Combination Boxes: Not The Lockbox Of Choice, Always Follow Listing Agreement Rules And Our Code
By Sarah Louppe Petcher, NVAR General Counsel
It has recently come to the attention of the Board of Directors that the use of combination boxes by members has reached epidemic proportions. To this end, we reprint this July/August 2008 Update Magazine Q&A with some enhancements to help our members understand the risks associated with the use of a combination box.
1. First, A Little Clarification:
The use of combination boxes is not regulated by our Regional Rules and Regulations for the Sentrilock Lockbox System for Realtor® Members (lockbox rules). Lockboxes on the other hand, which are available for purchase through NVAR, are covered by the lockbox rules.
What does this mean for Realtors®? First, the level of protection offered for the owners of a property differs. Access to properties with lockboxes is limited to Realtors® and their clients. In contrast, while MRIS restricts the publication of combination box combinations to the “Agent Remarks” field, there are no regulations preventing agents from publishing these codes on other Web sites, such as Craig’s List. Once the code is published, anyone can access the property at any time without leaving a record of it.
When someone enters a property through a lockbox, there is a record of the visit. Each SentriCard® is assigned to one agent and thus the owner can trace who has entered his or her property. Since combination boxes are not regulated, their use is unchecked, whereas lockbox rules violations can be brought to the attention of the Board and compliance can be enforced through NVAR’s Grievance Procedures.
So why are some owners requiring the use of a combination box? There are some advantages. Since the boxes are not regulated, the owner or the agent can give the combination out to all who need access to the property without having a representative present. The contractor, home inspector and appraiser can all access the property conveniently. On the other hand, the lockbox rules require that the agent, who owns the lockbox key, be present and secure the property upon the departure of these contractors.
Agents who elect to place a combination box on a property and publish the access code on a publicly accessible Web site may be facilitating unauthorized access to the property. By way of example: A house is listed for sale, the listing agent advertises the listing on Craig’s List and includes the access code on the ad. Any member of the public may now enter the property, whether for real estate-related activities or not. They could be entering the property for other reasons, including vandalism and general mayhem. The listing agent has no control over access to the property and no way of knowing who comes in and out.
In addition to these general problems that may arise from the use of a combination box, consider the following two more specific issues.
2. The Use Of Combination Boxes And The NVAR Listing Agreement.
The NVAR listing agreement specifically provides that you, the agent, will use a lockbox, not a combination box on your listing
F) Broker shall show the Property during reasonable hours to prospective buyers and shall accompany or accommodate, as needed, other real estate licensees, their prospective buyers, inspectors, appraisers, exterminators and other parties necessary for showings and inspections of the Property, to facilitate and/or consummate the sale of the Property. Broker shall install an electronic keybox on the Property to allow access and showings by real estate licensees who are authorized to use the electronic keybox system by area Realtor® Associations.
What does that mean for you? Unless you have modified the listing agreement with your client to allow the use a combination box, as soon as you install a combination box on the property, you have breached your obligations under the listing agreement. Some may ask, so what?
The listing agreement specifically protects agents from liability associated with the listing of a property:
C. Seller Assumption of Risk. The Seller retains full responsibility for the property, including all utilities, maintenance, physical security and liability until title to the property is transferred to purchaser. Seller is advised to take all precautions for safekeeping of valuables and to maintain appropriate property and liability insurance through Seller’s own insurance company. Broker is not responsible for the security of the property or for inspecting the property on any periodic basis. If the property is or becomes vacant during the Listing Period, Seller must notify Seller’s home owner’s insurance company and request a “Vacancy Clause” to cover the property. In consideration of the use of Brokers services and facilities and of the facilities of any Multiple Listing Service, the Seller and Seller’s heirs and assigns hereby release the Broker, sales associates accompanying buyers or prospective buyers, any Multiple Listing Service and the Directors, Officers and employees thereof, including officials of any parent Association of REALTORS®, except for malfeasance on the part of such parties, from any liability to the Seller for vandalism, theft or damage of any nature whatsoever to the Property or its contents that occurs during the Listing Period. Seller waives any and all rights, claims and causes of actions against them and holds them harmless for any Property damage or personal injury arising from the use or access to the Property by any persons during the Listing Period.
As you can see, the listing agreement shifts the risk to the seller for any vandalism, property damage and personal injury that the seller may suffer as a result of his or her property being listed by the agent. However, if you place a combination box on the property, your client may now argue that he did not agree to assume the risk associated with your use of a combination box and thus the risk may shift back to you.
3. The Use Of Combination Boxes And Your E&O Insurance.
You should consider checking your E&O insurance policy for any coverage exemptions. Some policies may specifically decline coverage if you fail to abide by your contractual obligations and thus may decline to cover you for any damage that the seller has incurred as a result of your use of a combination box on their property.