

A house is listed with one Real Estate Company. The company receives a
contingent offer from another Real Estate Company. After 90 days the seller
cancels the listing and then lists with another Real Estate Company.

1.    If a contract does not have a closing date, is this a valid contract?

2.    If the contract is valid, does the contract transfer to the new listing
      company? What is the time limit for the buyer to perform?

ANSWER:

1.    Yes. Although a contract to sell typically contains a provision that the act of sale
      will occur no later than a certain date, a contract which does not have a specific
      closing date may still be a valid contract. We unfortunately could not read the
      facsimile of the purchase agreement provided, but it is likely that the contract in
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      question, like most purchase agreements, contain various suspensive conditions
      which must be fulfilled prior to the time of closing. Those suspensive conditions
      might include the purchaser‘s satisfactory review of title, physical inspection of
      the property, preparation of a survey or other regularly identifiable due diligence
      items. It is likely that a Louisiana court would view a purchase agreement having
      not set time for closing as valid, and requiring the purchaser to act within a
      ―reasonable‖ amount of time to fulfill the suspensive conditions of the contract.
      Once such suspensive conditions had been met, the purchaser would then be
      required to either terminate the contract (if the suspensive conditions have not
      been met to the satisfaction of the purchaser) or follow through with the
      purchaser of the property at a closing.

2.    No. A contract for the purchaser of property does not simply transfer from one
      real estate company to another based upon the fact that the seller‘s listing
      agreement with its real estate company expires and the seller enters into a new
      listing agreement with a second real estate company. It is likely that the listing
      agreement of the first real estate company states that I t shall be paid a
      commission based upon its procurement of a purchaser for the seller‘s property
      and that such commission shall be paid at closing. Under the facts that you have
      presented us, the first real estate company would seem to have procured the
      applicable purchaser. While the listing agreement in question may have expired
      prior to the occurrence of a closing, this generally does not alleviate the
      requirement that the seller pay a commission to the first real estate company
      upon closing a sale to the purchaser who was first procured by the first real
      estate company.

      In the terms of the time limit in which the buyer must perform its obligations to
      purchaser the property, as stated in the answer to question 1 above, the failure to
      set a closing date within the purchaser contract does not necessarily invalidate
      the contract. Louisiana‘s general obligation laws require that a purchaser
      proceed in good faith and in a ―reasonable‖ amount of time to fulfill the
      suspensive conditions contained in the contract. There is no bright line rule
      establishing a time limit within which the buyer must act, only that he act in good
      faith and in a reasonable amount of time.




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REALTOR® SELLING HIS/HER OWN PROPERTY
QUESTION:

Recently I was told that I as a licensed broker cannot represent the buyer when
selling property that I own. Is this true?

ANSWER:

A licensee can list his/her own property with a broker or may sell his/her property
without listing the property.

The LREC Section 2511 provides:

      A. A licensed broker or salesperson who offers property in which he or
      she owns any interest as being for sale or rent shall state in any
      advertising, and on any sign placed on the property, that he or she is a
      licensed real estate agent.

      B.   …

      C. Including the term ―licensed real estate agent‖ in any advertising or on
      any sign shall be sufficient to satisfy this requirement.

LREC Section 2501.A. provides:

      All advertising by any licensee shall include the phone number and the
      identity of the listing broker or firm through the use of the identical name
      under which the listing broker or firm is licensed or a registered trade
      name that is a clearly identifiable entity which will distinguish the listing
      broker or firm from other licensees, registrants, or certificate holders.
      (emphasis supplied)

If the licensee owns the property being advertised and does not list the property, only
the designation of ―licensed real estate agent‖ on any advertisement or sign must be
included. If the licensee lists the property with a broker or firm, Section 2501.A applies
and the phone number and identity of the listing broker or firm must be included.

You also asked whether the licensee seller (selling their own property) can also be a
―dual‖ agent for the buyer:

Generally, ―[a] licensee may act as a dual agent only with the informed written consent
of all clients. Informed consent shall be presumed to have been given by any client who
signs a dual agency disclosure form prepared by the commission pursuant to its rules
and regulations.‖ La. R.S. 9:3897A.

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However, despite the consent of a buyer or the buyer‘s execution of a dual agency
disclosure form, ―[a] licensee shall not be considered as acting as a dual agent if the
licensee is working with both buyer and seller, if the licensee is the seller of the property
he owns, or if the property is owned by a real estate business of which the licensee is
the sole proprietor and agent.‖ La. R.S. 9:3897(G.)

Based upon the aforementioned statute, any buyer entering into a real estate
transaction with a licensed real estate broker who is also the seller of the subject
property, must be represented by a third party broker or real estate agent, or otherwise
will be considered to be unrepresented, despite any consent that the seller/broker serve
in a dual agent capacity.

RESPA
QUESTION:

Is it legal for a REALTOR® to also be a mortgage broker? What type of
disclosures must they give and what restrictions do they have as a REALTOR®?
This question has come up several times recently-from REALTORS® and now a
title attorney.

ANSWER:

While there are many disclosures that may be required if the REALTOR® is also a
mortgage broker, one of the most complex of the regulations is RESPA, the Real Estate
Settlement Procedures Act.

Section 8(b) of RESPA prohibits any person from giving or receiving any fee, kickback
or other thing of value in exchange for referrals of settlement service business involving
federally related mortgage loans. Settlement service is defined to include any service
provided in connection with a real estate settlement including, but not limited to, the
following: title searches, title examinations, the provision of title certificates, title
insurance, services rendered by an attorney, the preparation of documents, property
surveys, the rendering of credit reports or appraisals, pest and fungus inspections,
services rendered by a real estate agent or broker, the origination of a federally related
mortgage loan (including, but not limited to, the taking of loan applications, loan
processing and the underwriting and funding of loans), and the handling of the
processing, and closing or settlement.

RESPA does contain some exceptions to this referral fee prohibition. One of the
exceptions relates to affiliated businesses. RESPA specifically provides that an
―affiliated business arrangement‖ is not a violation of Section 8 of RESPA. An "affiliated
business arrangement" means an arrangement in which (A) a person who is in a
position to refer business incident to or a part of a real estate settlement service
involving a federally related mortgage loan, or an associate of such person, has either
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an affiliate relationship with or a direct or beneficial ownership interest of more than one
percent in a provider of settlement services; and (B) either of such persons directly or
indirectly refers such business to that provider or affirmatively influences the selection of
that provider.

In order to take advantage of the affiliated business arrangement exception three
requirements must be met:

       1.     Proper disclosure must be made;

       2.     The client must not be required to use the services of the company to
              which the referral is made; and

       3.     All payments must be a return on the ownership interest.

Disclosure

In order to satisfy the disclosure requirement, prior to the referral, the person making the
referral has to provide to each person whose business is referred a written disclosure in
the format prescribed by Appendix D of the RESPA regulations. Generally the
disclosure must specify the nature of the relationship (explaining the ownership and
financial interest) between the person performing settlement services (or business
incident thereto) and the person making the referral, and must describe the estimated
charge or range of charges (using the same or similar terminology of Section L of the
HUD-1 or HUD-1A Settlement Statement) generally made by the provider of settlement
services. The disclosure must be provided on a separate piece of paper and no later
than the time of each referral.

Required Use

In order to take advantage of the affiliated business exception, the person to whom the
referral is made must not be required to use the service of the entity or person to whom
they are referred. Required use exists where use of the provider is a condition of the
availability of another service to a person and the person will pay for the settlement
service.

Return On Ownership Interest

In order for the affiliated business exception to apply the ―ownership‖ distributions
(whether dividends or distributions of partnership profits) made to the person making the
referrals by the entity to whom the business is referred must not be based on the
amount of business referred and must be the only payments made to the person
making the referral. Payments that have no apparent business motive other than
distinguishing among recipients on the basis of referrals, payments that vary based on
the volume of referrals and payments that are adjusted on the basis of previous
referrals are not permissible.
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Conclusion

Although generally RESPA does not prohibit a REALTOR® from having an ownership
interest in a mortgage business, being a Mortgage broker, from referring business to
that mortgage business or from receiving returns on such the REALTOR‘S® ownership
interest in that mortgage business there are as set forth above and as further set forth in
the regulation very detailed disclosure requirements. The REALTOR® should obtain
independent legal advise regarding these required disclosures and regulations.

QUESTION:

Apparently there was a lot of discussion about the home warranty during the
RESPA seminar and it must have been decided that we can get the fee from the
warranty companies since we are filling out and processing an application for
them. The question that was asked of me later was about the agents that are
buying a home warranty policy for their sellers or buyers. Can they legally do
this or is that an enticement to list or buy from them? Or is this part of their
marketing plan and considered a cost of doing business?

ANSWER:

The National Association of REALTORS® website contains the following questions and
answers in relation to RESPA and home warranties:

       Q. RESPA prohibits service providers from giving anything of value in exchange
for referrals of business. Does that prohibition apply only to certain types of service
providers (i.e. lenders, title companies) from providing food at open houses or does it
apply to all service providers (i.e. home inspectors, pest control companies, advertising
companies and others)?

        A. RESPA applies to settlement service providers and does not distinguish
among different types of settlement providers. A settlement service includes any
service provided in connection with a real estate settlement including, but not limited to,
title searches, title examinations, the provisions of title certificates, title insurance,
services rendered by an attorney, the preparation of documents, property surveys, the
rendering of credit reports or appraisals, pest and fungus inspections, services rendered
by a real estate broker or agent, the origination of a federally related mortgage loan and
the handling of the processing and closing or settlement. This list is broad but not all-
inclusive. Anything listed on a HUD-1 form could be a settlement service and the
company providing it a settlement service provider.

       Q.     Is a home warranty company a settlement service provider?

       A.    Is noted above a settlement service provider is one who provides services
in connection with the purchase/sale of a property that are paid for, directly or indirectly,
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out of the funds at settlement. Most home warranties are sole in connection with a
property sale and therefore the company selling the warranty would be a settlement
service provider.

Generally, the Real Estate Settlement Procedure Act is violated when ―a thing of value‖
is given or received in exchange for a referral. RESPA defines a thing of value as a
discount, a rebate, or even the payment of another service provider‘s expenses.
Normal promotional activities not directly conditioned on the referral of business are
generally not violations of RESPA. The key test is whether those activities involve
defraying expenses that a service provider in a position to refer business would
otherwise incur.

Your question was agents buying a home warranty policy for their clients as a marketing
program. If it is part of a marketing promotion for their clients and otherwise disclosed
as provided by the real estate license law, this may not be a violation of RESPA.

REDHIBITION
QUESTION:

With regards to redhibition laws in Louisiana, is there a distinction between
residential and commercial real estate? In other words, does a purchaser of
commercial property have the same redhibitory rights enjoyed by a purchaser of
residential property? Is there a separate form/language that is/should be used
and if so, where can I obtain a copy of it?

ANSWER:

Generally, there is no distinction in the commercial and residential redhibition laws.

―Redhibition‖ is defined in Article 2520 of the Louisiana Civil Code which states:

       The seller warrants the buyer against redhibitory defects, or vices, in the
       things sold.

       A defect is redhibitory when it renders the thing useless, or its use so
       inconvenient that it must be presumed that a buyer would not have bought
       the thing had he known of the defect. The existence of such a defect
       gives a buyer the right to obtain rescission of the sale.

       A defect is redhibitory also when, without rendering the thing totally
       useless, it diminishes its usefulness or its value so that it must be
       presumed that the buyers would still have bought it but for a lesser price.
       The existence of the defect limits the buyer to a reduction of the price.


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Article 2534 of the Louisiana Civil Code provides in part:

       . . . However, when the defect is residential or commercial immovable
       property, an action for redhibition against a seller who did not know of the
       existence of the defect prescribes in one year from the day delivery of the
       property was made to the buyer. . . .

Any waiver of the warranty against redhibitory defects by a party must be specific and
will be strictly construed by the courts. Often, a provision in the contract stating that the
sale is without warranty expressed or implied as to the condition of the quality or fitness
of the property for the use intended and that the seller waives any right to rescind or
seek reduction in the purchase price on account of redhibitory defects in bold
conspicuous language signed by the buyer is used and is generally effective between
the parties. Even if the warranty against redhibitory defects is effectively waived, the
seller shall still remain liable for fraud or misrepresentation concerning the condition of
the property.

RIGHT OF WAY
QUESTION:

What is the likely ruling on access to this particular “land locked” tract? The
current situation is a large tract with a private servitude across 3 adjacent tracts
to a public paved road. The private servitude was established via survey plat and
recorded in the courthouse. The property owner also currently has right of way
to a public road across his relative’s property. This right of way was recorded in
court and established due to the requirement of a bank mortgage on the large
acre tract. This right of way was never used due to the property owner’s
manufactured home being located directly in the path of the right of way. Please
review the attached diagram.

The problem is the 3 adjacent property owners are disputing the access due to
the possibility of a shorter and less intervening plan to access the property via
another adjacent property. The plan would be to access the property from a
public road located 200 ft. from the large tract and located adjacent and parallel to
the southern property line on an adjacent property. This less intervening plan
has been refused by the adjacent property owner. What action should be taken to
acquire access to this property? What would be the estimated cost and time
frame to institute legal action and what would the most likely ruling be on this
particular case?

ANSWER:

Generally, a right of passage for an enclosed estate or landlocked property is provided
for in Louisiana Civil Code Article 689. This Article provides the owner of estate that

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has no access to a public road may claim a right of passage over a neighboring
property to the nearest public road. He is bound to indemnify his neighbor for the
damage he may occasion.

This means that a landlocked owner (unless the landlocking of his estate was caused
by his own act) is entitled to a right of passage to a public road across a neighbor‘s
property for compensation paid to his neighbor. Generally, the right of passage should
be taken along the shortest route from the landlocked property to the public road at the
location least injurious to the intervening neighbor‘s lands. See Civil Code Article 692.

However, it appears from the scenario you have presented, that the property is not
actually landlocked, but there is a recorded predial servitudes (private servitude)
established access to a public road. Therefore, the owner of the landlocked estate
might either have an action to gain access to the private servitude already established
by requiring removal of the impediment or requiring his neighbor to provide alternate
route to the public road. We cannot opine as to the time or cost for this proceeding,
however, generally Courts require surveys and alternate plans to determine the best
and shortest round. Under the current legal climate with many Courts still being closed
and backlogged, unless this plan can be consensually worked out between the
neighbors, it might be many months before a Court would rule on such a proceeding.

TREE ENCROACHMENT
QUESTION:

My client’s tree is encroaching on the neighbor’s property. If the branches need
trimming on the neighbor’s property – Who is responsible?

They want the tree cut down because the roots are growing on their property and
they want the branches cut. A tree expert said the tree was not causing any
damage to their property, so the owner doesn’t want to cut it.

ANSWER:

Under Louisiana law the ownership of a tract of land includes everything that is directly
above or below that tract of land. In terms of trees which are growing on one person‘s
property but extend by their branches or roots on to their neighbor‘s property, the
neighboring property owner has the right to demand that such branches or roots which
extend over or into his property be trimmed at the expense of the tree owner. However,
the foregoing right is conditioned upon the fact that the encroaching roots or branches
interfere with the neighbor‘s enjoyment of his or her property.

Under Louisiana jurisprudence, there is little guidance as to when an encroaching tree
interferes with a neighbor‘s enjoyment of his property. However, one might conclude
that a tree which encroaches upon neighboring property such that the neighboring

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property receives a significant reduction in sunlight and/or interferes with the growth of
grass or other vegetation on such neighboring property, could be considered to interfere
with a neighbor‘s enjoyment of his own property. Additional considerations as to
whether or not an encroaching tree interferes with the neighbor‘s enjoyment of his
property may be whether or not such tree sheds a substantial amount of leaf/pollen or
other debris which might cause such neighbor to incur additional time and effort in
keeping his or her yard kept.

In most instances, the owner of a tree which encroaches upon his neighbor‘s property,
is responsible for trimming the branches and/or roots which overhang into his neighbors
yard. Generally, Louisiana law does not permit the neighboring property owner to
demand that the tree be cut down entirely. A neighbor may only demand that the tree‘s
branches or roots be cut to the extent that they encroach upon his property.

UNLICENSED ASSISTANT
QUESTION:

May an unlicensed assistant give out information regarding real estate to the
public that is available to the public through the MLS on the internet?

ANSWER:

The Louisiana Real Estate License Law, Louisiana Revised Statutes 37:1430 et seq.,
(hereinafter the ―License Law‖) does not establish with specificity which activities can or
cannot be engaged in by personal assistants to licensed real estate brokers or agents.
However, the License Law allows the Louisiana Real Estate Commission to impose a
civil penalty of up to $5,000 against any unlicensed person found to have engaged in a
―real estate activity‖. The License Law defines real estate activity as activity relating to
real estate transactions performed on behalf of another person or business entity for a
fee, commission or other consideration or the execution thereof. Such activities include
among other things, the selling, purchasing, managing, leasing or the negotiation on
behalf of another for the sale, purchase, management or lease, the offering to sell or
offering to negotiate the sale or leasing of such properties, the listing or offering to list
for sale or lease real estate, the advertising of one self as being engaged in the
business of selling or renting or managing real estate, or the assisting or directing in the
procuring of potential clients for the sale, lease or management of any real estate.

Based upon the definition of real estate activity as provided by the Licensing Law,
generally personal assistants to real estate brokers or agents may engage in clerical or
administrative duties associated with the operation of the real estate licensee‘s business
but in no way should such assistants engage in work which if viewed by a third party
would give such third party reason to believe that the assistant was or is a licensed real
estate broker or salesperson.


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Summary of Hotline Questions Received in 2006 and 2007

ADVERTISING

QUESTION:

My office has been asked to handle advertising for people who would like for a
Modular Builder/Developer to build a home on the individuals lot or we can find a
lot for them and put the building package together at that time. The Modular
Builder will sign a listing for the home now and when the building package is
complete we well enter into MLS as a completed listing. Can I legally advertise the
home only in the news paper or the local builder magazine in our area? I will be
advertising on behalf of the Modular Builder/Developer.

ANSWER:

Generally the advertising rules provided for in the Louisiana Real Estate Commission
provide as follows:

Section 2501

      (a)      All advertising by licensee shall include the phone number and
               identity of the listing broker or firm through the use of the identical
               name under which the listing broker or firm is licensed or a
               registered trade name that is clearly identifiable which will
               distinguish the listing broker or firm from other licensees, registrants
               or certificate holders.

               Any trade name used the licensee, registrant or certificate holder in
               advertising shall be a trade name that is a clearly identifiable entity
               that will distinguish itself from other licensees, registrants or
               certificate holders.

      (c)      Any trade name used by a licensee, registrant or certificate holder
               in advertising shall be a trade name that is a clearly identifiable
               entity that will distinguish itself from other licensees, registrants or
               certificate holders.

      (d)      All advertising of a licensed individual, partnership, firm, or
               corporate broker shall include their licensed business name, which
               for the purpose of these rules shall mean the name in which that
               individual, partnership, firm or corporation is on record with the
               Commission as doing business as a real estate broker or, in the
               case of a trade name, that which is registered with the secretary of
               state and on record with the Commission.
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       (e)    A salesperson or associate broker is prohibited from advertising
              under only his or her name.

       (f)    All advertising by a salesperson or associate broker must be under
              the direct supervision of his or her sponsoring broker.

       (g)    In all advertising, the salesperson or associate broker must include
              the name and telephone number of his or her broker as defined in
              this Section. The broker's name and telephone number must be
              conspicuous, discernible, and easily identifiable by the public.

       (h)    If allowed by the sponsoring broker, the salesperson or associate
              broker may include in the advertisement:

              1.     The salesperson's or associate broker's personal logo or
                     insignia, which cannot be construed as that of a company
                     name;

              2.     The salesperson's or associate broker's contact information;

              3.     A group or team name, as long as the name(s) of the
                     salesperson(s) and/or associate broker(s) are included near
                     the team reference and cannot be construed as that of a
                     company name; and

              4.     A slogan that may not be construed as that of a company
                     name.

Further, Section 2503 of the regulations provides that a broker may not advertise unless
all owners of the property authorize the advertisement.

Finally, the regulations provide that all advertising shall be an accurate representation of
the property advertised and that all printed advertisement for the sale or lease of
residential real property shall indicate the month and year the advertisement is printed,
published or distributed. There are no requirements specific to modular builders or
developments of which we are aware. It would seem however, advertising for a
modular builder would be similar to advertising for any other type of speculative home
under construction by a builder.




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QUESTION:

I have a question regarding the size of an agent’s name as compared to that of
the agent’s company’s name in advertising.

It was my understanding that at one point, the agent’s name could be the same
size or smaller than the company name but not larger. It was stated at the
seminar that this was no longer the case. I also remember that some time ago
they did change the regulation but almost as soon as it was changed I was told
that the change had been rescinded.

I looked through the Louisiana Real Estate Commission’s Rules and Regulations
and there is no mention to the size any longer.

We want to be in compliance, can an agent’s name be larger than that agent’s
company name?

ANSWER:

Chapter 25 of the Louisiana Real Estate Commission Rules governs advertisements. A
copy of Sections 2501 through 2511 are attached for your convenience. We do not see
any mention of size of the company name included in these regulations. I believe you
are correct that at one time the size of the agent and company names in advertising
were regulated, but this is no longer the case.

QUESTION:

There is a piece of property for sale by owner on a side street. In the yard of this
property there is a For Sale Sign with phone numbers on it. There are also two
signs with the name of a mortgage company advertising 100% financing and their
telephone number. On the main street, about a block from the house, there is a
homemade sign that says "3 bedrm/2 bath home for sale" - no name but the
phone number of the mortgage company. Do these signs comply with the
License Law?

ANSWER:

The scenario that you have presented may be a possible violation of Louisiana Revised
Statutes 37:1436 and 1459. If the mortgage company owns the home then a home
being sold by the owner is not generally a violation of the license law. These statutes
prohibit an unlicensed person, including LLCs, Corporations and the like, from
conducting real estate activity. However, real estate activity includes all activities, such
as listing a home for sale. The activity must be done in exchange for, or in anticipation
of receiving, a fee, commission, or valuable consideration. If the person receives
nothing of value, then there is no real estate activity as defined by the statute. It appears
that the mortgage company is advertising the home for sale. If the mortgage company
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is, in fact, advertising the home for sale in exchange for some valuable consideration,
this may be a violation of the real estate license law unless the mortgage company is a
licensed broker or owns the home being sold. You may consider reporting this activity
to the Louisiana Real Estate Commission.

AGENCY
QUESTION:

Disclosure

1.    Should there be a special Team Agency Disclosure or should every
      member of the Team be required to sign the Agency or Dual Agency
      Consent Form?

2.    When the Team member acts as a dual agent-is the whole Team acting as
      dual agents?

3.    Should all members of the same Team sign Dual agency as well as
      agency?

4.    If one Team member lists and another member sells does that make it a
      dual agency situation?

5.    If there are four members of a Team, who should the contract be delivered
      to?

6.    If all client parties in a dual agency have to sign, should all Team members
      have to sign since Team members acting in different capacities are sill
      privy to information on both sides of the transaction?

Designated Agent

1.    Can any member of a Team sign a contract or just the designated agent?

2.    If a Team member goes out of town, and that Team member is a designated
      agent for a listing, will the broker need to designate in writing that another
      Team member is now the designated agent for that listing or can another
      Team member act in this capacity?

Responsibility/Liability

1.    At what point does a member of a Team fulfill his fiduciary obligation to the
      client: For example, if one Team member is responsible for execution and
      delivery of documentation, another for signage and another for closing

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      details. When one Team member fails to perform are the other Team
      members is error?

2.    Should there be one member of the Team who is responsible for all other
      Team member activities: (A designated agent for the Team.)

3.    Does a Team member have to notify a client that the other member of a
      Team will be working for them too? (Could be someone on the Team the
      client may not want to have working for them.)

4.    When one Team member is a designated agent on listing agreements and
      disclosures should the others have to sign sub-agency agreements?

5.    Should Teams have written agreement with each other outlining the duties
      of its members and other important “what if” scenarios?

6.    Should Teams be governed by a different set of rules and regulations or
      should there be additional rules and regulations designed for Team
      concept?

7.    There have been concerns about the communication between Team
      members-if one shows a property and another writes a contract-does the
      agent writing the contract know what was said to customer by agent who
      showed the property?

Disclosure

1.    Should there be a special Team Agency Disclosure or should every
      member of the Team be required to sign the Agency or Dual Agency
      Consent Form?

ANSWER:

Pursuant to our conversation, it is our understanding that the Team consist of listing and
selling agents who are independent contractors working with the same broker and
sometimes also includes a non-licensed member. These Team members all work with
the same client in different capacities for the sale or purchase of a home. For example,
one Team member may conduct the open houses and another Team member prepare
the contracts.

La. R.S. 9:3892 provides:

      Notwithstanding the provisions of the Civil Code Art. 2985 through 3032 or
      any other provisions of law, a licensee engaged in any real estate
      transaction shall be considered to be representing the person with whom
      he is working as a designated agent unless there is a different written
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      agreement between the broker and the person providing there is a
      different relationship or the licensee is performing only ministerial acts on
      behalf of the person.

Further, La. R.S. 9: 3897 provides:

      Dual Agency.

      a.    A licensee may act as a dual agent only with the informed written
      consent of all clients. Informed consent shall be presumed to have been
      given by any client who signs a dual agency disclosure form prepared by
      the commission pursuant to its rules and regulations… (emphasis added)

We know of no particular rule or statute that specifically addresses Team Agency
Disclosures. Applying the license law as written, it would appear that certainly as to the
dual agency consent form, the client must consent to each licensee on the Team acting
as a dual agent on their behalf. Further, pursuant to La. R.S. 9:3892, the licensee will
be considered a designated agent for the client unless a contract/disclosure is signed
providing otherwise or only ministerial acts are performed by the Team member.

2.    When the Team member acts as a dual agent-is the whole Team acting as
      dual agents?

Again, there are no specific rules in the license law or code regarding Team members.
Presumably, however, the conservative interpretation of the rules is, if each member of
the Team is acting on behalf of the client, conceivably then the entire Team is acting as
a dual agent for the client.

3.    Should all members of the same Team sign Dual agency as well as
      agency?

If the Team is representing its clients as both buyer and seller agents then most likely a
dual agency disclosure should be signed by all members of the Team that are
licensees. We know of no exclusion for Team members.

4.    If one Team member lists and another member sells does that make it a
      dual agency situation?

If the Team is marketing itself to its clients as a Team agent for the clients then the
conservative view is that, yes, the dual agency rules should be followed by all of the
members of the Team.




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5.    If there are four members of a Team, who should the contract be delivered
      to?

There are no specific license law statutes dealing with Teams. However the license law
provides that the contract should be delivered to the designated agent. It appears that
all members of the Teams might be considered the designated agent of the client.
Therefore it is advisable if the Team designates in their contract with their client which
Team member or if all Team members shall be considered the designated agent for
purposes of delivery of an offer or counteroffer.

Responsibility/Liability

1.    At what point does a member of a Team fulfill his fiduciary obligation to the
      client: For example, if one Team member is responsible for execution and
      delivery of documentation, another for signage and another for closing
      details. When one Team member fails to perform are the other Team
      members in error?

As there is no statute limiting responsibility in the Team concept, potentially each Team
member as a licensee is responsible to the client for the duties and fiduciary obligations
required by the license law. If an obligation of the Team is not performed or met for a
client, potentially all Team members could be liable to the client.

2.    Does a Team member have to notify a client that the other member of a
      Team will be working for them too? (Could be someone on the Team the
      client may not want to have working for them.)

Yes. It is only with the client‘s permission that the Team concept can be employed.

3.    When one Team member is a designated agent on listing agreements and
      disclosures should the others have to sign sub-agency agreements?

The Team member who is the designated agent could be addressed by contract. If
there is only one designated agent, then the other Team members would most likely
have to sign sub-agency agreements.

4.    Should Teams have written agreement with each other outlining the duties
      of its members and other important “what if” scenarios?

Although there is no license law that we are aware of addressing this written agreement,
it would certainly seem to be advisable to have a written agreement with the Team
members specifying the Team members‘ responsibilities.

5.    Should Teams be governed by a different set of rules and regulations or
      should there be additional rules and regulations designed for Team
      concept?
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There are no rules and regulations specifically addressing the Team concept of which
we are aware. This is perhaps an area where additional rules and regulations might be
useful because there is little guidance on how to employ a Team structure.

QUESTION:

Do listing agreements create an agency relationship under LIC law?

ANSWER:

There are several Louisiana Statutes addressing the agency relationship between a real
estate licensee and a client.

       La. R.S. 9:3891 defines ―agency‖ as the relationship in which a real estate broker
or licensee represents a client by the client‘s consent, whether express or implied,
regarding an immovable property transaction.

      La. R.S. 9:3892 provides notwithstanding the provisions of Civil Code Articles
2985 through 3032 or other provisions of law, a licensee engaged in a real estate
transaction shall be considered to be representing the person with whom he is working
as a designated agent unless there is a written agreement between the broker and
the person providing that there is a different relationship or the licensee is
performing only ministerial acts on behalf of the person. (emphasis supplied)

        La. R.S. 9:3892 defines ―ministerial acts‖ as those acts that are informative in
nature. The article further provides examples of those types of acts. The examples
listed in this statute do not include entering and maintaining a listing in MLS.

QUESTION:

I need to know if I am creating liability for myself by doing some of the legwork
for my client. My client’s time is very limited so I called around today to some city
parish offices and had them email or fax copies of the plat maps and drainage
maps for the property. I also received a copy of a permit and inspection summary
from an addition that was done to the house.

I also called around to find out what fire dept to contact for that area and I called
to find out the servitude area for the fire hydrant in the yard. I spoke with people
in each dept regarding various issues that we are exploring during the inspection
period. I forwarded the copies of the maps and inspection summary to my client
with names of depts. And ph numbers and told her that she would need to call
and verify information because of the liability reasons.

Is the agent doing too much by conducting the investigating and compiling the
data? Does this create liability? What if the agent adds the purchaser or seller on
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the phone line and makes the call? Is she within her realm to make calls with the
agencies with her client on the line while asking questions on behalf of her client
who is a party to the conversation? Does she need to investigate these issues
with her client during her representation? Per the Article in a magazine “Seven
Tips to Avoid Liability” it reads “your job is to guide people through the process
of buying and selling property.” It then reads further down “you can talk about
the physical aspects of the property and the financial aspects of the deal, but
once you start answering too many questions, especially that that start with
“what if”, you can quickly end up in dangerous territory.” Based on this
information, would these calls be considered talking about the physical aspects
of the property or by taking it to this extent is it likely that the information can be
miss-communicated and create a problem? I know with school districts we say
we can not give that information out. Therefore, it is of concern to me all of this
information is obtained and relayed. Please advise.

ANSWER:

We agree with the advice given in the magazine entitled, ―Seven Tips to Avoid Liability‖.
Investigating aspects of the property for the purchaser or seller may imply to the
purchaser or seller that the REALTOR® is warranting the accuracy of the information
supplied. Certainly having the purchaser or seller on the telephone line asking the
questions themselves would limit a perceived warranty from the REALTOR® that they
are warranting the information, but as indicated by the article answering ―What if‖
questions may seem as a warranty from the REALTOR® for particularly inexperienced
homebuyers. There is always tension between providing excellent service for your
customers and overstepping the role of the broker/agent.

APPRAISALS
QUESTION:

If it is a “cash sale” does the appraisal provision apply? It appears the appraisal
provision is totally exclusive of the financing clause and still applies via the
wording in the contract. Is this correct?

ANSWER:

The answer to this question will depend on the exact working of the purchase
agreement between the buyer and the seller. The ―cash sale‖ provisions and the
―appraisal‖ provisions of most purchase agreements are independent clauses.
Generally, however if it is a ―cash sale‖ the buyer does not obtain an appraisal. This is
because usually buyers wish to obtain an appraisal to insure they will be able to obtain
the loan pursuant to the financing clause contained in the purchase agreement.
However, a buyer might decide to pay cash and still require an appraisal to insure that
the property being purchased is worth, at least in the opinion of the appraiser, the

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amount being paid in cash. Again, the exact wording of the purchase agreement would
need to be reviewed to determine if the appraisal is still required even if no financing is
involved.

QUESTION:

Is a certified and licensed Louisiana appraiser/broker allowed to offer a free
appraisal to a seller in exchange for the listing on the property?

ANSWER:

Generally, under Louisiana law, a real estate Broker is not prohibited from offering
appraisal services if the Broker is a licensed real estate appraiser. The Louisiana
Administrative Code (LAC 46:LXVII.2513) provides that: "[n]o licensee shall offer or
advertise any appraisal service to the public in any manner which would create the
impression of the licensee being a state certified real estate appraiser unless the
licensee has been certified as such." Thus, generally an individual holding dual state
licenses/certifications as both a broker and appraiser may offer and/or advertise
appraisal services.

Generally, Louisiana Real Estate license law does not dictate the maximum and/or
minimum fee that must permissibly be charged for such services; nor does the law
contain any express prohibition against the Broker offering the services for free as an
inducement to potential sellers to list their properties with the Broker. There are some
ethical rules of conduct contained in the ―Uniform Standards of Professional Appraisal
Practice‖. We have not reviewed these ethical rules applicable to appraisers regarding
this issue.

BOND FOR DEED
QUESTION:

Was there an amendment to the Bond for Deed Statute La. R.S. 9:2942 in 2003?

ANSWER:

La. R.S. 9:2942 provides as follows:

§2942. Unlawful to sell encumbered real property by bond for deed without guarantee
to release on payment

       It shall be unlawful to sell by bond for deed contract, any real property
       which is encumbered by mortgage or privilege without first obtaining a
       written guarantee from the mortgage and privilege holders to release the
       property upon payment by the buyer of a stipulated mortgage release

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      price, with which agreement the secured notes shall be identified. The
      agreement shall be recorded in the mortgage records of the parish where
      the property is situated before any part of the property is offered for sale
      under bond for deed contracts. The provisions of this Part likewise shall
      apply to any property offered for sale by bond for deed contract which may
      be subsequently mortgaged or encumbered by a privilege.

       This statute was enacted in 1934 and has not been amended since that time.
There are not many cases following this section of the revised statutes. One case that
specifically interprets this section is Levine vs. First National Bank of Commerce, 738
So.2nd 133 (La.App 5th Cir. 1999) writ denied 751 So.2nd 225 (LA. 1999). This case in
discussing this portion of the statute, provides that the bond for deed contract between
the mortgagor and third party was not illegal under the statute making it unlawful to sell
encumbered real property by bond for deed without a guarantee to release on payment
and thus, did not provide a basis for mortgagee to institute foreclosure proceedings on
mortgaged property. The statute, as stated by the court, was meant to protect the buyer
of mortgaged property, not the mortgagee.

Further in a second case, Scott vs. Apgar, 113 So.2nd 457 (La. 1959), the court
provides that where there was substantial compliance with the section making it
unlawful to sell encumbered real property by bond for deed without guarantee to release
on payment and the purchaser enjoyed benefits of bond for deed contracts over a
period of 17 months without making any protest that the vendor had not obtained written
guarantee from the mortgage holder and placing it on record as required by the statute,
the purchaser was therefore prohibited from canceling his civil obligation under bond for
deed contract on the grounds this contract was void, as a result the vendors failure to
first obtain from the mortgage holder the written guarantee prescribed under the statute.

CANCELLATION OF A SALE
QUESTION:

All clear to close the house given on Thursday, July 20, 2006, according to the
mortgage company with me through power of attorney, to sign for, John Smith.

Everything was signed and dated July 21, 2006.

The Act of Sale is signed by Buyer and Seller and the Seller is given occupancy
after the sale although everything had been signed, occupancy had been given,
and that the money had been wired to the title company, that the lender gave
instructions to Jane Jones at the title company, to not disburse the funds. The
title company was told by the mortgage company that the lender did a verification
of employment after the closing, and based on the information obtained, would
not authorize the release of the funds.


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To this date, the title company is holding the seller's funds. The buyers still have
occupancy of the house, leaving the issue of who is responsible for the
liability. The Seller acted in good faith, and has no proceeds from the sale.

ANSWER:

The basic remedy for cancellation of a sale of real property is dissolution of the sale for
non-payment of a purchase price. The intent of this action is to place the parties in the
same state as if the obligation to purchase and sell had not existed. The real estate sold
is returned to the seller. The seller‘s right to dissolve a sale for non-payment of the price
is implied by law in every sale. The seller may file suit to dissolve the sale. See Groner
Apartments v. Controlled Building Systems, 432 So. 2nd 1142 (La. Ct. App. 3rd Circuit
1983), writ denied, 438 So. 2nd 1106 (La. 1983), and appeal dismissed, 465 U.S. 1015,
104 S. Ct. 1262, (1984). See also La. Civil Code Article 2461 et seq.

Dissolution of a sale does not take place automatically unless voluntarily agreed to by
the parties. A seller must sue for dissolution of the sale and dissolution must be
pronounced by the court. See La. Civil Code Article 2562 et seq. The seller may wish to
make written demand on the title company for payment of the purchase price. Absent
immediate payment, the seller may wish to file a suit to dissolve the sale.

COMMISSION
QUESTION:

Question #1.       If a Buyer’s Agent brings in a full price all cash offer not
subject to financing, property inspections or any other contingency with a 30 day
act of sale date (which would be considered “reasonable” in our area) and the
seller does not accept the offer, can the Buyer’s Agent/Broker demand payment
of their commission from the Listing Broker thereby requiring the Listing Broker
to possibly sue his own client to pay the Buyer Broker’s commission?

This example presumes that there is not a competing offer on the property at the
time which the seller accepts in lieu of the all cash offer and that the seller has no
legitimate objection to the terms in the offer (other than he decided not to sell the
property after all or he decided he wants more money for the property than the
list/asking price)

Question #2.       Same situation as in Question #1 except that the full price offer
is subject to the Buyer obtaining financing and subject to property inspections
(both of which are “normal” contingencies in a purchase agreement in our area).
Would this inclusion of these “normal” contingencies make a difference?

Question #3.     After all parties sign a purchase agreement, one of the parties
defaults or seems to have defaulted on the contract. Can the Buyer Broker

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demand payment (from the Listing Broker) of the co-operating Broker’s
commission that would have been earned on the transaction?

Question #4.         In the above type cases, is the payment of the co-operating
Broker’s commission dependant upon whether or not the Listing Broker decides
to pursue the seller for commissions (i.e., if the Listing Broker decides not to go
after the seller for commissions does this mean the Buyer’s Broker has no right
to go after the Listing Broker for the selling commission he would have earned on
the transaction)?

Question #5.       If the Listing Broker had to pay the Buyer Broker’s
commission in the above cases, would the Listing Broker have to pay this
commission before the Listing Broker actually collected the commission from the
Seller-possibly though a lawsuit?

Question #6.         If the Listing Broker could be liable to a Buyer’s Broker for
commission in any of the above cases, then is there a way to phrase the offer of
commission made in MLS to a co-operating Broker so that the Buyer Broker only
gets paid a commission if the Listing Broker is paid the gross commission by the
seller and only if the Listing Broker decides to pursue the Seller for commissions
earned? I ask this question because often a Listing Broker may not want to sue
his own client for commissions.

ANSWER:

Question #1.       If a Buyer’s Agent brings in a full price all cash offer not
subject to financing, property inspections or any other contingency with a 30 day
act of sale date (which would be considered “reasonable” in our area) and the
seller does not accept the offer, can the Buyer’s Agent/Broker demand payment
of their commission from the Listing Broker thereby requiring the Listing Broker
to possibly sue his own client to pay the Buyer Broker’s commission?

A listing agreement is defined by the Louisiana Real Estate License law as a written
document signed by all owners of real estate or the authorized attorney in fact
authorizing a Broker to offer or to advertise real estate described in the document for
sale or lease on specified terms for a definite period of time. LA R.S. 37:1431 (30). The
general rule is that a Broker is entitled to a commission when he has secured a Buyer
ready, willing and able to buy on the owners/sellers terms, even if the sale is not
consummated. See Eames v. McKnight, 262 La. 915, 265 So. 2nd 220 (1972); Prescott
Murphy Realty, Inc. v. Ward Peters Inv. Co., Inc., 340 So. 2nd 642 (La. Ct. App. 2nd Cir.
1976). This is in the absence though of a contrary agreement in the listing agreement.

Some listing agreements provide that a commission is only due at the time of signing of
the Act of Sale. The inclusion of this clause requires consummation of the sale for a
Broker to collect a commission. See Kuhn v. Stan A. Plauch Real Estate Co. 249 La.

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85, 185 So. 2nd 210 (1966); Alliance Financial Services, Inc. v. Cummings, 526 So. 2nd
324 (La. Ct. App. 4th Cir. 1988), writ not considered, 531 So. 2nd 465 (La. 1988).

To determine whether a commission is due if the full price offer with no contingencies is
brought to the Broker, the exact wording of the Listing Agreement will need to be
reviewed. The amount of commission or compensation to be paid by the owner or
Broker to a Buyer‘s Broker is a matter of contract and is not regulated by statute. Thus
the commission is negotiated between the parties. Generally in the absence of a
contrary agreement the Buyer‘s Broker and the Listing Broker divide the commission
due. See Pinetree Realty, Inc. v. Stan Weber and Associates, Inc. 405 So. 2nd 139 (La.
Ct. App. 1st Cir. 1981) and Orleans Title Insurance Agency, LLC v. R. Allen Bartlet, Inc.
811 So. 2nd 1126 (La. Ct. App. 4th Cir. 2002). The seller‘s obligation to pay a
commission is usually discharged by payment of the commission to the Listing Broker.
The Buyer‘s Broker must look to his or her contract with the Listing Broker to obtain
payment of the commission. This contract between the Buyer‘s Agent and Seller‘s
Broker may be in Multiple Listing Services terms or if the property is not in the Multiple
Listing Service set forth otherwise between the Listing Broker and Buyer‘s Broker. The
Multiple Listing Service generally provides that entitlement to compensation is
determined by the cooperating Broker‘s performance as a procuring cause of the sale.
See Multiple Listing Services Handbook, pg 39. Therefore if the property is listed in the
Multiple Listing Service then most likely no commission will be due to Buyer‘s Broker
unless a sale closes.

Question #2.       Same situation as in Question #1 except that the full price offer
is subject to the Buyer obtaining financing and subject to property inspections
(both of which are “normal” contingencies in a purchase agreement in our area).
Would this inclusion of these “normal” contingencies make a difference?

Again the exact terms of the listing agreement and any contract between Buyer‘s Agent
and Listing Agent would need to be reviewed as to whether or not this circumstance will
entitle the Listing Broker and subsequently the Buyer‘s Broker to a commission. The
Listing Agreement may specify what is considered a ―normal‖ or ―acceptable‖
contingency to entitle the Broker to a commission. Some Listing Agreements provide a
full price offer and must include no contingencies for a commission to be due. Property
inspection, even though routine, is a contingency.

Question #3.     After all parties sign a purchase agreement, one of the parties
defaults or seems to have defaulted on the contract. Can the Buyer Broker
demand payment (from the Listing Broker) of the co-operating Broker’s
commission that would have been earned on the transaction?

Again, whether or not a commission is earned will depend upon the exact wording of the
listing agreement itself and any contract between the Buyer‘s Broker and Listing Agent.
The Broker may not be entitled to a commission from either the seller or buyer if the
sale was not consummated because the buyer was unable to obtain financing which
was a contingency in the purchase agreement. See Landry and Passman Realty, Inc. v.
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King 170 So. 2nd 775 ( La. Ct. App. 1st Cir. 1964). If the defaulting party for example
failed to make a good faith effort to obtain financing, the Broker may be entitled to
recover commission from the buyer. See Timorman v. Smith 413 So. 2nd 627 (La. Ct.
App. 1st Cir. 1982). If the seller and the buyer are both equally at fault for failure to
consummate the sale, then the payment of a commission might be born equally by each
party by order of the court. See Radecker v. Walko Builders, Inc., 130 So. 2nd 684 (La.
Ct. App. 4th Cir. 1961). Further the commission might be denied to the Broker if the
purchase agreement is nullified due to some error caused by the Broker. In Schackai v.
Lagreco, 350 So. 2nd 1244 (La. Ct. App. 4th Cir. 1977) the Brokers commission was
denied when incorrect measurements of the property that he had inserted in the Listing
agreement caused the sale to fall through.

Question #4.         In the above type cases, is the payment of the co-operating
Broker’s commission dependant upon whether or not the Listing Broker decides
to pursue the seller for commissions (i.e., if the Listing Broker decides not to go
after the seller for commissions does this mean the Buyer’s Broker has no right
to go after the Listing Broker for the selling commission he would have earned on
the transaction)?

There must be either an express or implied written or oral agreement on the part of the
owner to pay a commission. See Woods Realty, Inc. v. Brimberry Trust, 520 So. 2nd
810, 813 (La. Ct. App. 2nd Cir. 1988). Not only must a valid Broker agreement exist
between the Broker and the client, but the contract must be made with reference to a
specific transaction under which the Broker claims a commission. See Winners Circle of
Homes, Inc. v. Barnette, 681 So. 2nd 42 (La. Ct. App. 2nd Cir. 1996). Although generally
the co-operating Broker‘s commission is dependent on the Listing Broker‘s commission
as set forth in the Multiple Listing Service Agreement, this term might by altered by
contract between co-operating Broker and Listing Broker if the property is not listed in
the Multiple Listing Service.

Question #5.       If the Listing Broker had to pay the Buyer Broker’s
commission in the above cases, would the Listing Broker have to pay this
commission before the Listing Broker actually collected the commission from the
Seller-possibly though a lawsuit?

Assuming the Buyer‘s Broker sued the Listing Broker for payment of commission,
whether or not the Listing Broker would have to pay a judgment to the Buyer‘s Broker
before being paid a commission by his or her Buyer would depend upon the exact facts
and circumstances of the law suit. The Listing Broker would have the option in the law
suit of filing a third party demand against the seller for payment of commission to the
Listing Broker. It is certainly conceivable though, that if the co-operating Broker has a
right of action against the Listing Broker for commission pursuant to a contract between
them, this obligation might have to be paid before the Listing Broker collected from the
seller.


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Question #6.         If the Listing Broker could be liable to a Buyer’s Broker for
commission in any of the above cases, then is there a way to phrase the offer of
commission made in MLS to a co-operating Broker so that the Buyer Broker only
gets paid a commission if the Listing Broker is paid the gross commission by the
seller and only if the Listing Broker decides to pursue the Seller for commissions
earned? I ask this question because often a Listing Broker may not want to sue
his own client for commissions.

It appears generally the MLS already contemplates a Buyer‘s Broker is only entitled to
commission if the Buyer‘s Agent is a procuring cause for a sale. A Listing Broker could
insure no commission was due until an act of sale closed in the Listing Agreement and
any agreement between Buyer‘s Broker and Listing Broker, by including ―commission is
earned at act of sale‖ The inclusion of such a clause in a contract has been held by
courts in regard to purchase agreement to require consummation of the sale for the
Broker and subsequently Buyer‘s Agent to collect a commission.

QUESTION:

Is there any problem with the Code of Ethics or State Law if an agent is selecting
higher commission properties to show his clients without informing the clients of
the selection process? Another way of putting it, if the agent steers his clients
toward the higher commission properties for the agent’s own benefit?

ANSWER:

Article 1 of the National Association of REALTORS® Code of Ethics provides:

       When representing a buyer, seller, landlord, tenant, or other client as an
       agent, REALTORS® pledge themselves to protect and promote the
       interests of their client…

The interest of the client is to be primary. Potentially agents who select higher
commission properties without informing the clients of the selection process might be
violating the Code of Ethics by considering their own interest above that of their clients.
Of course this determination would have to be made by a professional standards
committee of a board after considering the facts at hearing.

QUESTION:

Situation: Agents run up bills paid by the company and then become delinquent
repaying the company for the bills they incur. For example, they place an ad in a
real estate book for $400, the company pays the $400 and then bills the agent and
then the agent becomes delinquent reimbursing the company the $400.

Question: Can the company, in this case, Jack Smith Realty, reduce the agent’s
next commission check by the amount (no more) the agent owes the company?
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ANSWER:

Generally, any costs which are to be deducted from a commission due to an
independent contractor agent or employee agent (depending on the business model)
should be provided for and detailed in the employment agreement or independent
contractor agreement which is signed by the company and the agent. Absent such an
agreement, there may be some risk to a company that unilaterally deducting costs due
from an employee or contractor.

CONDOMINIUMS AND TOWNHOMES
QUESTION:

We would like to know the legal definition of condominium and town home as it
pertains to real estate.

ANSWER:

The Louisiana Condominium Act is located at La. R.S. 9:1121 et seq. This act defines a
―condominium‖ as ―the property regime under which portions of immovable property are
subject to individual ownership and the remainder thereof is owned in indivision by such
unit owners.‖ See La R.S. 9:1121.103 (1). The word ―townhome‖ is not defined in the
condominium act. Neither is the word ―townhome‖ defined in the Louisiana Civil Code.
Black‘s Law Dictionary defines the work ―townhome‖ as ―a dwelling unit having usually
two or three stories and often connected to a similar structure by a common wall and
(particularly in a planned-unit development) sharing and owning in common the
surrounding grounds.‖ It has been our experience that a ―townhome‖ is usually a
condominium.

DEPOSITS
QUESTION:

1.    We have a deposit in dispute in the amount of $3,000.00. The agent on the
      other side of the transaction believes that the Broker holding the check in
      dispute CANNOT make a decision in accordance with the Commissions
      Rules and Regulations if the deposit is in excess of $2,500.00. Is that
      correct? The Rules and Regulations do not stipulate a dollar amount.

2.    I really like the Brokers Tool Kit I received but there is one section that
      DOES refer to a $2,500.00 limit on deposits and refers to a Louisiana Law
      but I have been unable to find that law on the internet. These two
      questions may be one in the same.



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ANSWER:

We are aware of no statute or regulation which provides that the Louisiana Real Estate
Commission cannot handle a dispute if the deposit is in excess of $2,500.00. Attached
are regulations 2901 and 2903 regarding deposits held by the commission. Generally
though, if the deposit exceeds $1,000.00, the Real Estate Commission will not rule on
who is entitled to the deposit but will compel a concursus proceeding.

We reviewed the Brokers Toolkit. The section immediately prior to the section on
deposit deals with good funds for a closing pursuant to the Louisiana statutes. This
good funds statute does have a $2,500.00 cap if a personal check is used for funds for
the purchase price. This is not a requirement for deposit as per a purchase agreement.

QUESTION:

My dilemma: I need to find in writing a specified time frame for a Deposit Check
to be deposited into the escrow account of the named Broker, upon acceptance
of an offer. Our contracts spell out a time limit for which the Purchaser must
tender the check to the appropriate party, but apparently the Broker may deal
with it at leisure.

The Buy/Sell Agreement says nothing; my search of the Commission Rules and
Regulations website does not address the question, I hope you can help me or
direct me to another source for an answer.

ANSWER:

Section 2701 of the Rules and Regulations of the Louisiana Real Estate Commission
(the ―Rules and Regulations‖) mandate that all monies accepted by a resident broker on
behalf of a client in connection with the sale of real estate be maintained in a sales
escrow checking account in a Louisiana financial institution. Section 2701 of the Rules
and Regulations also provides that such sales escrow accounts be titled in the identical
wording as stated on the broker‘s license and that the wording ―Sales Escrow Account‖
shall be imprinted on all check and bank statements issued in connection with that
account.

The Louisiana Real Estate Commission regulations section 2723 provides any money
received in connection with a real estate transaction involved with the sale, lease or
management of real estate shall be deposited in appropriate sales escrow checking
account, rental trust checking account or security deposit trust checking account of the
listing or managing broker unless all parties have an interest in the funds have agreed
otherwise in writing. We do not find any rule in the license law that requires the check
be deposited in the escrow account within a certain period of time. Generally though,
conservative prudent practices and the fiduciary duties owed by a REALTOR® would
seem to dictate the deposit of the funds to be made as soon as practicable.

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QUESTION:

The REALTOR® affiliated with the Betty Lou Company is acting in the capacity of
dual agent. I, as the Broker, collected a deposit on the property and held it during
the term of the lease in the sales escrow account in the name of The Betty Lou
Company, Ltd. The lease expired December 20, 2005, and since that time there
has been a dispute between the Lessee and Lessor concerning perceived
outstanding expenses owed to the Lessor. This dispute may become a litigation
situation. The lease states, “…[the deposit] to be held in escrow by REALTOR®
which may be applied to any amounts due LESSOR by LESSEE hereunder….The
Deposit, less any portion thereof applied or retained by REALTOR® as aforesaid,
shall be returned without interest to LESSEE within (30) days after the date on
which LESSEE has surrendered the Leased Premises to LESSOR.”                    The
expiration of releasing the deposit is January 19, 2006.

What is the appropriate course of action in releasing the funds?

ANSWER:

Please note Section 2721 of the Rules and Regulations of the Louisiana Real Estate
Commission, which provides that no monies received and deposited into a security
deposit trust checking account shall be withdrawn in the absence of the following:

      1.     The mutual written consent of all parties having an interest in the funds;

      2.     An Order of the Louisiana Real Estate Commission; or

      3.     A Court Order.

      Regulation 2721 does however allow a broker to withdraw such funds:

      1.     For the purpose of depositing such monies into the registry of a court in a
             concursus proceeding;

      2.     For the purpose of depositing the funds with the Louisiana Real Estate
             Commission in an effort to seek the Commission‘s issuance of an escrow
             disbursement order;

      3.     To cover the payment and/or service charges incurred with the
             maintenance and/or operation of such security deposit trust checking
             account; or

      4.     To comply with the provisions of Louisiana Revised Statute 9:3251 or any
             other applicable law governing the transfer of a security deposit.


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Louisiana Revised Statute 9:3251 permits the landlord to retain all or any portion of a
security deposit which is reasonably necessary to remedy a default of the tenant and if
any such portion of the security deposit is so retained, the landlord is required to
present the tenant within one month from the date the tenancy terminates with an
itemized statement accounting for the reasons the security deposit was retained.

In accordance with the provisions of Regulation 2721 of the Louisiana Real Estate
Commission, it appears that in the absence of the mutual written consent of the tenant
and landlord, the conservative course of action for a realtor who holds a disputed
security deposit on behalf of the parties to a lease would be to turn such funds over to
the Louisiana Real Estate Commission or to a court of competent jurisdiction requesting
that either deliver an order dictating the proper method of disbursing the disputed funds.

QUESTION:

Jim Potts, an agent with Tony Properties acted as a disclosed dual agent in a
contract for purchase of a lot he had listed. Since that time the purchase
agreement has expired without going to Act of Sale. When speaking with the
purchasers they informed him that the reason they have not gone to Act of Sale
was because the property did not appraise for the purchase price. However, three
weeks earlier on March 21 between 1 and 2 P.M. they informed him the appraisal
was done and everything “appraised fine”. Now the purchasers want the deposit
back, but are not willing to supply any information regarding the appraisal.

What should our course of action be?

Can this property be marketed while the deposit dispute is ongoing?

ANSWER:

The Louisiana Real Estate Commission Rules and Regulations Section 2721 provides
as follows:

      A.     Monies received and deposited into a sales escrow checking
             account, rental trust checking account, or security deposit trust
             checking account shall be withdrawn for any purposes except:

             1.     upon mutual written consent of all parties having an interest in the
                    funds;
             2.     upon Commission order;
             3.     upon court order;
             4.     for the purpose of depositing monies into the registry of the court in
                    a concursus proceeding;
             5.     for the purpose of depositing the funds with the Commission
                    pursuant to Chapter 29;

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              6.     to disburse funds from a sales escrow checking account to the
                     appropriate party upon a reasonable interpretation of a contract for
                     the sale of real estate;
              7.     for the purpose of returning the funds to a buyer at the time of
                     closing;….

In accordance with this rule, a broker is permitted to make disbursements of the deposit
at closing directly to the title company or closing agent. In the absence of a closing or in
the event of a dispute, the broker should disburse the deposit in accordance with written
instructions of the parties. If the broker acting as escrow agent becomes aware of a
dispute as to the ownership of the deposit and an agreement cannot be reached
between the buyer and seller as to how to disburse the deposit, in accordance with
Section 2901 of the rules and regulations of the Louisiana Real Estate Commission, the
broker must do one of the following within ninety (90) days from the date of the
scheduled closing or the date upon which the broker became aware of the dispute in
question, which ever occurs first:

       a.     Disburse the funds in accordance with the broker‘s reasonable
              interpretation of the contract allocating the deposit to broker as
              escrow agent. (Broker shall not disburse until 10 days have passed
              since broker provided notice of his/her intent to disburse such
              funds.)

       b.     Deposit the funds into the registry of a court of competent
              jurisdiction and proper venue and invoke a concursus proceeding.

       c.     Deposit the disputed funds with the Louisiana Real Estate
              Commission and request that they make an escrow disbursement
              order.

Further, whether or not a purchase agreement is terminated and marketing of the
property can now continue will depend on the exact wording of the purchase
agreement. It is a good policy to have the seller and the potential buyer pursuant to the
contract sign a cancellation of purchase agreement. If the parties cannot agree on
cancellation of the purchase agreement and one party intends to enforce the purchase
agreement then there is a risk of liability to other potential buyers if the property is
marketed.

QUESTION:

Please advise what to do with a deposit after a contract expires and buyer is
rejected for the loan. The buyer refuses to sign a Deposit Nullification
Agreement.



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ANSWER:

Section 2721 of the Louisiana Real Estate Commission Rules governs the withdrawal
and disbursement of escrow deposits from a real estate broker‘s escrow accounts.
LREC Rule 2721 permits the return of the deposit to a perspective purchaser upon:

      1)     the mutual consent of all parties,
      2)     a court order, or
      3)     an order of the Louisiana Real Estate Commission.

       If a real estate broker becomes aware of the dispute among the parties as to
whom an escrow deposit should be disbursed, he or she should comply with the
requirements of Louisiana Real Estate Commission Regulation 2901 within ninety (90)
days by:

      1)     disbursing the disputed funds based upon the written mutual consent of all
             parties;
      2)     disbursing the disputed funds based upon a reasonable interpretation of
             the contract between the parties and providing all parties and licensees
             ten (10) days written notice of his or her intentions to disburse funds;
      3)     depositing the funds into a court of competent jurisdiction and requesting a
             concursus proceeding to be instituted;
      4)     depositing the funds with the Louisiana Real Estate Commission, along
             with a request that an escrow disbursement order be issued; or
      5)     disbursing the funds upon an order of a court of competent jurisdiction.

QUESTION:

Facts: Offer to purchase submitted by Buyers using LREC Residential Purchase
Agreement (5-05 version) to which Seller countered that deposit of $1,000.00 was
to be held by Seller. Seller is a builder and LLC and subject property is new
construction. Buyers submitted cancellation due to financing not available at
terms per contract. Seller has not responded as provided for in contract to
cancellation notice nor has Seller returned deposit monies. Two weeks have
elapsed and property has been back on market since date of cancellation. Sellers
LA listing broker states that they have no jurisdiction over deposit funds.

Question:    What remedies are available to Buyers?

ANSWER:

Buyer may wish to employ an attorney to write a demand letter to the Seller requesting
return of the deposit. If the Seller refuses to return the deposit and the Buyer is indeed
entitled to return of the deposit pursuant to the terms of the Purchasers Agreement, the
Buyer may wish to file suit for Breach of Contract against the Seller. As always with a

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question of contingencies in the contract including financing, which party is in breach of
the contract will be determined by the exact wording of the Purchase Agreement.

QUESTION:

Please advise Time Agency as to whether or not Bill and Sue Jackson are entitled
to their $500 deposit back from the sellers (Bob and Betty Johnson).

The Johnsons entered into an Agreement to Purchase and Sell on November 7,
2006 and provided a $500 deposit. On November 29, 2006, the Johnsons
executed a Cancellation of Agreement to Purchase or Sell for the reason that a
convicted sex offender lived across the street.

ANSWER:

Section 2721 of the Louisiana Real Estate Commission Rules governs the withdrawal
and disbursement of escrow deposits from a real estate broker‘s escrow accounts.
Deposits should be disbursed by real estate brokers in compliance with the Louisiana
Real Estate Commission Rules. LREC Rule 2721 permits the return of the deposit to a
perspective purchaser upon:

      1)     the mutual consent of all parties,
      2)     a court order, or
      3)     an order of the Louisiana Real Estate Commission.

If a real estate broker becomes aware of the dispute among the parties as to whom an
escrow deposit should be disbursed, he or she should comply with the requirements of
Louisiana Real Estate Commission Regulation 2901 within ninety (90) days by:

      1)     disbursing the disputed funds based upon the written mutual consent of all
             parties;
      2)     disbursing the disputed funds based upon a reasonable interpretation of
             the contract between the parties and providing all parties and licensees
             ten (10) days written notice of his or her intentions to disburse funds;
      3)     depositing the funds into a court of competent jurisdiction and requesting a
             concursus proceeding to be instituted;
      4)     depositing the funds with the Louisiana Real Estate Commission, along
             with a request that an escrow disbursement order be issued; or
      5)     disbursing the funds upon an order of a court of competent jurisdiction.

In the documents forwarded to us, the ―Cancellation of Agreement to Purchase or Sell‖
was only signed by the purchaser. If the seller refuses to sign the ―Cancellation‖ then
there is not mutual consent of the parties and the broker should take action as outlined
in Regulation 2901. The reason for the cancellation or request to withdraw the contract
i.e. registered sex offender across the street, does not itself determine who receives the
deposit or is entitled to its return. The Purchase Agreement as a whole will have to be
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interpreted by the Court or LREC to determine if the purchaser can cancel the contract
and receive return of the deposit if the parties cannot agree.

QUESTION:

Are dispute resolutions involving security deposit returns the same for property
management as they are with sales? The lessee disputes repairs that were
deemed necessary by the Owner upon their moving out. Thank you for any
information.

ANSWER:

The Louisiana Real Estate Commission Rules and Regulations Section 2721 provides
as follows:

      A.     Monies received and deposited into a sales escrow checking
             account, rental trust checking account, or security deposit trust
             checking account shall be withdrawn for any purposes except:

             1.     upon mutual written consent of all parties having an interest
                    in the funds;
             2.     upon Commission order;
             3.     upon court order;
             4.     for the purpose of depositing monies into the registry of the
                    court in a concursus proceeding;
             5.     for the purpose of depositing the funds with the Commission
                    pursuant to Chapter 29;
             6.     to disburse funds from a sales escrow checking account to
                    the appropriate party upon a reasonable interpretation of a
                    contract for the sale of real estate;
             7.     for the purpose of returning the funds to a buyer at the time
                    of closing;
             8.     to cover the payment of service charges on sales escrow
                    checking accounts, rental trust checking accounts, and
                    security deposit trust checking accounts with such payment
                    being made from funds deposited into the accounts by the
                    broker;
             9.     upon approval by the Commission in connection with the
                    sale or acquisition of a licensed entity; and
             10.    to comply with the provisions of R.S. 9:3251 or any other
                    state or federal statute governing the transfer of rents,
                    security deposits or other escrow funds.

LA R.S. 9 § 3251 sets forth the terms for withholding the deposit by a landlord when the
lease is terminated. This statute provides:

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      A.     Any advance or deposit of money furnished by a tenant or lessee to
             a landlord or lessor to secure the performance of any part of a
             written or oral lease or rental agreement shall be returned to the
             tenant or lessee of residential or dwelling premises within one
             month after the lease shall terminate, except that the landlord or
             lessor may retain all or any portion of the advance or deposit which
             is reasonable necessary to remedy a default of the tenant or to
             remedy unreasonable wear to the premises. If any portion of an
             advance or deposit is retained by a landlord or lessor, he shall
             forward to the tenant or lessee, within one month after the date the
             tenancy terminates, an itemized statement accounting for the
             proceeds which are retained and giving the reason therefore. The
             tenant shall furnish the lessor a forwarding address at the
             termination of the lease, to which such statements may be sent.

      B.     In the event of a transfer of the lessor‘s interest in the leased
             premises during the term of a lease, the transferor shall also
             transfer to his successor in interest the sum deposited as security
             for performance of the lease and the transferor shall then be relived
             of further liability with respect to the security deposit. The transferee
             shall be responsible for the return of the lessee‘s deposit at the
             termination of the lease, as set forth in Subsection A of the section.

      C.     Paragraph A of this Section shall not apply when the tenant
             abandons the premises, either without giving notice as required or
             prior to the termination of the lease.

Therefore generally the deposit can be returned by the broker holding the deposit to the
landlord in compliance with LA RS 9 § 3251.

DISBURSEMENT AUTHORITY
QUESTION:

August Kline International suggested that we “ought” be giving the closing
company a Disbursement Authority signed by the Broker that authorizes the
closing company to write a disbursement check to both the real estate company
(Barney Jones Realty) and the Barney Jones agent from the proceeds of the sale.
No one is doing this in this area so I am under impression that there is a law or
regulation that precludes it. Can you direct me to the applicable law that would
prohibit me from doing this?




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ANSWER:

You question if there is a law or regulation that precludes closing companies from
disbursing funds directly to both the real estate agent and the real estate company. The
Louisiana Real Estate License law La R.S. 37:1446(F) provides:

       Associate brokers and salespersons shall not accept a commission or
       other valuable consideration for the performance of any act herein
       specified, or for performing any act relating thereto, from any person,
       except their sponsoring or qualifying broker.

Put simply, associate brokers and salespersons must be paid by their broker. This
statute prohibits payment to agents and associate brokers by anyone other than their
broker. Presumably the ―Disbursement Authority‖ is an authorization by the broker for
the closing company to pay the agent directly. We are not aware of any decisions by the
LREC or by the Louisiana Courts that expressly authorize this type of authority to be
transferred by the Broker to another party.

DUAL AGENT
QUESTION:

Agent A presented an offer to the Listing Agent with another company. The offer
came back rejected and the Listing Agent told Agent A that she had been holding
a contract that she wrote waiting to see what Agent A’s offer was. When she
looked at Agent A’s offer, she went back to her buyer client (dual agent), informed
them of our offer price, they raised theirs, and got it accepted. Our concerns
center on her activity as a dual agent, multiple offer procedures, and ethics. Your
help and guidance is appreciated.

ANSWER:

In the current real estate market, it is not uncommon to receive many offers on a single
property. The Multiple Listing Handbook, the Code of Ethics of the National Association
of REALTORS® (―NAR‖) as well as Louisiana law governs the disclosure and
presentation of multiple offers to a seller.

LOUISIANA LAW

Louisiana law provides that a real estate broker has the duty to communicate to his
principal/client all offers received and may be liable for damages for his failure to do so.
See Leggio v. Realty Mart, Inc. 303 So. 2nd 920 (La. Ct. App. 1st Cir.1974), writ denied,
307 So. 2nd 629 (La. 1975). La. R.S. 9§3893 (A)(2)(b) provides that one of the duties of
a licensee representing clients is to timely present all offers to and from the client,
unless the client has waived this duty.

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Further, the Rules and Regulations of the Louisiana Real Estate Commission Chapter
39, section 3901 provides, all written offers and counteroffers for the purchase of real
estate shall be presented to all buyers and/or sellers for their consideration and decision
immediately, without delay (emphasis supplied). The licensee, who presents an offer or
counteroffer in a real estate transaction, shall insure that the time of day and date the
offer or counteroffer was signed by the offering party, are included in the document as
well as on any acceptance, rejection or counteroffer.

NATIONAL ASSOCIATION OF REALTORS® STANDARDS

The NAR professional standards provide a REALTOR® must present all offers to his or
her client in a timely manner unless the client has waived such right. The NAR Standard
of Practice 1-6 provides:

       REALTORS® shall submit offers and counteroffers objectively and as
       quickly as possible. (emphasis supplied)

What is considered ―objective‖ presentation is sometimes difficult to determine.
Comments made by a REALTOR® in presenting multiple offers should be essentially
without speculation and based on fact.

The obligation to submit offers objectively and as quickly as possible remains even if the
REALTOR® is a dual agent. Generally ―holding‖ a contract thereby not presenting it to a
client immediately may not be objective and timely presentation. This determination will
be made based on the facts and circumstances of the situation.

QUESTION:

A broker has listings on several lots in a development. The Broker assigns a co-
list agent who is not on the listing agreement or any other listing paperwork.
Does the co-list agent need to sign a dual agency in this situation since they are
only assigned by the broker?

Second Question: Dual agency is now defined if you are working with both
parties. However, does the old rule still apply for a broker? Does a broker enter
into dual agency if any of the broker’s agents are on the other side of the deal,
since the broker may have privilege to information of the other their own agents
client through the files or through the broker’s agent needing advice?

ANSWER:

First Question: A broker has listings on several lots in a development. The Broker
assigns a co-list agent who is not on the listing agreement or any other listing
paperwork. Does the co-list agent need to sign a dual agency in this situation since they
are only assigned by the broker?
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Dual Agency is defined in La. R.S. 9:3891 (10) as an agency relationship in which a
licensee is working with both buyer and seller or both landlord and tenant in the same
transaction. A licensee may act as a dual agent only with the informed written consent
of all clients. Informed consent shall be presumed to be given by any client who signs a
dual agency disclosure form prepared by the commission pursuant to its rules and
regulations. In your hypothetical, the broker assigns a ―co-list agent‖ which might be
interpreted as a ―designated agent‖ for the client (seller). 5The designated agent is also
potentially representing buyers in the same transactions. If an agent is working for both
the buyer and the seller, the conservative view is the agent should obtain a dual agency
consent form and will most likely be considered a dual agent.

Second Question: Dual agency is now defined if you are working with both parties.
However, does the old rule still apply for a broker? Does a broker enter into dual agency
if any of the broker’s agents are on the other side of the deal, since the broker may have
privilege to information of the other their own agents’ client through the files or through
the broker’s agent needing advice?

We are not aware of any license law or real estate regulations directly on point with this
question. Neither are we aware of the Louisiana Real Estate Commission directly
addressing this issue. However, it has generally been interpreted among the real estate
community that a broker does not become a dual agent because there is a licensee
working with him that represents the buyer and a second licensee working with him that
represents the seller on a single transaction.

ELECTRONIC SIGNATURES
QUESTION:

I have heard through different sources that we are able to use the new computer
technology in obtaining signatures electronically for clients on contracts and
such. I have heard from others that it is not true.

Is there any truth to this? Can we get clients authorization ahead of time?

ANSWER:

Attached is a copy of the Louisiana Uniform Electronic Transactions Act which was
passed in July of 2001. This statute provides in part in La. R.S. 9 § 2608(a)

         If the parties have agreed to conduct a transaction by electronic means
         and the law requires a person to provide, send, or deliver information in


5
 The broker should designate an agent in writing or if the agent is being considered a sub-agent, this should also be
by written agreement.
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      writing to another person, the requirement is satisfied if the information is
      provided, sent, or delivered in an electronic record capable of retention by
      the recipient at the time of receipt.

      Further, in section La. R.S. 9 § 2607 (a) the LUETA statute provides:

      A record or signature may not be denied legal effect or enforceability
      solely because it is in electronic form.

This, of course, would include facsimile document signatures or an email. Again, it is
important to note if electronic signatures are being used, consent of the parties must be
obtained and further, statements must be provided to the parties advising them of their
right or option to have records provided on paper and the right to withdraw consent to
conducting the transaction electronically and the consequences thereof. The statement
must also state whether the consent applies to only a single transaction or to a category
or series of transactions. The statement must also describe the procedures for
withdrawing or updating contact information.

ERRORS AND OMMISSION INSURANCE
QUESTION:

Scenario: Individual owns and operates a real estate company and decides to get
out of the business. The company is sold or shut down or an agent quits the
business. E & O insurance is canceled and the agent/business is retired.

On a prior sale, it is discovered that the house had unknown problems that no
one knew about including the previous owner. If the present owner can prove
that the problem existed when the house was bought and files a suit against
everybody that touched the house during the sale, the broker/agent can be
brought into the suit even though he/she is no longer in business. Most E & O
insurance is "claims made" so if no insurance is in force, the individual will be
sued. Even if it can be proven that the agent/broker was innocent, attorney fees
& costs could be substantial.

We need some means that retired agents or corporations that have pulled out of
the business can purchase E & O Insurance to cover past sales when claims are
made.

ANSWER:

The current Errors and Omissions policy can be viewed at the LREC website
www.lrec.state.la.us/errors.htm. Although the 2006 policy is published, the 2007 policy
is identical to the 2006 policy. Typically, E & O Insurance policies are issued on a
―claims made‖ basis. A ―claims made‖ policy will cover any claims that arise or are filed

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during the policy period, even if the underlying event happened several years earlier.
However, most policies contain a retroactive date, or prior acts date, which excludes
any coverage for claims arising from acts occurring before the retroactive date. The
retroactive date is determined separately for each licensee based on the date which the
licensee was first covered by an identical or similar errors and omissions policy. No
coverage exists for claims first made against a licensee before the beginning or after the
end of the policy period. The E & O Insurance policy period is usually for the calendar
year, i.e. January 1, 2006 to January 1, 2007. The policy covers those damages which
the licensee becomes legally obligated to pay because of any negligent act, error or
omission. This will include any settlement that the insurer negotiates on the licensee‘s
behalf.

Certain policies may also have an extended reporting period. The LREC policy has an
Automatic Extended Reporting Period of ninety (90) days, which allows an insured to
make a claim up to ninety (90) days after the policy period expires. The Automatic
Extended Reporting Period applies when an insured retires or allows his/her license to
expire. There is also an Optional Extended Reporting Period, which an insured can
purchase within ninety (90) days of the expiration of the insurance policy coverage
period. This extended reporting period allows insureds to make claims up to three years
after the expiration of the policy coverage period. The Optional Extended Reporting
Period may apply for cancellation or expiration of a real estate license for any reason.

The LREC policy is administered by Rice Insurance Services Company, LLC. You can
contact Rice Insurance Services Company, LLC at 1-800-637-7319 or 502-897-1876 or
policyadministrator@risceo.com. Rice should be able to determine whether the claim is
covered. If the claim is made within the ninety-day Automatic Extended Reporting
Period or if the underlying facts which form the basis for the claim occurred prior to the
Retroactive Date and the licensee is currently insured, the claim should be covered by
the LREC Errors and Omissions Policy. A real estate licensee may also purchase
coverage for up to three years after retirement, expiration or cancellation of his/her real
estate license through the Optional Extended Reporting Period.

ESTATE PROPERTY
QUESTION:

Three family members owned estate property---two owners agree to sale at
certain price, then other one decided not to sale but divided up property and keep
her interest---Can two owners sale property and give prorata part to other
person? What is state law in this situation how best to do this.

ANSWER:

The Louisiana law gives the right to co-owner‘s to partition (or divide) the co-owned
property. Certainly all co-owners of the property may agree to partition the property by a

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voluntary division into lots of their property and donation of their interest to each other
as appropriate to eliminate the ownership in indivision of the property. This means each
co-owner may become the full owner of a smaller lot of the now divided property.
Therefore the property is divided into as many lots of near or equal value as there are
shares in the property.

If the co-owners cannot agree to partition the property voluntarily, any of the co-owners
may file a suit to partition the property either in kind or by licitation. See Louisiana Civil
Code Procedure Article 3606 and 3607. ―Partition in kind‖ means that the judge will
divide up the property into lots between the co-owners. ―Partition by licitation‖ means
the property is sold at public auction and the proceeds from the sale distributed to the
co-owners accordingly to their ownership.

FOREIGN PURCHASER
QUESTION:

If a buyer’s agent’s clients are from a foreign country, should that information be
disclosed to the seller’s agent at the time the offer is presented?

ANSWER:

There is no requirement of which we are aware in either the real estate license law or
regulations that requires the buyer‘s agent to disclose that his or her clients are from a
foreign country. Section 1445 of the internal revenue code provides that a transferee
(i.e. the buyer) of a U. S. real property interest must withhold tax if the transferor (i.e. the
seller) is a foreign person. For U. S. tax purposes, the owner of an entity which has
legal title to a U. S. real property interest under local law will be considered the
transferor of the property. As noted, these rules generally apply to the seller of the
property and not the buyer of the property. Foreign nationals purchasing or selling
property though should seek appropriate legal advice to determine if any special tax or
other regulations will apply.

INDEPENDENT CONTRACTOR
QUESTION:

In light of our recent legislative law change regarding independent contractor
status of agents how would this have been handled in Louisiana? Are
Brokerages not liable for the actions of their salespeople in Georgia any longer?

I think we could all use some guidance on this.

Brokerage Not Liable for Salesperson


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A Georgia court has considered whether a brokerage was responsible for the
alleged misconduct of an independent contractor salesperson when the
brokerage had no direct involvement in the transaction.

Ray Johnson (“Developer”) purchased a vacant tract of land and had it rezoned.
He then hired an engineering firm to design plans for a subdivision layout. The
plans were approved, and so the Developer began the construction of the
subdivision. Following the completion of the subdivision infrastructure, the
Developer began selling individual plots. Most of the plots had not been cleared
prior to sale.

Steve Jenkins (“Builder”) purchased Lot 7 (“Lot”) from the Developer in 1997. The
Builder cleared Lot and built a home on the property. During construction, the
Builder noticed water accumulation on the back of the Lot, and he notified the
Developer and the city about the problem but no corrective action was taken. The
Builder attempted to alleviate the flooding by digging a trench to divert the water,
but that did not help the situation. Following the construction of the home, the
Builder sold the Lot, with Fran King (“Seller”) eventually purchasing the property
in 1998.

In 1999, the Seller wrote a letter to the Builder, complaining about the flooding on
the property. The Builder suggested that the Seller contact the Developer or the
city about these problems.

The Seller listed the Lot for sale with Nancy Smith (“Salesperson”) of Smith Real
Estate Services, Inc. d/b/a Century 21 Smith Realty (“Brokerage”). The
Salesperson had also been the listing agent in 1998, when the Seller had
purchased the Lot. Roy and Tess Walker (“Buyers”) negotiated to purchase the
Lot from the Seller. As part of the purchase process, the Buyers received a
“seller’s disclosure” statement from the Brokerage. The statement said that the
Seller was unaware of any past or present drainage problems on the property.
The Salesperson testified that she was aware of the property’s flooding problems,
but she “probably” had not reviewed the Seller’s disclosure statement.

During visits to the Lot, the Buyers had noticed fresh dirt in the backyard. They
hired an inspector and they claimed that the inspector had pointed out
indications of flooding on the property. However, the inspector denied this and
stated that he would have referred the Buyers to an engineer if he had made such
observations.

Following their purchase of the Lot, the Buyers experienced flooding on the
property, finding that the backyard filed with water when it rained. The Buyers
discussed the problem with the Salesperson, and she told them that she would
try to get the problem fixed. The Salesperson contacted the Developer, who did
nothing. The Buyers then contacted the Developer directly, and he advised them
to consult with a lawyer.
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The Buyers filed a lawsuit against the Seller, Developer, Builder, Brokerage, and
the Salesperson. The lawsuit sought to rescind the purchase contract. In
addition, they alleged that the Developer had negligently constructed the
subdivision and a nuisance claim. They also brought fraud and negligent
misrepresentation allegations against the Brokerage and Salesperson. The trial
court ruled in favor of all defendants, including determining that the Brokerage
was not liable for the actions of the Salesperson because she was an
independent contractor. The Buyers appealed.

The Court of Appeals of Georgia affirmed the trial court’s ruling in favor of the
Brokerage and Salesperson, but partially reversed the rulings in favor of the
Developer. The court first considered the nuisance allegations, which stated that
the Developer had created a nuisance by building the land in such a way that it
increased the water flow onto the Buyer’s property. The trial court had ruled that
the claim was barred by the four-year statute of limitations, as the flooding had
first been discovered on the Lot in 1997 and the lawsuit was not filed until 2002.
However, the court found that the allegations that the Developer had created a
continuing nuisance by clearing the land adjacent to the Buyer’s property
following the Buyer’s purchase was not barred by the statute of limitations and
so these allegations were sent back to the trial court.

Next, the court considered the allegations against the Salesperson. The Buyers
claimed that the Salesperson had concealed the Lot’s flooding from them. The
purchase contract contains a provision stating that the Buyers did not rely on any
statements made by the real estate licensees and that the real estate licensees
were not responsible for advising the Buyers. While the Buyers argued that the
disclosure statement contained a misrepresentation, the court noted that this was
the Seller’s disclosure statement and was not a disclosure from the Salesperson.
Thus, the court affirmed the dismissal of the claims against the Salesperson.

Finally, the court considered the claims against the Brokerage. The Buyers
alleged that the Brokerage failed to timely disclose all adverse material facts
known by the broker and which could not be discovered by a “reasonably diligent
inspection of the property by the buyer”. Even though the Buyers did not allege
that the Brokerage was aware of this information, they claimed that the Brokerage
was negligent in overseeing the Salesperson, who was aware of the Lot’s
flooding problems.

Looking at Georgia law, there was nothing which prevented the Brokerage from
entering into an independent contractor relationship with its salespeople.
Because the Buyers did not dispute that the Salesperson was an independent
contractor, the Brokerage would only be liable for actions by the Salesperson in
which the Brokerage exercised control over. The Brokerage had no involvement
in the Buyer’s transaction, as the designated broker for the Brokerage testified he
had no knowledge or involvement in this transaction and the Buyers offered no
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contrary evidence. Thus, the court affirmed the trial court’s ruling that the
Brokerage had no liability for the Salesperson’s actions.

Walker v. Johnson, 630 S.E.2d 70 (Ga. Ct. App. 2006).

ANSWER:

General Louisiana employment law provides that an employer is liable for the actions of
an employee. Pursuant to Louisiana Civil Code Article 2320, the employer is liable for
the actions of the employee if (1) a master servant relationship existed between an
employer and the employee and (2) the act causing the liability of the employee was
committed within the scope and during the course of the employment of the employer.
See Brumfield v. Gafford, 99-1712, P. 7 (La.App. 1 Cir. 9/22/00), 768 So.2d 223. The
distinction between an employee and an independent contractor is a factual
determination decided on a case by case basis. Therefore, whether a salesperson is an
independent contractor or a direct employee of the broker will be determined in each
case.

In a case decided by the Louisiana First Circuit Court in 2002, Hughes v. Goodreau,
836 So.2d 649 (La.App. 1 Cir. 12/31/02), the court considering whether or not a broker
was liable for the action of his agent. The court considered many factors in determining
whether the agent was an independent contractor or direct employee of the broker. The
court noted that (1) the agent worked exclusively for the broker, (2) the agents were not
free to carry out their work using their own methods because their written employee
agreement required them to comply with policy and procedures manual prepared by the
brokers, (3) the agents were required to attend an introductory orientation on the
broker‘s policies and procedures and (4) the agent‘s referrals were considered property
of the broker. These items were considered by the Goodreau court to hold that the
agent was an employee of the broker and not an independent contractor of the broker.
In response to the Goodreau case in 2002 and as amended in 2006, the Legislature
passed the statute shown below to clarify the actions required to create an independent
contractor agreement between an agent and a broker.

LA R.S. 37 § 1446(H) provides as follows:

      H. A real estate salesperson or associate broker shall be an independent
      contractor of the broker with whom he is affiliated for all purposes and
      shall not be an employee of the broker if all of the following conditions are
      met:
             (1) The real estate salesperson or associate broker is a licensee.

             (2) Substantially, all of the real estate salesperson's or associate
             broker's remuneration for the services performed are directly
             related to sales or other output rather than the number of hours
             worked.

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             (3) There is a written agreement between the real estate
             salesperson or associate broker and the broker that specifies that
             the real estate salesperson or associate broker will not be treated
             as an employee.

Georgia law regarding employment and independent contractor status seems to be
similar to Louisiana law except that Georgia does not have a similar statute to LA R.S.
37 § 1446(H). Louisiana courts in determining the status of the agent, will most likely
consider the statute as well as the degree of control exercised by the broker over the
activities of the agent as either an independent contractor or employee as discussed by
the Georgia Court. There has been no Louisiana court interpretation of the real estate
licensee independent contractor statute to date.

QUESTION:

Can a licensed salesperson acting as a Independent contractor sponsored by a
real estate brokerage A, be a employee of a real estate brokerage B, in there
property management department?

ANSWER:

The Louisiana Real Estate License law addresses this issue:

      §1455. Causes for censure, suspension, or revocation of license,
      registration, or certification

      A. The commission may censure a licensee, registrant, or certificate
      holder or conditionally or unconditionally suspend or revoke any license,
      registration, or certificate issued under this Chapter, levy fines or impose
      civil penalties not to exceed five thousand dollars, or impose continuing
      education requirements on licensees, registrants, or certificate holders if,
      in the opinion of the commission, a licensee, registrant, or certificate
      holder is performing or attempting to perform or has performed or has
      attempted to perform any of the following acts:

      (8) Representing or attempting to represent a real estate broker or real
      estate agency other than the licensed broker or agency listed on the real
      estate license issued by the commission.

Seemingly, this provision of the Real Estate License law would prohibit the type of
scenario posed by your inquiry. The salesperson would appear to be representing
Broker B, as a property manager. It is assumed that Broker A is the only broker or
agency listed on the salesperson‘s real estate license.

      §1438 exempts certain individuals from the application of the of the Real
      Estate License law. This includes,
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             (6) Any salaried person employed by a licensed real estate broker
             for and on behalf of the owner of any real estate which the licensed
             broker has contracted to manage for the owner, if the salaried
             employee is limited in his employment to:

                    (a) Delivering a lease application, a lease, or any
                    amendment thereof to any person.

                    (b) Receiving a lease application, lease, or amendment
                    thereof, a security deposit, rental payment, or any related
                    payment for delivery to and made payable to a property
                    manager or owner.

                    (c) Showing a rental unit to any person, as long as the
                    employee is acting under the direct instructions of the
                    broker, including the execution of leases or rental
                    agreements, provided the broker is responsible for the
                    actions of his employees.

                    (d) Providing information about a rental unit, a lease, an
                    application for lease, or the status of a security deposit or the
                    payment of rent to any person.

                    (e) Assisting in the performance of property management
                    functions by carrying out administrative, clerical, or
                    maintenance tasks.

However, the salesperson in your scenario would not enjoy the benefit of this exemption
because the salesperson is subject to the Real Estate License law as a real estate
licensee. This exemption is intended to apply to clerical employees and support staff of
brokers who may have limited involvement in real estate activity.

Additionally, §1446(F) states that ―Associate brokers and salespersons shall not accept
a commission or other valuable consideration for the performance of any act herein
specified, or for performing any act relating thereto, from any person, except their
sponsoring or qualifying broker.‖

This provision prohibits salespersons from accepting a commission or any other
valuable consideration, such as a salary or wage, from any person other their
sponsoring broker in return for any real estate activity.

This would seem to further restrict the salesperson in your scenario from employment
by Broker B unless the salesperson received nothing of value from Broker B. Even if
that were true, the salesperson would probably still be prohibited from participating in
such an arrangement by the above-cited §1445.
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Additionally, Chapter 21 of the Louisiana Real Estate Commission‘s regulations
addresses ―Concurrent Licenses and Registrations.‖ Specifically, §2101(B) provides
―Associate brokers and salespersons shall not be sponsored by more than one
sponsoring broker.‖

The definitions provided in the Louisiana Real Estate License law state:

      (8) "Real estate salesperson" means a person, other than an associate
      broker, sponsored by a licensed real estate broker to participate in any
      activity described in this Section.

Property management is included as an ―activity described in this Section‖ according to
the definition of ―Real estate activity‖:

      (7) "Real estate activity" means any activity relating to any portion of a real
      estate transaction performed for another by any person, partnership,
      limited liability company, association, or corporation, foreign or domestic,
      whether pursuant to a power of attorney or otherwise, for a fee,
      commission, or other valuable consideration, or with the intention, in the
      expectation, or upon the promise of receiving or collecting a fee,
      commission, or other valuable consideration:

      (a) Sells, exchanges, purchases, manages, rents, or leases, or negotiates
      the sale, exchange, purchase, rental, or leasing of real estate.

The salesperson in your scenario is sponsored by one broker. This would prohibit that
salesperson from being sponsored by another broker. This raises the issue of whether
―employment‖ is tantamount to ―sponsorship.‖ If so, then the salesperson would be
prohibited from working as an employee or independent contractor for a second broker.

It is not clear whether ―employment‖ and ―sponsorship‖ are distinctive concepts or one
in the same. However, regardless of that determination, the salesperson in your
scenario would be prohibited from working as an independent contractor for Broker A
and an employee of Broker B because (a) that salesperson is prohibited from
representing a broker who is not their sponsoring broker and (b) the salesperson is
prohibited from accepting anything of value in return for real estate activities performed
from anyone except his/her sponsoring broker. The law further states that a licensee
may only have one sponsoring broker. Thus, circumventing or avoiding either scenario
(a) or (b) would likely be prohibited since the salesperson could not have two
sponsoring brokers.




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INSPECTION REPORT
QUESTION:

Property is under contract and Buyer pays for a Home Inspection which is
performed by a local Home Inspector. A copy of the report is placed in the office
file. This contract falls through and the Buyer, who paid for the Home Inspection
does not purchase the property.

Another agent in the same firm produces a buyer for the same property. Agent is
aware that the Home Inspection Report was made and that it is in office file.

Question: How should agent handle this? May agent provide a copy of the
Home Inspection Report if they do not have written permission to do so? Who
owns the report? (Buyer who paid for it?) Should agent even make reference that
report exists? Is agent required to disclose that report was made?

ANSWER:

Generally, a home inspection report is the property of the party who requested the
inspection and paid for the home inspection report. Therefore if an agent wishes to
provide a copy of the home inspection report which they have in their file or in the file in
the broker‘s office, this must be supplied only with the written permission of the person
who owns the property inspection report.

If a copy of the home inspection report was provided to a seller (even if ordered by the
buyer), it is possible that the Property Disclosure Document which is required to be
supplied to a buyer by a seller by state law, will need to be amended or revised by the
seller to include the information in the home inspection report. The definition of ―known
defect‖ means a condition found with the property that is actually known by the seller
and that results in a substantially adverse effect on the value of the property, impairs the
health of the occupants or safety of the property, or shortens the expected normal life of
the property. Therefore if the seller was given a copy of this home inspection report in
the previous transaction which did not close, the seller may be required to amend their
property disclosure document to include any known defects of the property.

Further, La. R.S. 9:1455 (27) provides a licensee may be censured or fined for failure to
disclose to a buyer a known material defect regarding the condition of real estate of
which a broker, salesperson, or timeshare interest salesperson has knowledge. If the
agent is aware of a material defect regarding the condition of the property from having
reviewed the home inspection report, the agent is required to disclose this information to
any potential buyer. To our knowledge there is no specific statute requiring an agent to
disclose there was a home inspection report done for a failed purchase agreement.
However the circumstances of the first failed transaction might require, for the clients


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best interests, the REALTOR® advise of the existence of the report as provided in
Article 1 of the National Association of REALTORS® Code.

QUESTION:

When a purchaser pays for an inspection report; gives that report to the seller of
a property; the transaction falls through for reasons other than the inspection –
who owns the inspection report? Our Buy/Sell Agreement specifies that the
inspection report be given to the seller.

ANSWER:

       Some home inspectors limit the use of home inspection reports to their intended
beneficiaries, which could be seller or purchaser, depending on the contract with the
home inspector. The inclusion of such a provision in any contract to perform an
inspection serves as an added measure of protection for the home inspection as to the
claims of any third parties who later attempt to rely upon such an inspection report.

To determine the ―owner‖ of the inspection report both the Purchase Agreement terms
itself and the contract with the home inspector should be reviewed. Merely because a
copy of the report is delivered to the seller, does not necessarily mean the seller may
use the inspection report for any purpose. If no provision regarding who owns the home
inspection report is contained in either the Purchase Agreement or the contract with the
home inspector, then generally most courts will interpret the owner to be the party who
paid for the report.

QUESTION:

You have answered our question that since the Buy/Sell Agreement nor the
inspection report addresses itself to the ownership of the inspection report, then
the inspection report belongs to the buyer who paid for the report. My question
is, where does that leave the seller and the REALTOR® in the obligation to
disclose?

ANSWER:

The Louisiana Residential Property Disclosure requirements pursuant to LSA-R.S.
9:3195-3199 require that a seller make disclosure of any material known defect found
within the property that is actually known by the seller that results in one of the
following:

      A)     Substantial adverse effect on the value of the property;
      B)     Significantly impairs the health or safety of future occupants of the
             premises; or
      C)     If not repaired, removed or replaced, significantly shortens the
             expected normal life of the premises.
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Presumably the seller may have learned of potential defects found within the property
through the property inspection report of which the seller received a copy. The
conservative view is that a seller now is put on notice of those potential defects of the
property. Unless the seller has some legitimate reason to disbelieve the report, the
seller may wish to investigate the potential known defects of the property so that the
seller can properly complete the Property Disclosure Document. We know of no
Louisiana statute that requires a seller to give a copy of an inspection report from a
previous failed sale to a potential new buyer. However, the obligations pursuant to
disclose known material defects of the property disclosure law discussed above are
imposed on the seller.

LICENSEES
QUESTION:

We have a situation where a local builder will allow a REALTOR® to register their
customer when the REALTOR’S® customer has expressed interest in property for
sale by the builder. The registration form that the agent has to sign says the
agent is the buyer’s agent.

From the point of registering the customer, the builder will not allow the
REALTOR®, who is listed as the buyer’s agent, to be involved in the transaction
process at all. The REALTOR® does not negotiate the contract (does not have an
opportunity to even see the contract), answers no questions about the property
and usually is not present for the closing. The builder or his representative
handles all of this. The commission check is mailed to the buyer-agent’s broker
after the closing.

The major concern is the liability the buyer’s agent may assume even though they
are not allowed to be involved in the transaction.

ANSWER:

Among other statutes and regulations which may apply to the duties of a buyer‘s agent,
the following two rules particularly address the buyer‘s agent‘s responsibility.

      La. R.S. 9 § 3893 Duties of licensees representing clients:

      A.     A licensee representing a client shall:

      (1)    Perform the terms of the brokerage agreement between a broker
             and the client.
      (2)    Promote the best interests of the client by:


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             a.     Seeking a transaction at the price and terms stated in the
                    brokerage agreement or at a price and upon terms otherwise
                    acceptable to the client.

             b.     Timely presenting all offers to and from the client, unless
                    the client has waived this duty.

             c.     Timely accounting for all money and property received in
                    which the client has, may have, or should have had an
                    interest. (emphasis supplied)

The Rules and Regulations of the Louisiana Real Estate Commission, Chapter 38,
Section 3903, provide that:

      Negotiations with a buyer that has entered into an exclusive buyer agent
      contract with a licensed broker shall be carried on with the licensed
      broker, or agent designated by the licensed broker, not the buyer, except
      with the express consent of the licensed broker. (emphasis added)

If the buyer‘s agent does not (or is not allowed to) perform his/her duties pursuant to
these rules, the license may be a cause for censure, suspension, or revocation of
license, registration or certification pursuant to La. R.S. 37 § 1455. If the terms of
negotiation with this builder cannot be changed, the REALTOR® should consider
obtaining a written release of the required the duties from their client.

QUESTION:

Does a developer of a subdivision need to be licensed to sell individual lots?

If the developer lives out of state does he need to be licensed to be able to sell
his lots in Louisiana?

ANSWER:

A real estate license is not required for the sale of an individual‘s or a company‘s own
property. Therefore if the developer owns the property being sold, the developer may
sell his own property without a real estate license.

LA R.S. 37:1436(A) provides it shall be unlawful for any person or entity, directly or
indirectly, to engage in or conduct, or to advertise or hold himself out as engaging in or
conducting the business, or acting in the capacity, of a real estate broker or real estate
salesperson, within the state without first obtaining a license such as a broker or
salesperson, and be classed as an active licensee, as provided in this Chapter, unless
he is exempted from obtaining a license as specified herein.


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Therefore if the developer is not the owner of the lots being sold but is acting in the
capacity of a real estate broker or real estate salesperson, the developer must obtain a
license within the state of Louisiana to conduct this activity.

LISTING AGREEMENTS
QUESTION:

I am a REALTOR® that represents a buyer. The question is this. An offer has
been made and accepted. It will close in less than 5 weeks. Is it OK to list the
property under my company, for the purchaser, before we go to the original act of
sale.

ANSWER:

Generally though, a property cannot be listed unless the owner of the property consents
to the listing. The purchaser cannot list the property until the purchaser is the actual
owner of the property. See La. R.S. 37 § 1455 (11). The concern is the sale to the
proposed purchaser for some reason does not close and the purchaser therefore never
becomes the owner of the property.

QUESTION:

Sellers have a home that is about to be either foreclosed or sold at Sheriff’s Sale.
They also have a second mortgage on this property.

The Sellers have agreed to give power of attorney to Company A, to sell this
property for them and to show Company A as the Seller. Company A will find a
buyer and negotiate with the 2nd mortgage holder to reduce the mortgage
balance. Company A can also list this property with a real estate company
showing themselves as the Seller.

Can we as a real estate company enter into a listing agreement with Company A?

ANSWER:

Generally a property may only be listed by the owners of the property. A listing pursuant
to LA R.S. 37§1431 (30) means a written document signed by all owners of real estate
or their authorized attorney in fact authorizing a broker to offer or to advertise real estate
described in such document for sale or lease on specified terms for a defined period of
time. One of the causes for censure suspension or revocation of license registration or
certification included in LA R.S. 37§1455 (11) is the offering of real estate for sale or
lease without written consent of the owner or his authorized agents.



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It is arguable in fact situation you have presented the Sellers have designated Company
A as their agent or attorney for the sale of their property pending Company A purchase
of the property. However, the conservative view would be to require the current owners
of the property, the Sellers to sign the listing agreement along with Company A.

QUESTION:

I currently have a listing agreement to sell a certain property located at 5858/60
Mac Drive, Port Allen, LA. During this agreement my client leased half of the
aforementioned Multi – family property without my knowledge. In our contract it
is clearly stated that if this property is leased during my listing agreement term,
then my company is owed a commission of 60% of the first month lease. My
client refuses to pay and the total amount due is $930.00. Additionally, the client
has informed me that he has a tenant for the second side as well. One reason my
client has stated as to why he does not feel that he owes me a commission on the
rental is because the listing agreement is still active and I can potentially still
make a commission upon a potential sale of the property. I have spent significant
time, effort and money marketing this property. How should I proceed?

ANSWER:

Whether or not a commission is due on the lease agreement will depend on the exact
terms of the listing agreement. Generally most listing agreements provide a commission
is due on lease of the property even if the property is still offered for sale. You should
carefully review the terms of the listing agreement which may require a letter be sent to
the seller giving him/her notice if you believe he/she is in default of the listing
agreement. If the listing agreement is in default and you wish to pursue your remedies
provided in the contract such as damages for the unpaid commission then you will need
to employ an attorney.

LOT SIZE DISCREPANCIES
QUESTION:

1.    Does it constitute a title problem if a buy/sell agreement provides for the
      sale of a lot that 1 acre and the actual size of the property turns out to be
      21% smaller than 1 acre?

2.    Is the buyer allowed/entitled to reduce the price by 21% due to the survey
      being smaller than the size of the land which was represented by the
      sellers?




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ANSWER:

Many times the actual quantity of land differs from the quantity described in the
purchase agreement. The actual property may be more or less than that described in
the purchase agreement after a survey is conducted. Such a discrepancy does not
generally create a defect that renders the title unmerchantable but sometimes may
require the buyer to supplement the purchase price or may require a diminution in the
price paid to the seller. This depends upon the exact terms of the purchase agreement.

If the property is sold as ―sale by measure,‖ see article 2492 of the Louisiana Civil Code,
then the price must be proportionally reduced or increased depending upon the survey.
For example, the property is described as being sold at ―$1,000.00 per acre subject to
verification at survey‖.

If the property is offered for sale for a lump price under article 2494 of the Louisiana
Civil Code then the sale of an immovable is made for the set price regardless of the
surplus or shortage shown by a survey unless the shortage or surplus is more than 1/20
of the property described. For example sale for lump price is, if the property sold is
described as ―a certain piece of land described at that part of the West ½ of Sec. 20,
T9N, R4E, estimated to contain approximately 80 acres more or less.‖

Further, there is an additional type of sale which is a sale per aversionem under article
2495 of the Louisiana Civil Code which provides in no event will there be an increase or
diminution of price in the case of surplus or shortage in the actual amount of property
sold.

Other paragraphs to note in the purchase agreement when determining how the sale is
contemplated is the paragraphs regarding the inspection period and remedies if the
buyer should find, after inspection, which may include survey, the property is
undesirable. This could result from the survey reflecting a lack of acreage as
contemplated by the buyer.

MINERAL RIGHTS
QUESTION:

1.    Can mineral rights held by the seller take any priority over surface rights of
the new owner?

2.     Are mineral rights conveyed to the new owner automatically at any time
after the property transfer if not used by the holder of the rights.

3.     Is there a statute or section that can be accessed?



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ANSWER:

1. Can Mineral rights held by the seller take any priority over surface rights of the new
owner?

Generally, neither the surface owner nor the mineral owner will have priority over the
other. They must exercise their rights so that the rights of the other are not violated or
infringed upon. The correlative rights of landowners and owners of mineral rights are
primarily governed by Louisiana R.S. 31:11. This statute states that the owner of land
burdened by mineral rights and the owner of mineral rights must ―exercise their
respective rights with reasonable regard for those of the other.‖ This vague phrase
provides little direction in determining the rights and duties of each party in these
circumstances.

―Reasonable regard‖ must be determined on a case-by-case basis. To provide some
idea what this means, we can look to cases interpreting this statute to determine what
constitutes ―exercising rights with reasonable regard for those of the other.‖

The legislature amended R.S. 31:11 in 2006 to provide some further guidance. The
amendment became effective August 15, 2006. The amended version of the statute
requires a reservation of mineral rights in an instrument transferring ownership of land
to include mention of surface rights in the exercise of the mineral rights reserved, if not
otherwise expressly provided by the parties.

The amendment also includes particular language, which can be included in the
instrument transferring ownership, to satisfy the new requirement. The statute provides:

      The transferor (seller) shall exercise the mineral rights herein reserved
      with reasonable regard to the rights of the landowner, and shall use only
      so much of the land, including the surface as is reasonably necessary to
      conduct his operations. Such exercise of mineral rights shall be subject to
      the provisions of Articles 11 and 22 of the Louisiana Mineral Code. The
      transferee (buyer) recognizes that by virtue of the mineral reservation
      herein made, the mineral owner shall have the right to use so much of the
      land, including the surface, as is reasonably necessary to explore for,
      mine and produce the minerals.

This provision should only be used if more particular provisions which specifically
describe the extent, location and nature of the rights of the mineral owner to conduct
operations on the property can not be used. The amendment will only apply
prospectively. Thus, any sales completed before August 15, 2006 will not be subject to
the new requirements of LA R.S. 31:11.

2. Are mineral rights conveyed to the new owner automatically at any time after the
property transfer if not used by the holder of the rights?

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Your question is regarding the concept under Louisiana law of prescription of nonuse.
Prescription refers to the passage of time and a resulting legal effect. In this context,
prescription of nonuse occurs when the holder of a mineral servitude does not exercise
the rights related to that servitude for a ten year period. A mineral servitude will be
extinguished if it is not exercised for a period of ten years. Typically, the servitude is
exercised by exploration and/or drilling activities on the land. However, a mineral lease
is not subject to prescription of ten years of nonuse. A mineral lease is distinguished
from a mineral servitude in that the lease is merely a contract which permits the lessee
to explore for minerals in consideration of payment of a rental or bonuses, and it places
no charge on land, while a servitude is an incorporeal immovable that attaches to the
land itself. If the seller has retained the mineral rights in the transfer of the property, it is
most likely that he has created a mineral servitude.

Additionally, there are many ways which the ten year prescriptive period can be
interrupted. Any good faith operations for the discovery and production of minerals, on
the land that is subject to the servitude, or any land which is unitized with the burdened
land, will interrupt prescription. Land is unitized when several pieces of land are
grouped into a unit for the purpose of mineral production. Once prescription is
interrupted, a new ten year period begins to run. For example, the property we are
concerned with is Tract 1. Tract 1 includes a mineral servitude in favor of the previous
owner. Assume that Tract 1 is part of a unit and that there are no drilling or exploration
operations on Tract 1, or any other part of the unit, for eight years. In the ninth year of
the mineral servitude, the holder of the mineral servitude conducts operations on an
adjacent piece of land which is part of the unit. These operations will interrupt
prescription. The clock will be set back to zero and a new ten year period will begin
running. There are also special rules involved when only portions of the land are part of
the unit but those are highly detailed and would require a much more lengthy
discussion.

3. Is there a statute or section that can be accessed?

Title 31 of the Louisiana Revised Statutes is known as the Mineral Code. The Mineral
Code regulates almost all of the production and exploration of minerals along with the
rights and duties of surface landowners and the owners of mineral rights. It can be
found at the Louisiana Legislature website – www.legis.state.la.us.

MULTIPLE LISTING SERVICE
QUESTION:

We are having a little dispute here. MLS is in discussion of mandating when we
input a new construction listing into the MLS system to mandate the
builder/company name of who constructed the property along with their License
#.


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The problem is not with the name being stated, but with the License # being
required along with the builder/company name.

In reviewing our MLS Rule & Regulations, we know within reason we can mandate
this as an imputing requirement.

The main question lies, are we putting ourselves (members) out there for any
liabilities or negative impact by mandating the License # be added? (FYI….on our
public site we show this field).

FYI….If we mandate the License # for builders/company should we mandate them
for Appraisers if it is known there is an appraisal on file, etc.?

ANSWER:

As I understand your question, you are concerned whether the publication of a
contractor‘s license number could subject the MLS or individual real estate agents to
liability. The license number of a contractor is generally considered to be public
information. The license number for any licensed contractor can be accessed through
the Louisiana State Licensing Board for Contractors (http://www.lslbc.louisiana.gov/).
Appraiser‘s license numbers are also available at http://www.lslbc.louisiana.gov/. Thus,
there would seem to be no potential liability for invasion of privacy, or similar torts,
because the license number is not a private fact.

According to the Louisiana legislature, the purpose of regulating and issuing licenses to
contractors is the ―protection of the health, safety, and general welfare of all those
persons dealing with persons engaged in the contracting vocation, and the affording of
such persons of an effective and practical protection against the incompetent,
inexperienced, unlawful, and fraudulent acts of contractors with whom they contract.‖
Publishing a contractor‘s license number through the MLS so that consumers can fully
investigate the contractor and apprise themselves of as much information as possible
could further the stated goal of the Legislature.

The MLS committee must make a decision that best serves their needs. There does not
appear to be any negative legal impact that would result from the publication of a
contractor‘s license number because the license number can already be accessed by
the general public.

We can not opine to any negative business or professional impact that may result from
the publication of the contractor‘s license number.

QUESTION:

Can a member who is a licensed agent and auctioneer advertise auction property
under their real estate company’s name, when they do not have a signed listing
agreement by the seller’s?
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If they answer is yes, can this agent input the auction properties in MLS and input
the list price as the opening bid or must they input the reserved price?

ANSWER:

According to the mandatory provision of MLS manual, the listing broker must have the
seller's authority to cooperate with and to offer compensation to potential cooperating
brokers‘ policy statement. If these requirements are met, the property should qualify to
be listed on the MLS. If there is no listing agreement through, it is unlikely there is
authority to cooperate. Listing agreement as defined by the Louisiana Licenses law is a
written agreement signed by all owners per LA RS 37§1431.

In addition to the mandatory requirements of the MLS stated above, the MLS has
several optional policy statements. These optional policy statements can be adopted by
local boards if they choose to do so.

One such optional policy is stated in Section 7 of the MLS Policy on Current Listings
(Policy Statement 7.82, Adopted 11/04), which states:

      Multiple listing services may, as a matter of local discretion, accept
      exclusively-listed property subject to auction. Where listings subject to
      auction do not include a listed price, they may be published in a separate
      section of the MLS compilation of current listings.

The local board can choose whether to adopt Policy Statement 7.82 and thereby allow
auction listings which do not include a listing price to be listed in a separate section of
the MLS compilation of current listings.

QUESTION:

I just had a situation come up wherein the MLS sheet says the square footage is
5400 for the living and we just measured the building and it says 4892 living from
measuring. My buyer just brought this to my attention.

I know the MLS has a waiver on it regarding square footage.

I know the Seller who is agent/owner 'should' have superior knowledge and
'should' have measured the building before offering it for sale.

I see from the past MLS that she just took it from previous sales. She only
purchased this building on 3/12/2007. This building is flooded and gutted on the
bottom and occupied by two tenants upstairs. Because the Agent/Owner/Seller
only owned it for a short period of time, that would most likely relinquish her from
"superior" knowledge.

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How do I protect my clients on this issue? And, yes, they did sign a “Waiver of
Red." No disclosures because this is a commercial building. And, no
contingencies on square footage because they believed it was correct at 5400 as
listed.

Is there any case law you can direct me to for research or any advice.

ANSWER:

If square footage is an important factor to a buyer, the buyer should consider having the
purchase agreement contingent on the property including a minimum square footage. If
the property is contingent on appraisal this will also be affected by square footage.

After signing a purchase agreement or Act of Sale may also be vitiated by fraud or
error.6 To rescind the contract on account of fraud, the purchaser would have to prove:
(1) the owner‘s misrepresentation was intentional and (2) the purchaser suffered actual
or potential loss or damage.7 According to your letter, the seller‘s misrepresentation
does not seem intentional because the seller merely used the same square footage
from a previous MLS sheet.

Louisiana law provides that consent is not vitiated by fraud when the non-fraudulent
party ―could have ascertained the truth without difficulty, inconvenience, or special
skill.‖8 Because the buyer could have measured the building before entering into the
contract rather than after, fraud probably cannot be used as a basis for rescinding the
contract.

In one Louisiana case with somewhat similar facts, the plaintiffs bought a residence
which the agent incorrectly listed on MLS as 2547 square feet in living area. 9 After the
sale closed and the purchasers received an appraisal, it came to their attention that the
house was only 2054 square feet. The court held that the sale could not be rescinded
on account of fraud or error due to the living space for several reasons. First, there was
no evidence that the seller knew the purchaser was misinformed regarding the living
area. Second, the seller did not know that the real estate agent was using inaccurate
information. Third, the purchasers could and should have measured the residence prior
to the sale to determine the actual living area, which would have lead to the discovery of
the error. Last, the purchase price was extremely close to the appraised value;
therefore, the plaintiffs did not suffer any damage.




6
  LA. CIV. CODE ANN. Art. 1948.
7
  LA. CIV. CODE ANN. Art. 1953; St. Paul Mercury Ins. Co. v. Williamson, 224 F.3d 425 (La. Ct. App. 5
Cir. 2000).
8
  LA. CIV. CODE ANN. Art. 1954.
9
  Smith v. Remodeling Services, Inc, 648 So. 2d 995 (La APP 5 Cir 1994).
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In the same case, the plaintiffs also brought an action against the real estate broker
based on fraud10 and negligent misrepresentation.11 Both claims were unsuccessful. As
previously stated, fraud requires an intentional misrepresentation which the plaintiffs
could not prove. Real estate agents have a duty to provide accurate information to
sellers and purchasers and may be held liable for negligent misrepresentation.
However, in order for a party to recover based on negligent misrepresentation, he or
she must have suffered some type of damage. Because the price the plaintiffs paid for
the property was very close to the appraised in the Smith case, the court denied the
plaintiffs recovery because they suffered no real damage.

Again a contingent square footage clause in the purchase agreement may prevent
these types of misunderstandings.

QUESTION:

Our question is: Can the MLS committee impose a fee for each “Exclusive Office
Listing” distributed to Brokers?

FYI: The listing can not be entered into the MLS or advertised in the monthly
“REALTOR® Magazine”, therefore, does not go to Realtor.com. It must be posted
on the MLS when sold for comp purposes only. By acknowledging and signing
the form submitted to the Brokers the Owners know of these restrictions.

ANSWER:

The Handbook on Multiple Listing Policy from the National Association of REALTORS®
for 2006 provides in section 5 that an office exclusive listing is as follows:

           If a seller withholds consent for a listing to be published in an MLS
           compilation of current listings, such listings shall be filed with the MLS but
           not disseminated to other participants. As a matter of local discretion,
           certification may be required from the seller or from the listing broker that
           the listing is being withheld from the MLS at the direction of the seller.

           This is a mandatory provision pursuant to the handbook.

We spoke with Kevin Milligan of NAR who advised that the charging of a fee by an MLS
for an Exclusive Office Listing may or may not be permissible depending upon the
reason for the fee. If the reason for the fee is to offset costs incurred with the inclusion
of the Exclusive Office Listing for comp purposes after sale in the MLS, then perhaps
the fee may be allowable. If the reason for the fee is punitive to discourage Office
Exclusive Listings then the fee is most likely not permissible.


10
     LA. CIV. CODE ANN. art. 1953.
11
     LA. CIV. CODE ANN. Art. 2315.
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MODULAR HOMES
QUESTION:

Modular Homes are a new commodity in Southeast Louisiana and there are real
concerns as a real estate broker regarding the status of modular homes. In my
opinion, the term “modular home” has not been well defined. For example, there
are some modular homes that are nothing more than mobile homes that arrive on
scene with axels and wheels (that means they can also be removed without much
difficulty). There are other modular homes that come in one piece without wheels
and then there are modular homes that are literally built at a remote site through
the use of templates and then brought to site and erected. This type of modular
home is intended to be permanent and not moved at a later date.

The questions:

Is a modular home “real estate”? The laws are currently written, I do not believe
they are.
Is a modular home “real property” if there is no land involved in the sale?
If a licensed real estate agent is involved in the sale of a modular home and it
does not involve the purchase of land, does the compensation go through the
agent’s broker?
If a modular home is NOT real estate, would the agent/broker’s E&O cover them
on the sale?

ANSWER:

Question 1:

Is a modular home “real estate”? The laws are currently written, I do not believe they
are.

Answer 1:

The Louisiana Real Estate License Law (Louisiana Revised Statutes, Title 37, Chapter
17) defines ―Real Estate‖ for purposes of the regulation of real estate professionals as:

      "Real estate" shall mean and include condominiums and leaseholds,
      as well as any other interest in land, with the exceptions of oil, gas
      and other minerals and whether the real estate is situated in this
      state or elsewhere.

According to this definition, a modular home may not be real estate because it is not an
interest in land. A modular home not installed can not be considered an ―interest in
land‖. However, that interpretation would likely change once the modular home is

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incorporated into/on immovable property. Additionally, this definition applies only to the
Real Estate License Law. This definition may not apply to other areas of the law.

It should also be noted that the definition of ―Real Estate Activity‖ in the Real Estate
License Law includes the purchase and sale of real estate ―and the improvements
thereon‖. Thus an installed modular home is generally considered an immovable and an
improvement on land and therefore would be considered in the definition of ―Real Estate
Activity‖.

Under Louisiana law modular home designed and permanently installed or constructed
on a residential site must be constructed in accordance with the International
Residential Code (IRC) adopted by the State of Louisiana pursuant to La. R.S.
40:1730.28 and which is enforced by the Louisiana State Licensing Board for
Contractors. An Attorney General Opinion (Opinion No. 06-0175) cites the differences
between manufactured housing and modular homes. Significant factors that distinguish
the modular home from the manufactured home involve site preparation, on-site
construction, including setting the modules in place, sealing of walls, roof construction
and installation, electrical, plumbing HVAC system connection and installation, interior
finishing, etc. The manufactured home comes to the delivery site fully completed and
assembled and remains permanently attached to the chassis. In addition, the
manufactured home remains portable once in place whereas the modular home is
permanently affixed to a foundation at the residence site. It is clear that a modular home
is not ―mounted on chassis‖ as part of its factory-built process. In Attorney General
Opinion No. 78-15385 the Attorney General stated that, due to the nature of its
assembly and its foundation, a modular structure, whether used as a dwelling or
commercial office, would be excluded from the definition of mobile home (manufactured
home) under La. R.S. 51:911.22(5).

Another clear distinction between a manufactured home and a modular home is that
each provides and follows separate statutory warranties. La. R.S. 51:911.25 provides
that each new manufactured home be covered by a warranty for only the first retail
purchaser and only for a period of one year from the date of purchase. The New Home
Warranty Act (La. R.S. 9:3141-3150) outlines the warranty available for modular homes
and supplies the remedy available for new home owners. The warranty pursuant to the
New Home Warranty Act is transferable and can last up to five years. It should also be
noted that a manufactured home is registered with the Louisiana Office of Motor
Vehicles and a title issued similar to that of a motor vehicle. A modular home has no
such title since it becomes part of the property upon which it is assembled and
constructed.

Question 2:

Is a modular home “real property” if there is no land involved in the sale?



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Answer 2:

The term ―Real Property‖ is a common law term. The civil law equivalent, which is used
in Louisiana, is ―immovable property.‖ Immovable property is defined as ―tracts of land
with their component parts.‖ A modular home is most likely not considered a component
part, however, a modular home would likely fall under another category of property in
Louisiana – a ―building‖ or ―other construction permanently attached to the ground‖.
Buildings and other constructions permanently attached to the ground may belong to a
person other than the owner of the ground. Nevertheless, they are presumed to belong
to the owner of the ground, unless separate ownership is evidenced by an instrument
filed for registry in the conveyance records of the parish in which the immovable is
located. However, the separate ownership of a building or other construction and the
underlying land is a rare situation.

The sale of a modular home would generally take place in the form of a construction
contract. As such, the laws applying to the sale of modular homes can most closely be
analogized to the laws which apply to construction contracts for new home construction.
There is actually generally no transfer of property in such a construction contract but
rather an agreement to construct a home or building.

Question 3:

If a licensed real estate agent is involved in the sale of a modular home and it does not
involve the purchase of land, does the compensation go through the agent’s broker?

Answer 3:

For purposes of this question, I shall assume that you are referring to a modular home
that has not yet been constructed on the subject land. The Louisiana Real Estate
License Law states that ―Associate brokers and salespersons shall not accept a
commission or other valuable consideration for the performance of any act herein
specified, or for performing any act relating thereto, from any person, except their
sponsoring or qualifying broker‖. Considering that ―Real Estate Activity‖ includes the
sale of land and ―any improvements thereon‖, it seems that any commission earned on
the sale of a modular home would be required to be passed through the broker similar
to the construction of a home by a regular builder. Although the modular home would
not be considered real estate, it would likely be considered an improvement thereon.
You should further consult your employment and/or independent contractor agreements
with your agents to determine the scope of real estate activity covered by the
agreement.

Question 4:

If a modular home is NOT real estate, would the agent/broker’s E&O cover them on the
sale?

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Answer 4:

Errors and Omissions insurance policies cover claims arising out of services performed
by a licensee as a real estate broker or salesperson as defined in the Louisiana Real
Estate License Law and for which the licensee is required to have a real estate license.
It seems that a salesperson would generally have coverage in this case because the
sale of improvements upon land is described as ―Real Estate Activity‖ in the Louisiana
Real Estate License Law.

MULTIPLE OFFERS

QUESTION:

We listed 61 acres on 06/13/2007 for $96,900.00.

We received an offer with deposit on @ 9am on 06/22/2007 for $95,000.

The sellers consist of 9 brothers and sisters situated throughout the state. One of
these brothers lives in Alexandria. He is our first contact.

On 06/22/2007, we received a full price offer with deposit from a doctor from
Alexandria who lives next to subject property. We explained to him that there was
another offer on the table that was verbally accepted by one of the heirs. We did
not disclose anything else. This doctor knocked on our seller’s door in
Alexandria and asked questions and our seller informed him that the first offer
was not for full price so the buyer (the doctor) called us to make a full price offer.
He then told us that he is under contract with the seller SIMPLY because he
offered full asking list price. I explained to him that he is not under contract just
because he offered full price and asked him if this scenario created an automatic
contract then what would happen if 2 full price offers came in simultaneously?! I
explained to him that a contract is not executed until all parties have signed it. He
argued with me and threatened a law suit against me and the seller stating again
that he says he is under legal contract with the sellers. (The sellers haven’t even
signed his offer.) We haven’t had time to mail them to all 9 sellers and our
Alexandria seller had previously verbally accepted the first offer.

Please advise. Is this doctor (the second buyer) under legal contract just because
he made a full price offer?

In the meantime, a third offer has come in by a family member of the sellers which
is also a full price offer. We have no choice but to continue with our offer process
of presenting the 3 offers to the sellers until we are told otherwise that the 2nd
buyer is actually under legal contract with the sellers on said property.



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ANSWER:

Generally, a seller is going to require even a full price offer must be made in writing and
include all terms of the offer before a seller will accept the offer. Is the full price offer
contingent on financing? When would the sale close? Will mineral rights be
transferred? What happens if title is not merchantable? Just an agreement on price
does not address any of the many details which must be agreed upon.

Although the Louisiana Civil Code literally only requires the Act of Sale to transfer the
real property to be in writing, many courts have interpreted this to also include the
contract to sale or purchase agreement, must also be in writing. See Louisiana Civil
Code Article 1832 to 1839. Riddle v. Simmons, 589 So. 2nd 89 (La. App 2nd Cir. 1991).

We know of no case law that eliminates the requirement for an agreement signed by a
seller and buyer simply because it is a full price offer.

Please note the obligation of a licensee to present all offers to their clients continues
pursuant to the terms set forth in the Listing Agreement.

Louisiana law further reiterates that a real estate broker has the duty to communicate to
his principal/client all offers received and may be liable for damages for his failure to do
so. See Leggio v. Realty Mart, Inc. 303 So. 2nd 920 (La. Ct. App. 1st Cir.1974), writ
denied, 307 So. 2nd 629 (La. 1975). La. R.S. 9§3893 (A)(2)(b) provides that one of the
duties of a licensee representing clients is to timely present all offers to and from the
client, unless the client has waived this duty.

Further, the Rules and Regulations of the Louisiana Real Estate Commission Chapter
39, section 3901 provides, all written offers and counteroffers for the purchase of real
estate shall be presented to all buyers and/or sellers for their consideration and decision
immediately, without delay. The licensee, who presents an offer or counteroffer in a
real estate transaction, shall insure that the time of day and date the offer or
counteroffer was signed by the offering party, are included in the document as well as
on any acceptance, rejection or counteroffer.

NEW CONSTRUCTION
QUESTION:

We have a situation concerning who should sign a listing agreement as the Seller
of new construction. Should the licensed building contractor or the contractor’s
investor sign as the Seller – or should they both sign?

I understand there is a new law which allows only a licensed contractor to sell a
newly-constructed home or an owner who built the home and lived in it for at
least one year.

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ANSWER:

Generally the ―seller‖ is defined as the party who owns the property according to public
records filed in the Conveyance Office of the Parish. This would be the ―seller‖ for
purposes of listing the house. Therefore, whether the builder or the builder‘s investor
should sign the Listing Agreement will depend upon who the ―seller‘ is according to the
conveyance records of the Parish.

Pursuant to your second question we believe you are referring to the ―New Home
Warranty Act‖ at LA R.S. 9§3143 et seq. A ―builder‖ pursuant to the New Home
Warranty Act is defined as:

      any person, corporation, partnership, limited liability company, joint
      venture, or other entity which constructs a home, or addition thereto,
      including a home initially occupied by its builder as a residence. A person,
      corporation, partnership, limited liability company, joint venture, or other
      entity which constructs the home, or any addition thereto, is a builder,
      whether or not the consumer purchased the underlying real estate with the
      home (LA R.S. 9§3143(1)).

―Owner‖ is defined pursuant to the New Home Warranty statute as:

      the initial purchaser of a home and any of his successors in title, heirs,
      invitees, or assigns to a home during the time the warranty provided under
      this chapter or in effect (LA R.S. 9§3143(6)).

The New Home Warranty is automatically transferable without charge to any
subsequent Owner who acquires title to the home (See LA R.S. 9§3148). We are
unaware of any prohibition as posed in your question. If you can provide more
information, we will be glad to investigate this question further.

OFFERS
QUESTION:

1)    What are the requirements for delivery of offers and counteroffers?

2)    How should the lines in the information box of the new Statewide Purchase
      Agreement regarding “Delivered By Designated Agent to” and the following
      lines be completed?

3)    When is delivery of an offer complete?



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ANSWER:

The Louisiana Real Estate Commission provides the rules regarding delivery of offers,
which are as follows:

§3901 of the regulations provides:

      a)     All written offers and counteroffers for the purchase of real estate
             shall be presented to all buyers and or sellers for their
             consideration and decision immediately without delay.

      b)     The licensee who prepares an offer or counteroffer in a real estate
             transaction shall insure that the time of day and date the offer or
             counteroffer was signed by the offering party are included in the
             document.

      c)     The licensee who presents an offer or counteroffer in a real estate
             transaction shall insure that the time of day and date the offer or
             counteroffer was accepted, rejected or countered are included in
             the document.

§3905 further provides:

      a)     Designated agents receiving offers or counteroffers and
             transactions shall annotate the offers or counteroffers to indicate
             the time of day and the date the offers or counteroffers were
             received.

      b)     It shall be the responsibility of each designated agent to make
             reasonable efforts to contact and notify the designated agent of the
             other party of the existence of an offer or counteroffer.

             1)     It shall be the responsibility of the designated agent who
                    transmits or delivers the written offer or counteroffer to
                    document date, the time of day, place and method of
                    delivery.

             2)       Such documentation as to the date, time of day, place and
                      method of transmission or delivery of the written offer or
                      counteroffer may include, but will not be limited to,
                      annotation by delivering designated agent, a date and time
                      facsimile transmissions receipt or a dated and time
                      electronic mail receipt….
The following lines on the Statewide Purchase Agreement form address the delivery
and receipt of offers.

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______________________________________________________________________________
Delivered by Designated Agent to [Name of Designated Listing Agent] Day    Date     Time      AM/PM
______________________________________________________________________________
Comments
______________________________________________________________________________
Received by [Name of Recipient]                                   Day      Date     Time     AM/PM
______________________________________________________________________________
Received by Designated Listing Agent                                 Day     Date     Time     AM/PM




The drafters of the Statewide Purchase Agreement form intended that, for example, the
buyer‘s designated agent would deliver the offer to the seller‘s designated agent. The
name of the agent to whom the offer was presented would be completed on line marked
―Delivered By Designated Agent to‖ with the day, date and time. The actual recipient
would be noted on the line ―Received By,‖ whether that be the designated agent or
some other person, such as an assistant or administrative staff member. The line
marked ―Received by Designated Listing Agent‖ would simply be completed with the
date and time that the offer is received by the agent.

Delivery of an offer is generally accomplished when the offer is received by the offeree
or his designated agent. While another individual may actually physically receive the
offer, such as an assistant or administrative staff member, the delivery of the offer is
effective upon receipt by the offeree, usually the seller‘s designated agent. The
regulations of the Louisiana Real Estate Commission make it clear that each agent
should note when the offer was delivered and when it is received. The purchase
agreement form provides the lines necessary to comply with those regulations.

OPTION TO PURCHASE
QUESTION:

I have an agent who personally submitted an Option to Purchase raw land and it
was accepted. The contract gave him the right to sell it during the option period.

The problem is that the original owner still has it listed with another real estate
agent. Can my agent place the property on the market as the owner of the option
and either sell his option right or the land and place his sign on the property and
put it in the MLS?

ANSWER:

An option to purchase real estate, once accepted, results in a contract to sell the real
estate. La. Civil Code Article 2620.

While property cannot be listed and advertised unless the consent of all owners of the
property is obtained, in the case of an option to purchase, the party owning such option
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does not have an ownership interest in the property, until he or she invokes such option
and executes an act of sale conveying the property. Thus the owner of such property is
free to continue to list the property for sale with another agent, however such owner
should not enter into a purchase agreement with any third party, without disclosing or
otherwise predicating such purchase agreement upon the terminating of the previously
granted option to purchase.

Provided the owner of the property did grant the option holder the right to market the
property during the option period, the option holder may market the property.
Furthermore, the option holder should market the property solely as the owner of the
option to purchase, not the owner of the property itself. The option holder may assign
his rights under the option to purchase as the rights and obligations arising from a
contract (including an option to purchase) are assignable unless the law, the terms of
the contract, or its nature preclude such effects. La. Civil Code Article 1984.

Lastly, in the event the agent is the owner of the option or becomes the owner of the
property to be sold, pursuant to the Louisiana Real Estate Commission regulations
section 2511 provides that:

       A licensed broker or sales person who offers in which he or she owns any
       interest as being for sale or rent shall state in any advertising and on the
       sign placed on the property, that he or she is a licensed real estate agent.
       Including the term ―licensed real estate agent‖ in any advertisement or on
       any sign shall be sufficient to satisfy this requirement.

Finally, section 3501 of the regulations provides that:

       The licensee acting as a principal in a real estate transaction, whether
       individually or through any entity in which he or she has an interest, shall
       disclose his or her status as a licensed real estate agent to all of the
       principals in the real estate transaction, in writing, prior to entering into any
       real estate contract.

OWNERSHIP OF PROPERTY
QUESTION:

I have a question regarding ownership of a property. I have an agent in my office
who has been asked to list a home that is in succession with a surviving spouse
and court appointed executrix. During the last year while the succession was
being worked on, there were unpaid property taxes and the property sold at a tax
sale. The succession attorney advises to list the home and redeem the tax sale at
closing. Can this be done redeeming the tax sale and placing ownership back to
the original tax debtor?


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ANSWER

Pursuant to Louisiana Constitution Article 7 § 25, real estate may be sold for
nonpayment of ad valorem or real estate property taxes. The Tax Collector, after giving
notice to the delinquent tax debtor, may advertise and sell the real estate for the taxes
which are due. The real estate sold at a tax sale is generally redeemable for three years
after the date of recordation of the tax sale. See Louisiana Constitution Article 7 § 25
(B). Some courts have taken the view that the tax sale of the property is merely a lien
on the property and not an actual conveyance of the property until the redemption
period has expired. Other Louisiana courts and the Tax Commission‘s view is that the
tax sale is in fact a conveyance of the property, thereby the owner of the property is the
third party who bid in the property at the tax sale.

The Louisiana license law provides that in Section 1455 that the causes of censure,
suspension or revocation of licensee, registration or certification include the offering of
real estate for sale or lease without the written consent of the owner or his authorized
agent. It is the conservative view that offering property that the real estate agent knows
has been sold by tax sale to a third party could violate this section of the license law, as
the party listing the property does not own it.

Further, Louisiana Civil Code Procedure Article 3286 provides that a succession
representative may execute a listing agreement for the sale of succession property only
upon an ex parte motion and approval by the court. The court may require the
redemption of the property from tax sale prior to the listing of the property or may set
other parameters for redeeming the property prior to the sale.

PROCURING CAUSE
QUESTION:

In January I helped negotiate a lease (this lease had no provision for a
commission in the event of a sale) on a commercial property that I have listed for
sale (ERS). The tenant and I communicated regularly about how she would like to
purchase the property & she has asked me for advise periodically since then,
especially on how she should proceed with making an offer subject to her ability
to obtain financing. She indicated to me and to the Lessor/Seller that I would be
assisting her with the purchase. Day before yesterday an offer was faxed to me
from her through another agent/broker who has never communicated with me
about the property. It was a low offer that the Seller rejected and expressed his
surprise at this other agent being brought in at this time. I now feel that
tenant/prospective purchaser used me to obtain the lease then brought in a
broker-friend to benefit from the commission on the sale.

Any advice you can offer me is most appreciated.


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ANSWER:

Generally, a REALTOR® has a claim to a commission if he or she was the procuring
cause of a sale. ―Procuring cause‖ is judicially defined as a cause originating or setting
in motion a series of events which, without a break in continuity, results in the
accomplishment of the objective of the employment of the broker (i.e., sale of property)
and ultimate agreement between the principal and prospective contracting party, or the
procurement of a purchaser who is ready, willing and able to buy on the principal‘s
terms.

The question of procuring cause is almost always problematic. It is intensely factual,
always requiring a detailed analysis of all underlying facts and circumstances
surrounding the matter, including the prior course of contact of all parties vis-à-vis their
relations to one another with respect to the property at issue. Some of the questions
which should be considered in determining if the initial broker is entitled to a
commission include the following:

1.     Who first introduced the purchaser to the property?

2.     When was the first introduction made?

3.     How was the first introduction made?

4.     Did the broker who made the initial introduction to the property engage in
       conduct, which caused the purchaser to utilize the services of another broker?

5.     Did the cooperating broker initiate a separate series of events, unrelated to and
       not dependent on any other broker‘s efforts which led to the successful
       transaction - that is, did the broker perform services which assisted the buyer in
       making his decision to purchase?

6.     How did the efforts of one broker compare to the efforts of another?

7.     What was the length of time between the initial broker‘s efforts and the final sales
       agreement?

8.     Did the broker who made the initial introduction to the property maintain contact
       with the purchaser?

9.     Did the seller act in bad faith to deprive the initial broker of his commission?

It should also be noted that if a broker believes he/she is entitled to commission as the
procuring cause of the sale, the broker may request arbitration of this issue with his/her
local board of REALTORS®. Such a request must be filed within 180 days of the
transaction.

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QUESTION:

Is the Seller’s former broker (Company A) the procuring cause in this case and
due 50% of the fee?

If we are not found to be the procuring cause by Board arbitration or another
procedure, can we pursue other legal options to obtain a fee from the Seller post
closing?

Are there any ethics issues with a Buyer’s broker suggesting to a Seller that he
execute a commission agreement effectively eliminating the Seller’s
representation?

ANSWER:

1.      Is the Seller’s former broker (Company A) the procuring cause in this case and
       due 50% of the fee?

Generally, a REALTOR® has a claim to commission if he or she was the procuring
cause of sale. ―Procuring cause‖ is judicially defined as a cause originating or setting in
motion a series of events which, without a break in continuity, results in the
accomplishment of the objective of the employment of the broker (i.e., sale of property)
and ultimate agreement between the principal and prospective contracting party, or the
procurement of a purchaser who is ready, willing and able to buy on the principal‘s
terms.

The question of procuring cause is almost always problematic. It is intensely factual,
always requiring a detailed analysis of all underlying facts and circumstances
surrounding the matter, including the prior course of contact of all parties vis-à-vis their
relations to one another with respect to the property at issue. Some of the questions
which should be considered in determining if the initial broker is entitled to a
commission include the following:

       1.     Who first introduced the purchaser to the property?
       2.     When was the first introduction made?
       3.     How was the first introduction made?
       4.     Did the broker who made the initial introduction to the property engage in
              conduct, which caused purchaser to utilize the services of another broker?
       5.     Did the cooperating broker initiate a separate series of events, unrelated
              to and not dependant on any other broker‘s efforts which led to the
              successful transaction- that is, did the broker perform services which
              assisted the buyer in making his decision to purchase?
       6.     How did the efforts of one broker compare to the efforts of another?
       7.     What was the length of time between the initial broker‘s efforts and the
              final sales agreement?

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      8.     Did the broker who made the initial introduction to the property maintain
             contact with the purchaser?
      9.     Did the seller act in bad faith to deprive the initial broker of his
             commission?

There are hundreds of cases on procuring cause. No two are exactly alike. No doubt
cases can be found both for and against the argument that Agent A might be a
procuring cause for the sale in this instance. We cannot, in this HOTLINE, opine as to
the likelihood of success on the merits of a case as to whether Company A might be a
procuring cause for the sale.

2.    If we are not found to be the procuring cause by Board arbitration or another
      procedure, can we pursue other legal options to obtain a fee from the Seller post
      closing?

The National Association of REALTORS® Statement of Professional Standards Policy
Applicable to Arbitration Proceedings sets forth the circumstances under which a
REALTOR must submit to arbitration. Every REALTOR® of the Board who is a
REALTOR® principal, who participates in a Board‘s MLS where they do not hold Board
membership and every nonmember broker or licensed or certified appraiser who is a
Participant in the Board‘s MLS shall have the right to invoke the Board‘s arbitration
facilities in any dispute arising out of the real estate business with a REALTOR®
principal in another real estate firm or with that firm (or both), or nonmember
broker/appraiser or their firm (or both) who is a Participant in the Board‘s MLS.

      Article 17 of the Code of Ethics provides

      In the event of contractual disputes or specific non-contractual disputes as
      defined in Standard of Practice 17-4 REALTORS® (principals) associated
      with different firms, arising out of their relationship as REALTORS®, the
      REALTOR® shall submit the dispute to arbitration in accordance with the
      regulations of their board or boards rather than litigate the matter…. The
      obligation to participate in arbitration contemplated by this Article includes
      the obligations of REALTORS® (principals) to cause their firms to arbitrate
      and be bound by any award.

      Standard of Practice 17-1 provides

      The filing litigation and refusal to withdraw from it by REALTORS® in an
      arbitrable matter constitutes a refusal to arbitrate.

Standard of Practice 17-2 provides

      Article 17 does not require REALTORS® to arbitrate in those
      circumstances when all parties to the dispute advise the board in writing
      that they choose not to arbitrate before the board.
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Therefore, generally, the requirement is that REALTORS® agree to arbitrate certain
disputes as part of their ethical obligations. An arbitration award issued by the board is
appealable by a request for procedural review of the arbitration hearing procured by
board directors made within 20 days of service on the notice of the award upon the
parties. If no such review is requested, the award becomes final and binding following
the 20 day period. Further, if an award is rendered and a party fails to abide by the
award, the recipient to whom the award has been rendered by the arbitration panel shall
be advised by the board to seek judicial enforcement and to request reimbursement of
legal fees incurred in seeking the enforcement.

REALTORS® generally have no duty to arbitrate with clients unless provided by written
contract. We cannot specifically opine on whether or not a direct action can be filed
against the seller. In one case the court held that when a listing agreement contains
specific primary and secondary periods for commission to be paid to a broker, nothing
prevents the owner from waiting until expiration of the secondary period to sell the
property to a prospect who had become interested in the property through the efforts of
the broker during the primary period. If no contract to sell is executed until expiration of
the secondary period, the seller is not liable for a commission to the broker pursuant to
this court. Treadaway v. Lambert & Sarrazin, 96 So. 2d 115 (La. Ct. App., Orleans
1957)

Other cases have held that if the broker is the procuring cause of the sale, even if the
listing agreement has expired, the broker may still be entitled to a commission. See Lee
Eyster and Associates, Inc. v. Favor, 504 So. 2d 580 (La. Ct. App. 4th Cir. 1987), writ
denied, 507 So. 2d 232 (La. 1987). Katz v. Young Men’s Christian Ass’n of Greater
New Orleans, 466 So. 2d 603 (La. Ct. App. 5th Cir. 1985). A real estate broker may be
considered the procuring cause of the sale and entitled to a commission if he brings the
parties together, even though the parties conduct the final negotiations themselves
without the broker‘s knowledge. See Real Estate Development and Investment Co., Inc.
v. D’Antoni, 466 So. 2d 701 (La. Ct. App. 4th Cir. 1985). Strahan v. State Through Dept.
of Agriculture and Forestry, 633 So. 2d. 886 (La. Ct. App. 1st Cir 1994).

3.     Are there any ethics issues with a Buyer’s broker suggesting to a Seller that he
       execute a commission agreement effectively eliminating the Seller’s
       representation?

Although we cannot opine as to the facts in this particular situation, there are several
Ethics Articles and Standards of Practice dealing with exclusive representation of a
client.

Article 16 of the Code of Ethics provides

       REALTORS® shall not engage in any practice or take any action
       inconsistent with excusive representation or exclusive brokerage
       relationship agreements that other REALTORS® have with clients.
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Standard of Practice 16-8 provides

      The fact that an exclusive agreement has been entered into with a
      REALTOR® shall not preclude any other REALTOR® from entering into a
      similar agreement after the expiration of the prior agreement.

Standard of Practice 16-9 provides

      REALTORS®, prior to entering into a representation agreement, have an
      affirmative obligation to make reasonable efforts to determine whether the
      prospect is subject to a current, valid exclusive agreement to provide the
      same type of real estate service.

Standard of Practice 16-13 provides

      All dealings concerning property exclusively listed, or with buyer/tenant
      who are subject to exclusive agreements shall be carried on the with
      clients representative or broker, and not with the client, except with the
      consent of the client‘s representative or broker, or except where such
      dealings are initiated by the client.

PROPERTY DISCLOSURES
QUESTION:

I work for commercial real estate agents and I cannot seem to get a definitive
answer as to the necessity of Property Disclosures for Commercial Listings
and/or Land. Is a Property Disclosure Form ever REQUIRED for commercial
listings or is it only required for residential listings?

ANSWER:

LA R. S. 9: 3196 defines as residential real property as:

      Real property consisting of one or not more than four residential dwelling
      units, which are buildings or structures each of which or occupied or
      intended for occupancy as single family residences.

The residential property disclosure law provides that the law applies only to the transfer
of any interest in residential real property, whether by sale, exchange, bond for deed,
lease with option to purchase, or any other option to purchase, including transactions in
which the assistance of a real estate licensee is utilized and those in which such
assistance is not utilized. The provisions of the property disclosure document law do not
apply to commercial property or to undeveloped land.

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PURCHASE AGREEMENTS
QUESTION:

We represent a seller who is entered into a valid contract with a buyer where all
contract stipulations have been met by both parties, however, now the seller no
longer wants to sell. The reason being they cannot afford to build their new home
where they wanted to build. What are the consequences to them should they pull
out of the contract and refuse to sell?

ANSWER:

A purchase agreement entered into by a seller and buyer is generally a binding contract
between the parties for the sale of the home to the buyer. If the seller decides he or she
no longer wishes to sell the home, potentially this is a breach of the purchase
agreement. The purchase agreement may provide for liquidated damages to be paid to
the buyer or it might also provide for specific performance whereby the buyer can
essentially, through court orders, require the sale of the home. The remedies available
to the buyer if in fact the seller breaches the contract, are governed by the exact terms
of the purchase agreement.

QUESTION:

A property that I have listed had gone under contract June 19, 2006 and was
scheduled to close July 14, 2006 according to the original contract and did not
contain an earnest deposit. The buyer of this property could not obtain financing
on her own and had her father obtain the financing under his name and was
obtaining bond money from the State at the same time, according to the lender.
An addendum was drawn and signed by both parties extending the contract to
the 17th of July when I found out that the father of the buyer had to leave the
country for a week. The property did not close by the extended time and the seller
refuses to sign an additional extension to the contract even though he said he
would at the beginning on this contract. Also, the seller accepted a back up offer
the next day. Can the seller refuse to sign an extension even though he has
indicated in the past that he would sign to continue the contract?

ANSWER:

In most purchase agreements the contract provides that ―time is of the essence‖ and
further provides that any amendments, changes or extensions to the contract must be in
writing. Depending upon the exact wording of the purchase agreement, the seller may
be able to refuse to sign an extension of the closing date even though he may have
orally agreed to extend the closing date. Generally, with most purchase agreements,
failure to close the transaction by the date set out in the contract either means the buyer

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(assuming it was the buyer who failed to close) is in breach of the purchase agreement
or the purchase agreement is null and void. The buyer may wish to retain a lawyer to
review the purchase agreement to determine whether or not there was a breach of the
contract by the seller in refusing to sign an extension of the contract, but as stated
above usually a verbal extension is not enforceable.

QUESTION:

As per the title clause of the new purchase agreement, does this obligate the
seller to pay for the title search?

Also, if there are flaws discovered in the title, does this obligate the seller to pay
for all legal work to correct the flaws (regardless of the cost)?

In the past, we have had sellers decide to pass up the deal because the title work
is too costly.

This reads as though they will not have a choice.

Has this come up as a question before?

ANSWER:

Lines 135 – 145 of the Statewide Purchase Agreement address merchantable title and
curative work. Specifically beginning at line 142 the Statewide Purchase Agreement
states:

      Seller shall make a good faith effort to deliver merchantable title. Seller‘s
      inability to deliver merchantable title within the time stipulated herein shall
      render this agreement null and void, reserving unto Buyer the right to
      demand the return of the deposit and to recover from Seller actual costs
      incurred in processing of sale as well as legal fees incurred by Buyer.

      Any curative work required to make the title merchantable is at the cost of
      the seller (see line 136). However, any title search or title insurance
      required by the buyer shall be at buyer‘s cost (see lines 127 and 128).

Pursuant to the Statewide Purchase Agreement, it is the seller‘s obligation to deliver to
the buyer a merchantable title at seller‘s cost. However, the requirement to deliver a
merchantable title is tempered by the requirement that the seller make a good faith
effort to deliver same. What is reasonable for the seller to be obligated to pay to correct
flaws in a title will depend on the exact circumstances of each transaction. If the parties
are unable to agree and the purchase agreement is litigated, the judge will look at what
constitutes a good faith effort to deliver merchantable title. The Judge will consider what
would be reasonable to expect from a seller‘s in order to deliver a merchantable title.

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If your seller wants to limit his/her possible expenses to cure title defects you could
include this limitation on an addendum or on lines 289-297 as an additional term.

QUESTION:

One of my agents (currently representing a buyer) is co-oping with another
agency in our town. During our routine inspection period, our client sent the
inspection report to the seller. Their response to said report was a bid for a new
roof on the subject house. The bid was reasonable and therefore our client
accepted the sellers’ counter offer. Now that we are in a contract and due to close
this Wednesday, the buyer called the roofer that gave the bid to schedule the new
roof. The roofer said he doesn’t do existing residential roofs. We feel the co-op
agent mislead us and our client to get an acceptance of her client’s counter offer.
Our buyer received another bid from another roofer which was substantially more
money than they were expecting to spend. We are currently composing an
addendum to seller from buyer requesting half of the difference of the new bid.
When questioned about it, the co-op agent said it was a legitimate bid as the
contractor/roofer is licensed. However, we don’t understand HOW it could be
legitimate if the licensed roofer can give a bid on something he doesn’t do. Would
you get a bid from a vet to remove your tonsils? He is licensed in the medical
field. Would he be able to even give a bid? We feel this is a similar scenario to
what occurred. Please advise……

ANSWER:

The rights and remedies available to the Buyer will depend upon the exact terms of the
purchase agreement. Did the purchase agreement provide that the Seller would provide
information on the roof? Did the purchase agreement provide that the roof could be
repaired for the price provided in the bid? If in fact the acceptance of the counter offer
by the Buyer was based on misleading and inaccurate information supplied by the
Seller, the buyer may have a claim to nullify the agreement for vice of consent based
upon fraud.

The bid by the roofer would be a separate issue. The roofer may or may not be required
to honor the bid. It would depend on the specific terms of the bid. Typically, contractors
and subcontractors will include some sort of disclaimer that does not require them to
strictly comply with the bid amount. Additionally, the Buyer is not a party to the bid
submitted by the roofer and would likely have no right to compel the roofer to honor the
bid, unless the bid is assignable and is assigned to the Buyer by the Seller.




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REDHIBITION
QUESTION:

Several questions have arisen in regard to whether an “As Is” sale with waiver of
redhibition (as per language in LREC Agreement to Purchase and Sell) would
affect the Builder’s Warranty required on now construction as LRS 9:3141 et seq.

1.    Would checking the As Is provision negate the Builder’s Warranty?
2.    What would be the correct way to fill out the LREC contract to protect the
      Buyer?
3.    Can the Buyer negotiate a longer warranty from the builder and what
      language would be appropriate to accomplish that end?
4.    Finally, have there been any recent changes in the time for making claims
      under either the builder’s warranty or on a claim for redhibition.

ANSWER:

1.    Would checking the As Is provision negate the Builder’s Warranty?

Generally, the ―as is‖ provision in the purchase agreement or act of sale does not
negate the new home warranty. LSA-R.S. 9:3141 et seq., the ―New Home Warranty
Act,‖ (the ―Act‖) provides ―clear, concise, and mandatory warranties for the purchasers
and occupants of new homes in Louisiana.‖ See, LSA-R.S. 9:3141. While similar to the
warranties against redhibitory defects contained in the Louisiana Civil Code, the
warranties contemplated by the Act relate specifically to defects arising from (1) a
builder‘s failure to comply with applicable building standards; or (2) materials or
workmanship not regulated by building standards. See, LSA-R.S. 9:3144(A). Further,
while the warranties against redhibitory defects may be enforced against any seller of
the defective property, the warranties contained in the Act may only be enforced against
the ―builder‖ -- as that term is defined in LSA-R.S. 9:3143(1) -- and only for the time
periods outlined in LSA-R.S. 9:3144(A). Finally, unlike the warranties against redhibitory
defects, the warranties established in the Act ―shall not be waived by the owner or
reduced by the builder provided the home is a single or multiple family dwelling to be
occupied by an owner as his home.‖ See, LSA-R.S. 9:3144(C). Thus, it appears from
the language of the Act that while a buyer may, through an Act of Sale or other
document purporting to transfer ownership of residential property, waive the implied
warranties against redhibitory defects, he/she generally may not waive the warranties
contained in the Act whether the property is sold ―as is, where is‖ or not. It should be
noted that there is no Louisiana court case we have been able to locate on this issue.

2.    What would be the correct way to fill out the LREC contract to protect the Buyer?

Please restate or clarify this question if it is not answered by the answer to number one.
If the Seller is also the builder, the Buyer may want to expressly include language in the

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purchase agreement that the property is sold subject to the warranties provided by the
New Home Warranty Act.

3.    Can the Buyer negotiate a longer warranty from the builder and what language
would be appropriate to accomplish that end?

Yes, a longer warranty can be negotiated. We suggest you consider tracking the
language of the New Home Warranty Act but provide for longer time periods.

4.      Finally, have there been any recent changes in the time for making claims under
either the builder’s warranty or on a claim for redhibition.

Yes. There were substantive amendments to the Act in 2001, which decreased from ten
to seven years the warranty contained in LSA-R.S. 9:3144(A)(3) against ―major
structural defects‖; and in 2004, which further decreased that warranty from seven to
five years. There have been no substantive amendments to the Louisiana Civil Codes‘
articles on redhibition since their enactment in 1993 and 1995. We have attached a
copy of the New Home Warranty Act for your convenience.

RESPA
QUESTION:

Recently a warranty company has offered life insurance to real estate agents in
return for them selling their home warranty program.

I don’t have all the details but I am concerned that this may be a RESPA Violation.
I would appreciate any input that you would have.

ANSWER:

Your question is whether a real estate licensee is allowed under the Real Estate
Settlement Procedures Act (RESPA) to receive a free life insurance policy in return for
selling a particular home warranty program. RESPA is a Federal statute which regulates
the settlement services associated with almost all residential real estate transactions.
According to RESPA, ―Settlement Services‖ includes any service provided in connection
with a real estate settlement. Services that occur at or prior to the purchase of a home
are typically considered settlement services. These services include title insurance,
mortgage loans, appraisals, abstracts, home inspections and most likely the purchase
of home warranties.

The applicable provision of RESPA reads ―No person shall give and no person shall
accept any fee, kickback, or thing of value pursuant to any agreement or understanding,
oral or otherwise, that business incident to or a part of a real estate settlement service
involving a federally related mortgage loan shall be referred to any person.‖ The term
―federally related mortgage loan‖ is a very broad term that includes practically every
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residential mortgage loan. In plain English, this provision prohibits anything given or
received to/from someone able to refer real estate business.

However, RESPA generally allows these types of arrangements as long as there is full
disclosure. The agent must inform the home buyer that, if the particular home warranty
is purchased, the agent will be receiving something of value in return.

RESPA is mainly directed at preventing kickbacks to real estate licensees by other
settlement service providers. If the agent receives something of value – a life insurance
policy in this case – based on that agent‘s referral, it could very well be a violation of
RESPA unless full and adequate disclosure is made by the agent.

QUESTION:

Can “Seller(s)” mandate who the “Buyer(s)” use for their Title Company/Attorney,
etc?

According to RESPA, agents can not mandate who can be used but can the
“Seller(s)” set that stipulation?

ANSWER:

As I understand your question, you are asking whether the seller in a residential real
estate sale can require that a buyer use a particular title company or title attorney.

RESPA prohibits any ―person‖ from directing real estate settlement business to another
―person‖ for any type of kickback or fee unless the arrangement is fully disclosed to all
parties. Therefore, the seller could not require that the buyer use a particular title
company if the seller were to receive anything of value in return unless the seller
adequately disclosed under the RESPA rules the nature of the relationship between
himself/herself and the title company to the buyer.

Further §2603 of RESPA provides that ―No seller of property that will be purchased with
the assistance of a federally related mortgage loan shall require directly or indirectly, as
a condition to selling the property, that title insurance covering the property be
purchased by the buyer from any particular title company.‖ This provision clearly
prohibits the seller from requiring the buyer to purchase title insurance from a particular
title company. However, this section does not address whether the seller can require
using a particular title company for other purposes.

§2603 of RESPA provides that damages are recoverabl