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Nov 2, 2014

Advertising Real Estate in Wisconsin

For the following discussion relating to the advertisement of interests in real estate and Wisconsin real estate practice law, consider that those conducting advertising relating to interests in real estate may include 1) people who are not required to have a license, or 2) people who have a real estate license (licensees, licensed brokers), or 3) people required to have a license but who have failed to become properly licensed.  (Figuring out which classification applies to a particular circumstance is the subject of other discussions).

FRAUDULENT MISREPRESENTATION BY ANYONE:
All persons (all 3 classes) conducting advertising may be liable for misrepresentation.

Statutory fraudulent representation claims.
100.18  Fraudulent representations. (1) No person, firm, corporation or association, or agent or employee thereof, with intent to sell, distribute, increase the consumption of or in any wise dispose of any real estate ...  or with intent to induce the public in any manner to enter into any contract or obligation ... shall make ... an advertisement, announcement, statement or representation of any kind to the public  ... which advertisement, announcement, statement or representation contains any assertion, representation or statement of fact which is untrue, deceptive or misleading.
There are numerous deceptive advertising practices defined by statute.  For example, it is a deceptive practice to fail to "affirmatively and unmistakably" indicate when a transaction involves someone engaged in a business rather than by a private party not engaged in a business.  100.18(3), Stats.  Another deceptive practice involves misleading advertising as to the plan or scheme involved in a transaction.  100.18(9), Stats.  Finally, and more generally, any material representation or statement of fact relating to a transaction which is untrue, deceptive or misleading may be actionable.

Violation of sec. 100.18, Stats., will subject the violator to an action for civil damages plus attorney fees (sec. 100.18(11)(b) (except a real estate licensee isn't liable for attorney fees) and forfeitures, fines, and possible imprisonment (sec. 100.26).

Common law misrepresentation claims.

There also remain additional, cumulative common law claims which can arise from the same facts.  A statement made by someone who knew or should have known it was false and which was (reasonably) relied upon by another to their detriment can give rise to a tort claim for negligent misrepresentation. 

A false statement also may give rise to a strict liability misrepresentation claim. The elements of strict liability misrepresentation are: (1) statement of fact made by the defendant on personal knowledge or where he should have known whether the statement was true (2) which is false (3) that the injured party believed and relied upon to his detriment (reasonableness of reliance may or may not be an element) (4) in circumstances in which the defendant had an economic interest.  Kailin v. Armstrong, 2002 WI 70, 252 Wis.2d 676, 643 N.W.2d 132, 148, fn. 23.


A person making statements in advertising relating to a real estate transaction could be liable under several different theories if the statements are not true.  Further, the law recognizes that misrepresentation can occur by omission,  In other words, the failure to make a statement of fact in circumstances where silence misleads the other party can be a misrepresentation.

FALSE ADVERTISING BY A LICENSEE

Real estate licensees are further restricted by REEB 24.04
 Advertising.
 (1)  False advertising. Licensees shall not advertise in a manner which is false, deceptive, or misleading.
 (2) Disclosure of name. (a) Except for advertisements for the rental of real estate owned by the broker, a broker shall in all advertising disclose the broker's name exactly as printed on the broker's license or disclose a trade name previously filed with the department, as required by s. REEB 23.03, and in either case clearly indicate that the broker is a business concern and not a private party. (b) Except for advertisements for the rental of real estate owned by the licensee, a licensee employed by a broker shall advertise under the supervision of and in the name of the employing broker. (c) A licensee may advertise the occasional sale of real estate owned by the licensee or the solicitation of real estate for purchase by the licensee without complying with pars. (a) and (b), provided that the licensee clearly identifies himself, herself or itself as a real estate licensee in the advertisement.
(3) Advertising without authority prohibited. Brokers shall not advertise property without the consent of the owner.
 (4) Advertised price. Brokers shall not advertise property at a price other than that agreed upon with the owner; however, the price may be stated as a range or in general terms if it reflects the agreed upon price.

FALSE ADVERTISING BY AN UNLICENSED BROKER

A person who should be but is not licensed as a broker has numerous liability concerns in addition to the sec. 100.18 fraudulent representation liability noted above.

Certain types of advertising activity relating to interests in real estate falls within the definition of the activity of a "broker" under sec. 452.01, Stats.,  The fact that the broker is not licensed obviously would not provide any liability shield.  Instead, the person would stand exposed to liability for violating the law relating to the practice of real estate.  Penalties can include forfeitures, fines and imprisonment. Sec. 452.17.

In addition, any contract agreeing to compensate an unlicensed broker is void at inception.  Badger III Ltd. v. Howard, Needles, Tammen & Bergendoff, 196 Wis. 2d 891539 N.W.2d 904 (Ct. App. 1995), 94-2531  The unlicensed broker is not entitled to compensation.

For example, a "broker" includes anyone who, for another and for consideration, offers or promotes an interest in real estate.  This paragraph does not apply to a person who only publishes or disseminates verbatim information provided by another person.  So some advertisement may be done for "another" provided that the advertiser is only publishing or disseminating verbatim information. 

This exception for publishers would not seem to apply to a company that seeks out owners, contracts with them to obtain an option of some type on the property, and then advertises the property for sale, lease, lease option, land contract, etc.  That activity almost certainly constitutes acting as a "broker."

A "broker" also includes anyone engaged in the business of selling real estate interests.  There is a presumption that 5 sales in 1 year or 10 sales in 5 years shows that one is engaged in the business. A person engaging in such practice without a license

Note that a "broker" has a host of statutory duties.  See, ex. 452.133, Stats.  These duties do not apply only to licensed brokers.  Rather, a broker who violates a duty and is unlicensed is violating 2 laws instead of one.

Advertising by an unlicensed "broker" almost certainly will not contain the disclosures required of brokers by Wisconsin law.  Presumably the "broker" does not realize that they need to obtain a license to do what they are doing.


CONCLUSION
There are a host of varieties of misrepresentation that can arise in the advertisement of real estate.  There also are considerations as to what must be said depending upon whether the person making the statements is an owner, a licensed broker, or a "broker" who should be licensed.