Brokers, I am a newbie and starting a Detroit based company.

I have a quick question. How do you handle attorney costs when agents need legal advice? Do you swallow the bill or do you have the agent pay it?

I am trying to prepare for when agents do something wrong, need legal council, etc. that has to be taken to an attorney. Would you charge your agent for expenses incurred or do you swallow it?

Also, is it worth it to retain an attorney or pay on an incident per incident basis? Thanks guys!
Mike

We use attorneys to close here so they provide advice for free to my brokerage and in return they are a partner that gets closing business from my agent although my agents are free to choose whoever they want to.

In most Jurisdictions, if you are the Broker and one of your Agents does something wrong (Real Estate related) . . . . then YOU did something wrong. They call it Vicarious Responsibility. You should plan on being responsible for all of your Agency's Legal Defenses and Expenses.

The Sales Agents are merely Agents, or extensions, of you, the Broker. Any legal action, or disciplinary action brought against your Agents will be brought against them through you, the Broker. It's almost guaranteed that when they are sued, disciplined, fined or punished for any Real Estate related reason, you will be there by their side, and will also be the recipient of some corrective measures taken.

I have one specific Attorney who I take ALL of my legal problems to. He IS NOT a Conveyance Attorney, although he knows our business very well, and handles an occasional Title Issue or Closing (that's how I came to know him). Instead, he is an experienced Trial Court Lawyer, and his advance work keeps most issues from ever getting to a Courtroom. He does Criminal Defense and Litigation on behalf of others who have been wronged. I like him. He's a really a very nice guy who can then become mean as a Junk Yard Dog when arguing. Yes, I like him a lot.

He is not on a Retainer with me; but I know that his meter is running anytime I call to obtain advice. I don't mind that at all. He's well worth every penny I've paid him. I like him, and he has saved me much grief and money. I am most pleased by the fact that because he has represented our Firm, so I needn't worry about ever facing him on the other side.

Choose and train your Agents well; don't hire anyone who has already developed bad habits; and learn from the mistakes of others . . . . there's a wealth of educational material available by looking at the mistakes that others have made and been punished for previously.

Important Notice: This information is provided as basic educational information by the author and is not a substitute for the advice of an expert and/or the advice of a Lawyer. There is NO representation as to legality, accuracy, correctness of the herein information and the reader is strongly urged to consult an Attorney in the relevant jurisdiction to ensure accuracy before acting on this information.

That's GREAT advice, thanks so much for taking the time Vermont! It means a lot!
Mike

Speaking as an agent:

I have had a couple issues where legal issues/questions have arose. My broker has an attorney that he consults (probely the way Vermont does). I don't pay for that, I am simply an agent of the broker, I get sued he gets sues and the E&O insurance kicks in thus raising the rates I have to pay as an office fee.

All the broker has ever asked is if an issue arrises tell me quickly so I can review it, have the attorney review it, and we go from there. Its cheaper to start settleing a problem sooner than later. The agent needs to know that they can pick up the phone and say "Hey, we may have a problem".

No Broker should ever discourage open communication like that.

The sooner we know about it, the sooner we can work on a strategy to solve it. Not every week, Please!; but not a month after a situation began festering.

I'm reminded that most E&O Companies want to know almost immediately too. Some Policies are written to deny Coverage when they aren't told about issues as they occur . . . . but we must be careful of this also, because the "Frequency" of incidents is a Rating Issue, right along with "Severity". They figure it's just a matter of time before one of your little snags turns into a catastrophic loss; so they want the Premiums to reflect the Risk.

Since talking about him yesterday, I've been thinking about how lucky I was to originally engage the services of my Attorney Friend "Steve".

For fun, I thought I'd document it. It was by accident. I didn't know he existed, until he was representing a fellow Client of mine on a "short sale" long before short sales were so common. My Client had defaulted on a Car Loan (of about $14,000), after the car had mysterioulsly burned. The Credit Union had not properly placed a lien on the home that she was now being threatened with foreclosure and were engaged in this Short Sale.

During the events leading up to the Closing, my Client was intent on getting the Car Lien placed on her home, in the hopes of also having that debt wiped out at the same time the Short Sale was processed. Her Attorney and I participated in that process, searching out old documents, acting like her little puppy dogs; and ultimately getting the attachment corrected. She manipulated both of us . . . . very crafty woman.

Then, at the Closing, my Client sees the Bill from her Attorney, Steve. It includes numerous charges for conversations he had with the Credit Union, her Bank, and Me - her Broker. She went absolutely berserk, throwing herself around the Conference Room like a spoiled Bratty 2 Year Old, but screaming and yelling like a banshee, (she was a big scary woman) and refusing to participate any further in the Closing if someone didn't call Steve and get that Bill reduced. I think the Bank called the Police to calm her down.

Steve was not available. But Steve's Bill was legitimate. To facilitate the Closing, I finally offered to pay the extra portion of his Bill which was associated with getting that old Car Lien attached (just so it would be wiped off). That seemed okay, because both Steve and I were working for the same Client. It was just $400 or $500, so I wrote a Check, and gave it to the Bank's Closing Agent, and the Closing was concluded.

After the Closing, Steve sent my check back, saying he didn't want my money. He said he had been a fool for taking on a Client like that anyway, and he did not deserve to be paid; and he certainly didn't want to be paid with my money. He chalked it up to being another part of his Legal Education regarding the careful selection of his Clientele.

Many Attorneys have no Friends. Steve has at least one . . . . a Friend for Life.

So that's how "Steve" became my Legal Counsel. I just thought the rest of this story was worth sharing, and it was right here on the surface of my brain after talking about him yesterday. I wouldn't have had it any other way. I had forgotten about it !

Vermont -
Interesting. I actually met out RE attorney by mistake.
Local in-house title company for buyer refused to finish closing mostly because they didn't seem to understand REO closing process. One week before closing. Bank's attorney worked with Tom on local issues, they handled closing flawlessly.

Turned out I did know him since he was local attorney for several banks at monthly sheriff sales.