January 2018 Courtside Newsletter: Real Estate Teams & the Quandary of the Independent Contractor Status



The status of a real estate agent as an independent contractor has always been prone to controversy. Currently, there are questions surrounding the independent contractor status, and how it is affected by real estate teams.

According to the IRS, “[t]he general rule is that an individual is an independent contractor if the payer has the right to control or direct only the result of the work and not what will be done and how it will be done.” Due to the nature of their jobs, real estate agents enjoy a certain autonomy that generally places them as independent contractors, even though they must be supervised by a broker.


The IRS created a special category for real estate agents as statutory non-employees. Per IRC § 3508, real estate agents are considered statutory nonemployees if:

  • They are a licensed real estate agent;
  • All payments for their services are related to their sales or other output (rather than number of hours worked); and,
  • There is a written contract stating they will not be treated as employees for federal tax purposes. (The California Association of REALTORS® has created the Independent Contractor Agreement (ICA) form to satisfy this requirement.)


Additionally, under California Labor Law an independent contractor can be any person who renders service for a specified result, under the control of a principal only as to the result of the work. The principal has no control by which such result is accomplished. The issuance of a 1099 or independent contractor agreement does not, in itself, create an independent contractor relationship.

Historically, the most important factor considered by California courts and administrative agencies involved the independent contractor’s right to control the manner and means of accomplishing the result desired. The courts use a multifactor balancing test to determine the answer, yet no one factor is decisive. Generally, the more control a principal has over the manner and means used by the alleged independent contractor is the most important factor.

The Team Issue
Real estate teams have long been both lauded and lamented by those in the industry. Whichever side of the fence you choose, there is no doubt that they have been rising in popularity. With that popularity comes the exposure of certain legal issues, such as the question of independent contractor status, and how it works within teams. This is something both agents and supervising brokers should be aware of.

On most teams, there is someone who is considered a “team leader,” or the individual who controls and dictates what the rest of the team does with leads or listings. This poses issues with both employment law and a broker’s statutory duty to supervise his or her agents. Team leaders have no requirement to supervise the actions of the agents working under them. However, lack of supervision could open-up both the agents and broker to liability. Additionally, a Team Leader’s act of directing other agents could potentially be seen as treating them as employees rather than independent contractors. The more control a Team Leader exerts over the agents with the team, the greater the liability becomes. Teams, and their supervising brokers, need to be sure that the agents under them are acting in the capacity of independent contractors at all times. Otherwise, they will need to renegotiate their contracts to hire them as employees.

Why is this Important?
Recent litigation has brought this issue to the forefront of many brokers’ concerns. In Barasani v. Coldwell Banker, Barasani brought a class-action lawsuit against Coldwell Banker stating he had been “willfully misclassified” as an independent contractor, when he should have been classified as an employee. The matter settled before going to trial, thus no California case precedence was set. However, Coldwell Banker will nonetheless be paying out $4.5 million to real estate agents and associates in California under the terms of the settlement.

Misclassification of a real estate agent could result in significant financial blow to a broker. Should the court determine that a real estate agent was misclassified as an independent contractor, he or she may be entitled to employee benefits. According to California Labor Code Section 226.8(b), if the court or administrative agencies determines that a broker has misclassified a real estate agent as an independent contractor, that broker may be subjected to civil penalties greater than $5,000, in addition to other penalties and fines. The real estate agent who was misclassified may be entitled to reimbursement of business expenditures, taxes, workers’ compensation, wait time penalties, meal/rest break penalties, overtime pay and/or vacation pay.

Ultimately, maintaining independent contractor status is key for brokers to avoid liability under the law. The line between independent contractor and employee is very fine, thus supervision and education of team leaders are important steps for brokers to take in order to stay within the bounds of the contracts they enter into with their agents.



Q. 1: Who is a Broker-Associate?

A Broker-Associate is:

  • An individual licensed as a real estate broker by the California Department of Real Estate
  • Who works in the capacity of a salesperson for another responsible broker or
    corporation brokered by another individual

Q. 2: What is a Responsible Broker?

“Responsible broker” means:

  • The broker responsible for the exercise of control and supervision of a salesperson(s) or
    licenses(es) or group of the same
  • Who is subject to discipline under Business & Professions Code § 10177 (h) (“B&P
    Code”) for failure to supervise activity requiring a real estate license
  • Responsible broker may be an individual broker or a corporation

Q. 3: Do Broker-Associates need to work under a written agreement with a Responsible

Yes, the Responsible Broker must have a written agreement with the broker-associate (DRE
regulation 2726).

Q. 4: What is Assembly Bill (“AB”) 2330?

  • AB 2330 is legislation that was signed into law by Governor Brown in September 2016
  • AB 2330 adds Section 10083.2 and amends Section 10161.8 of the B&P Code

Q. 5: What does AB 2330 require?

AB 2330 requires the DRE:

  • To post on its website whether a licensee is a broker-associate licensee
  • To identify each Responsible Broker with whom a Broker-Associate is contractually associated with under B&P Code § 10032

AB 2330 requires the Responsible-Broker and Broker-Associates:

  • To immediately notify the Commissioner of the Broker-Associate employment
    agreement in writing
  • To immediately notify the Commissioner of the Broker-Associate termination in writing

Q. 6: When does AB 2330 become law and go into effect?

AB 2330 goes into effect January 1, 2018.

Q. 7: How do I notify the DRE of a licensee’s Broker-Associate status?

  • DRE created a new form, RE 215 – Broker-Associate Affiliation Notification
  • RE 215 shall be used for the sole purpose of notifying the DRE of a Broker- Associate / Responsible Broker affiliation or termination
  • This form is available on DRE’s website
  • All other changes pertaining to an individual broker license, such as changes of
    mailing/main office address, adding or cancelling fictitious business names, or updates to
    contact information should continue to be submitted using the form RE 204 – Broker
    Change Application

Q. 8: Do brokers working in a Broker-Associate capacity under a Responsible Broker prior to January 1, 2018 need to submit a Broker-Associate Affiliation Notification form to the DRE?

  • Yes, Broker-Associates who have worked for a Responsible Broker prior to January 1,
    2017 will still be required to submit a Broker-Associate Affiliation Notification form to
    the DRE.
  • The date of the Broker-Association relationship required on the form shall correspond to the date provided on the contractual relationship agreement between the Broker-
    Associate and the Responsible Broker.

1 As of July 1, 2018, name will change from “California Bureau of Real Estate” to the “California Department of Real Estate.”

This comprehensive Frequently Asked Questions (FAQ) is based on information gathered from the
California Association of REALTORS® (C.A.R.), the California Department of Real Estate (DRE), and the opinion of The Giardinelli Law Group, APC specifically as it relates to AB 2330 “Broker-Associate” Affiliate Notification. This information is subject to change.

Courtside Newsletter: California Association of REALTORS® December New & Revised Forms Release



The week of December 11, 2017, the California Association of REALTORS® (“C.A.R.”) has scheduled the release of three (3) new forms and twelve (12) revised forms for REALTOR® use. Three (3) forms will also be discontinued. Below we discuss these additions and changes in greater detail, delving into how they may affect your practice.

New Forms

1. Amendment of Existing Agreement Terms (AEA)*
Per C.A.R., the AEA is to be used by a party to an existing contract to change the terms. The form can be used to amend a Purchase Agreement, Lease or Month-to-Month Rental Agreement, or other contract, and contains specific parameters surrounding the time frame for accepting and automatic revocation of the amendment. Following the space in which the proposed amendment is to be written, the Buyer/Tenant or Seller/Landlord indicates that the proposal can be revoked at any time, but will be deemed revoked if not accepted by 5 p.m. on the third day from which the initiator signed the AEA, or another specified date and time. The form also contains separate sections for the receiving party to accept or reject the proposed terms. If the terms are rejected, the existing contract remains unchanged. As one might notice, the AEA works in much the same way as the Buyer and Seller Counter Offers.

2. Property Images Agreement (PIA)*
Earlier this year, C.A.R. issued a Legal Q&A entitled “Copyright Issues for REALTORS®,” bringing to light that REALTORS® could run into legal hot water in their use of certain marketing materials. To that end, the PIA is entered into between a broker and a photographer to help REALTORS® avoid copyright infringement, and ensure that both the broker and creator of the work (aka the owner of the copyright) are in agreement. The PIA applies to photographs, videos or other creative works. The form indicates what work is being done, the compensation and payment the photographer is receiving, and specifications for the final images (e.g. format and quality). There is also a section regarding the granting of the photographer’s rights over the images to the broker, either through an assignment agreement, wherein the photographer assigns and transfers all of his or her rights to the images to the broker, or exclusive license agreement, wherein the photographer retains the title and ownership of the images. The photographer must also indicate that he or she has the right to enter the PIA, meaning he or she “owns all right, title and interest in and to the images [and] no third party has any rights in, to, or arising out of the Images.” The photographer can indemnify the broker, and the form acknowledges that the photographer is an independent contractor. Both parties must also acknowledge receipt and understanding of the PIA.

3. Team Agreement (TEAM)
The TEAM is to be entered into between a Team Leader (“TL”) and Team Member (“TM”). Both the TL and TM must be licensed salespersons or broker-associates, working under a responsible broker, who is specified in paragraph 15 of the TEAM. Paragraph 1(D) states that both TL and TM “must remain licensed during the term of [the] Agreement” and must tell the other if his or her license is revoked, suspended, or forfeited, or if the party is no longer working under the responsible broker. The form also defines the duration of the agreement, the scope of the agreement and covered transactions, how pre-existing client relationships will be handled, and compensation. The TEAM contains language to split compensation based on all covered transactions, or based on who generated the transaction, and either as a flat fee or percentage. There is also an option to attach an addendum with different instructions. Paragraph 8 goes on to discuss “Compensation and Other Rights and Obligations Upon Termination.” Should a TM leave the team, specific protocol is laid out for him or her regarding pending transactions or business, future transaction with preexisting clients and team clients, expenses, DBAs and Team Names, and the potential need for a referral agreement if the TM or TL begins working under a new broker.

Other topics that are covered by the TEAM include:

  • Expenses;
  • Team Name;
  • Team Guidelines and Policies;
  • Broker Agreement to compensate parties based on the parties’ agreement;
  • Legal Relationship, including the potential to create an employment status depending on the “actions and intents of the parties and any control extended by one party over the other;”
  • Dispute Resolution;
  • Additional Provisions;
  • Definitions;
  • Attorney Fees; and,
  • Incorporation of any prior agreements.

TEAM attempts to be as all-encompassing as possible, while making it clear that all licensed activity goes through the responsible broker. C.A.R. believes that one of the most important aspects of the form is how it “addresses what happens to ‘clients’ and compensation if the agreement between the team leader and team member is dissolved.” Given some agents’ propensities for seeking out the team with the best fit, and the often-asked question of “who a client belongs to,” this is an important topic indeed.

Revised Forms

1. Buyer Representation Agreement – Exclusive (BRE)

2. Buyer Representation Agreement – Non-Exclusive (BRNE)
The language in the BRE and BRNE has been revised to clarify that agency compliance is not exclusive to 1-4 residential units, and applies to more than just 1-4 residential units. The Dispute Resolution paragraph has also been updated in keeping with the June updates to the Residential Listing Agreement (RLA), and the arbitration advisory directs parties to the C.A.R. Form ARB. It is acceptable to use prior versions of these forms.

3. Back-Up Offer Addendum (BUO)*
There is now a “Notice of Cancellation of Prior Contracts” section on the BUO to advise back-up buyers that prior contracts have been cancelled and they are now in the primary position. Included in the new section is a signature line for the back-up buyer(s) to acknowledge receipt and agreement of the BUO. It is acceptable to use prior versions of this form after the December release.

4. Contingency for Sale of Buyer’s Property (COP)*
The changes on the COP seem to come at a particularly relevant time, given the current market trend for buyers (and, oftentimes, sellers) to want to keep their homes until they find a new home. New language has been added to the COP indicating that the buyer will inform the seller upon the close of escrow (within two (2) days, or another agreed-upon amount of time). Paragraph 1(B) has also been added, which indicates that the buyer is not required to remove the contingency unless given notice, and the contingency must be removed in writing. Furthermore, even if the contingency is removed, all other contractual obligations on the COP remain in effect. Per C.A.R., this was added to clarify that the buyer cannot unilaterally remove the contingency to avoid other obligations. It is acceptable to use prior versions of this form.

5. Manufactured Home Purchase Agreement and Joint Escrow Instructions (MHPA)
Slight but significant modifications were made to the MHPA. Paragraph 1(F) was updated to include the designation that the property is subject to “annual registration and in lieu tax.” Under Paragraph7, “Allocation of Costs,” subparagraph C, a line was added to indicate whether the buyer or seller would pay HDC fees for providing registration and documents. Lastly, Paragraph 12, “Residency Application,” indicates that the buyer is responsible for submitting a completed residency application and any other required information to the park, landlord, or HOA. It is acceptable to use prior versions of this form.

6. Notice to Buyer to Perform (NBP)*
Per C.A.R., the language that was added to the NBP was to dispel the argument “that the NBP can only be used for contingencies or covenants but not both at the same time.” Revisions to the form include language for the seller to give the buyer notice to, “as applicable, remove the specified contingencies and take the specified contractual action.” (Emphasis added.) However, it is still acceptable to use prior versions of this form after the revision’s December release.

7. Parking and Storage Disclosure (PSD)*
According to C.A.R.’s Forms Release Summary, the PSD has been revised to clarify previous confusion caused when the agreement does not include permit parking or storage. There was also a paragraph added for additional disclosures.

8. Receipt for Reports (RFR)*
A paragraph has been added to the RFR stating, “Buyer has been advised that if Buyer receives any report that has not been ordered by Buyer (whether prepared by or for Seller or others), Buyer may have no recourse against the preparer of the report for any errors, inaccuracies or missing information.” Ultimately, this means the buyer may not have any legal recourse for errors in reports prepared by others on behalf of others. It is acceptable to use prior versions of this form.

9. Seller License to Remain in Possession Addendum (SIP)*
The SIP is intended to allow the seller of a property to remain in possession and continue use of the property for a period of less than 30 days. Paragraph 2, “Consideration,” subparagraph A, has been amended to include the language: “If Seller vacates the Property prior to the end of the term in paragraph 1, no portion of the consideration will be returned to Seller unless otherwise agreed in writing.” Paragraph 7, “Insurance,” has also been revised to advise the seller to obtain insurance as his or her personal property is not insured by the buyer. Please note that it is not acceptable to use a prior version of this form.

10. Seller’s Purchase of Replacement Property (SPRP)*
The SPRP has been updated with one addition, and a caveat from C.A.R. Under “Seller’s Purchase of Replacement Property,” subparagraph 1(B) has been added, allowing the seller to inform the buyer that seller has already entered into a contract to obtain another property. Per C.A.R., if this optional box is checked, the seller would want to review, and potentially mark, subparagraph 1(C), which indicates that the agreement is contingent on whether the seller closes escrow on a replacement property. It is acceptable to use prior versions of SPRP.

11. Septic Inspection, Well Inspection, Property Monument and Allocation of Cost Addendum (SWPI)*
The SWPI has been revised to make it clear that a “qualified septic professional” is conducting any inspections, and issuing any certifications. Paragraph 1(D) also now has the language that if an agreement is not reached “within the time for removing the Buyer investigation contingency or the loan contingency” or another agreed-up contingency, then either the buyer or seller can cancel the agreement. Paragraph 2, “Well Inspection and Allocation of Cost,” now has language about where parties can obtain more information regarding well standards, well completion reports and well basics. Prior versions of this form are acceptable to use following its December release.

12. Wire Fraud and Electronic Funds Transfer Advisory (WFA)*
Previously known as simply the “Wire Fraud Advisory,” the WFA has been updated to indicate that not only wire transfers are subject to fraudulent activity. The WFA now warns that fraudulent activity can happen to all forms of electronic payments, including rent payments. The signature lines of the WFA have also been revised to allow for its use with lease agreements. It is acceptable to use prior versions of WFA.

Discontinued Forms

The following forms will no longer be in use after the December forms release:
1. Natural Hazard Disclosure (NHD)
2. Notice of Your “Supplemental” Tax Bill (SPT)
3. Mortgage Loan Disclosure Statement (Borrower) (MS)

Per C.A.R., these forms are either duplicative, or have been superseded by other, more well-known forms. As a result, they may serve to cause confusion and their removal seemed appropriate.

*According to C.A.R., these forms will only be available through zipForm®Plus or from the following Associations: Beverly Hills/Greater Los Angeles Association of REALTORS®, Newport Beach Association of REALTORS®, North San Diego County Association of REALTORS® and Sacramento Association of REALTORS®.

Courtside Newsletter: Ahead of the Curve: Real Estate Technology & What It Means for You


Tide and time wait for no man, and the Information Age’s effect on real estate is no exception. However, it seems that recently we have been seeing an influx of new technology that not only targets how real estate practitioners distribute and execute forms, but also how consumers buy and sell homes. Currently, there is a back-and-forth argument taking place amongst many REALTORS® with many pushing for growth and expansion of real estate technologies, whilst others argue that these same technologies are disruptive and will take over traditional real estate practices.

Get on the Bus
In the words of Ken Kesey, “you’re either on the bus or off the bus. If you’re on the bus and you get left behind, then you’ll find it again. If you’re off the bus in the first place—then it won’t make a [darn].” The same goes for technology. It has been moving along at a steady clip since the 90s—we can all attest to that. The way REALTORS® do business has been revolutionized with the advent of the internet, email, and smart phones. With all that, consumers’ expectations, and even the consumers themselves, have also changed. According to the National Association of REALTORS® March “Home Buyer and Seller Generational Trends” report, “buyers 36 years and younger (Millennials/Gen Yers) is the largest share of home buyers.” Furthermore, per Goldman Sachs, Millennials make up the largest generation in history. As Millennials move into their prime home-buying years, REALTORS® are being faced with meeting the needs of a generation that grew up in a time of rapid change, especially when it came to technology. While many remember the tell-tale sound of an AOL dial-up, they are all now living their lives online.

The real estate industry has begun to respond in kind. According to Josh Team, Keller Williams’ Chief Information Officer, Keller Williams will invest $3.5 billion into real estate technology in 2017. Companies such as Redfin, Open Listings, Opendoor, Offerpad, and Zillow’s “Instant Offers” are trying to close the perceived gap between what the consumer wants and what the industry provides. Zillow’s “Instant Offers” has caused some waves in the industry of late. The program is in a testing phase right now, but hopes to expand to offer homeowners a way to sell their homes quickly. Verified homeowners confirm information about their homes, list any improvements, and upload photos. They are also given a comparative market analysis (CMA) from a local real estate agent, and an estimate for what the home might sell for on an open market. Investors then present their offers on the home. Zillow ultimately acts as a middleman and encourages the use of an agent throughout the process, but an agent is not required.

HomeLight is a similar company in the Bay Area, playing matchmaker between home buyers and the best possible real estate agent to suit their needs. According to the CEO, Drew Uher, HomeLight’s “value proposition is quite compelling for potential homesellers: Get a better outcome by using an agent who’s proven to sell their listings faster and for more money… Our main challenge is simply…to educate consumers that there’s this better way to sell a home.”

Of these trends that we’re seeing, they seem to be focused on breaching the divide between the consumer and the real estate industy via technology. While that is admirable, consumers are not so easily fooled. According to a study by Aimia, Inc., “Born this Way: The Millennial Loyalty Survey,” people aren’t using mobile apps and technology simply because it’s there. They are more discerning, looking at what technology is really doing for them. Aimia, Inc’s study goes on to say, “All marketing is mobile because that’s where technology is leading us… But…the winners will be marketers who answer that essential question for Millennials: Why?” Ultimately, this is a question that apps and websites can’t answer.

The Human Element
The takeaway from this “real estate disruption” is that real estate professionals are being forced to redefine their role in the process of buying and selling a property, and how they work with clients. The information to make an informed decision about buying a home can be found online, so agents must bring more to the table than the facts that their clients could have found at the click of a mouse (and without the commission fee).

To bridge the divide between what consumers want and what the real estate industry has to offer, brokers and agents should focus on what they, and they alone, can bring to the table: the human element. Numerous articles have repeated the sentiment that nothing can replace a real estate agent as the local expert. Time Magazine reports that “real estate is a local game, and to win you need someone who plays in the areas where you’re looking to buy.” Local agents not only know the neighborhood and recent market trends, but also what is going on in the neighborhood on more granular levels. They’ll know about the neighborhood mom group that meets in the park every Tuesday, and that the community association just voted for a five-year overhaul of the street that your potential house is on. They have their clients’ best interests at heart. Live, human agents aren’t middlemen like online platforms and, because of that, they remain exactly what consumers are looking for when making potentially the biggest investment of their lives.

The key for agents and brokers is to leverage technology to their advantage to show how they are the “local expert.” While many agents are already doing this with their social media platforms, it’s time to take these steps to the next level. Now more than ever, it is important for agents to differentiate and show their value to potential clients. Not only is technology redefining how agents do business, it also seems to be redefining the concept of community. Communities have begun to be forged online, through social media and blogs. Agents can tap into this wellspring to engage with clients, on a personal level and build their own communities, offering the facts, transparency and guidance that people are looking for. This will be especially important for the new generation of homebuyers (Millennials) entering the market. The goal should be to help potential clients realize that you’re not only tech-savvy but also that you communicate effectively and are listening to what they have to say. Agents can use technology to make themselves more effective and efficient, using their knowledge to deliver what the client wants.

No amount of technology will know and understand the myriad emotions involved in a real estate transaction like the competent agent will. In adapting to the future demands of the market, it is important for real estate agents to continue to build their client relationships while also becoming tech-savvy. According to Huffington Post, real estate is “an industry ripe for change.” Technology will be the catalyst for this forward movement and agents can either fight the current, or get swept up in it—the choice is up to them. However, the growth of technology should not mean the inability to connect. Some of the soundest advice that we’ve seen is for real estate professionals to get on the bus and start directing it themselves, ensuring that it goes down a path that will benefit everyone involved.

Courtside Newsletter: Much Ado About “Coming Soon”


With low inventory and decent economy (read: people looking to buy), the real estate market is currently a seller’s dream. However, as we’ve seen in the past, with that comes a host of other problems. The current thorn in many real estate practitioners’ sides are “Coming Soon” signs, and what they actually entail. As innocuous as they may seem, there are many legal ramifications to “Coming Soon” signs, both when done
with the best intentions and with malintent.

The Basics
Part 1—Agency and Fiduciary Duty
Before we delve into why “Coming Soon” signs may be so malevolent, let’s first look at what creates an agency relationship between sellers and their real estate broker. It’s
important to focus on the granular aspects of agency relationship in this instance since the relationship that ensues is considered a “special agency” versus a general agency.
Under Civil Code § 2297, “an agent for a particular act or transaction is called a special agent. All others are general agents.” According to the California Bureau of Real Estate’s (CalBRE) reference book on Agency (which can be found online at www.dre.ca.gov), “the agency relationship between a real estate broker and his or her principal results in a special agency typically limiting the broker to soliciting and
negotiating on behalf of the principal to the real property or real property secured transaction. (Business and Professions Code § 10131 et seq.; Civil Code § 2297).”

This special agency creates a fiduciary duty that real estate practitioners owe to their clients. Included in that duty are the duties of:

  • Good faith
  • Loyalty
  • Confidentiality
  • Fair and honest dealing
  • Reasonable care and skill

According to CalBRE, “The courts have consistently equated the duty of an agent to a principal with the duty owed by a trustee to a beneficiary. The Probate Code provides that, in all matters connected with a trust, a trustee is bound to act in the
highest good faith toward the trustee’s beneficiary, and the trustee may not obtain any advantage over the beneficiary by the slightest misrepresentation, concealment, duress or adverse pressure of any kind.” Fiduciary duty plays a key role in a real estate practitioner’s line of work. People come to real estate agents for help navigating the oftentimes confusing waters of purchasing or selling a property. These laypeople
rely on the agent for the knowledge he or she possesses and therefore trust him or her implicitly with what may be the largest investment of their lives. It is not a duty to be taken lightly, and one never wants to be called into question for having potentially violated it.

Part 2—The Controversial Concept of Dual Agency
Dual agency is a legal, albeit controversial, practice in California. It occurs when an agent “double-ends” a transaction, meaning they represent both the buyer and the
seller. This can arise when a listing agent procures an unrepresented buyer, and the agent thereafter represents both parties in a transaction. It can also occur when two agents at the same brokerage represent the buyer and the seller of the
property. California has strict disclosure laws regarding dual agency, and representation cannot occur without both parties’ consent. Failure to obtain express (written) consent may lead to the broker losing his or her commission and/or rescission of the transaction.

As you may have guessed, dual agency gets murky when you think about an agent’s fiduciary duty. How can an agent represent both parties and still have both of their best interests in mind? It’s a controversial question that does not necessarily have a clear answer. If an agent is truly an upstanding citizen, upholding the tenants of his profession, there should be no issue. However, at the end of the day, an agent makes a commission on the final purchase price of the home and the realities of human nature must also be contended with. Dual agency is an area in which unscrupulous agents may have an opportunity to take advantage of trusting individuals. Per CalBRE, “The conflict of interest which is inherent in dual agency has been recognized by other authorities. The reasons underlying the rules against dual agency are of ancient origin. ‘No man may serve two masters; for either he will hate the one and love the other; or else he will hold to the one and despise the other…’ (Gospel of Matthew, Chapter vi: 24 quoted in Nahn-Beberer v. Schrader (Mo. App. 1936) 89 S.W. 2d 142). Although dual agency is a common practice in California real property and real property
secured transactions, a real estate broker who represents both parties must act with extreme care.”

The Question About “Coming Soon”
With these three factors in mind—agency, fiduciary duty, and dual agency—we return to the issue at hand: “Coming Soon” signs. The issue with “Coming Soon” signs  evolves around this special agency relationship and, more importantly, the fiduciary duty owed to clients. Many agents are expressing concern over whether the use of “Coming Soon” signs violates that fiduciary duty by keeping a listing off the multiple
listing service (MLS) in an attempt to “double-end” a transaction. They are concerned that agents are acting in their own best interests, and not those of their clients. (If they
double-end the transaction by listing it as “Coming Soon” and attracting a potential buyer, they make more money off the commission.)

On the other hand, there are some agents who argue the benefits of “Coming Soon” advertisements, such as creative marketing and generating interest in a property. While there may or may not be legitimate reasons for “Coming Soon” signs, it is important for all agents to be aware of the associated risks involved. The issues of the agency relationship, fiduciary duties, and dual agency are only a few of the topics for which agents need to be familiar. How to Ethically List a Property as “Coming Soon” That said, the “Coming Soon” sign can and does still present problems. Agents and brokers are advised to thoroughly research whether “Coming Soon” advertising is in the best interest of their clients. If it is, they must fully explain to the seller the benefits and risks of keeping a property off the MLS for any length of time, and they must do so to the extent that the fulfillment of their fiduciary duty is never brought into question.

In addition to complying with state license laws, an agent should also check with the rules of their local MLS as they relate to “Coming Soon” marketing and Days on Market calculation. For example, the California Regional MLS (CRMLS) has a new form entitled “CRMLS Seller’s Instruction to Exclude Listing from MLS,” which provides, in part, for an agent to advertise a property as “Coming Soon.” The form allows the seller to instruct that the property will be marketed, but not listed with the MLS until a certain date. If a seller instructs that the property is not to be listed with the MLS until a certain date, the Days on Market will be the beginning date of the Listing Agreement (not the date it was submitted into the MLS). The form may also indicate that the property is to be excluded from the MLS and not marketed by the agent. If a seller instructs that the property is not to be listed with the MLS and not marketed, then the Days on Market will be the beginning date of marketing.

However, not all agents are members of CRMLS and not all MLS’ have such a provision. As a result, the use of “Coming Soon” advertisements may create an issue related to the Days on Market calculation. REALTORS® should also note that the C.A.R. Form “Seller Instruction to Exclude Listing from the Multiple Listing Service” does not have a provision to exclude a property from the MLS for a certain amount of
time. REALTORS® should be hyper-aware of their association’s rules regarding the timeframe to submit listings to the MLS.

Should you have any questions regarding “Coming Soon” signs, dual agency, or any other real estate gray areas, we urge you to consult SRCAR® or qualified legal counsel. Not only would a good intention gone awry not be worth the litigation fees, it could also harm your number one marketing tool: your good name.

Rent vs. Buy

The housing market across California has had large price gains over the past years, with statewide median prices attaining November 2007 highs. Consumers often contemplating whether it is more beneficial to buy a property now or continue renting. To assist with this decision, C.A.R. has looked at the costs and benefits of renting versus owning property in California and eight of its local regions over a seven year time horizon.

Continue reading…

June 2017: C.A.R. New and Revised Forms Release


Slated for release the week of June 26, 2017, the California Association of REALTORS® (C.A.R.) has issued four new forms and revised 16 existing forms. In keeping with tradition, this month’s Courtside Newsletter will explore these new and revised forms, keeping real estate practitioners apprised of the industry changes and trends reflected therein.

New Forms

Bed Bug Disclosure (BBD)
Beginning July 1, 2017, landlords will be required to include the Bed Bug Disclosure form with lease/rental agreements. The form contains information about identifying bed bugs (e.g. what they look like), their life cycles, what bites look like, and signs of an infestation.

According to the Center for Disease Control (CDC), everyone is at risk for getting bed bugs, and they can live anywhere (a home’s cleanliness is not a factor in determining risk). People who travel often and stay in hotels (e.g. shared living spaces) are at a higher risk. Bed bugs are experts at hiding and can go for long periods of time without feeding. They can stow away in the “seams and folds of luggage, overnight bags, folded clothes, bedding, [and] furniture,” amongst other places. While bed bugs do not carry disease or pose a medical threat, they do present the risk of secondary infections if a person overzealously scratches the bite.

Tenants must tell the landlord or property manager of suspected bed bug infestations, and cooperate with any inspections or treatments. Landlords must also inform tenants within two days if any units are inspected by a pest control officer and, of course, if there are any infestations in common areas.

Cancellation of Lease or Rent (CLR)
The CLR is a single-page form that allows for the termination of a lease/rental agreement, generally prior to a tenant taking possession of the property. Reasons for cancellation include:

  • Tenant failure to pay move-in rent and/or security deposit per the Lease Agreement (C.A.R. Form LR), after being given a Pre-Possession Notice to Tenant to Pay (C.A.R. Form PPN).
  • Landlord is unable to deliver possession with five or more days after the agreed commencement date, in spite of tenant meeting all requirements under the Agreement.
  • Mutual cancellation (no explanation required).

The form also includes a section to address the return/release of the rent and security deposits. If the Agreement is terminated by mutual decision and it is after tenant has taken possession of the property, the landlord must return any remaining security deposit to the tenant within 21 days, along with an itemized statement pursuant to Civil Code § 1950.5(g). The statement will indicate the basis for, and the amount of, any security deposit received and the disposition of the security deposit.

Lastly, the form states that Tenant and Landlord release each other from all rights and obligations under the Agreement. They are also released from all claims, actions and demands they may have against each other (unless box B(ii) is checked, which indicates further judicial or arbitration decisions are necessary).

Landlord Pre-Possession Notice to Tenant to Pay (PPN)
The PPN is equivalent to a notice to perform issued to a tenant and is “for use when tenant does not pay [the] amount(s) due prior to taking possession” of a rental property. Such amounts include the rent and/or security deposit per Paragraph 5 of the C.A.R., “Move-In Costs Received/Due,” but there are also blank lines for any other agreed-upon amounts that may be applicable. The form issues the ultimatum that if the tenant does not pay in a specified number of days after delivery of the PPN, the landlord may cancel the lease agreement (utilizing C.A.R. Form CLR). There is a section for the tenant to initial receipt of the form via personal delivery. However, it also contains the caveat that if the property is subject to a local rent or eviction control ordinance, the landlord should consult an attorney before cancelling the agreement.

Water Submeter Addendum (WSM)
Beginning January 1, 2018, landlords are required to provide certain disclosures to tenants regarding submeters. Pursuant to Civil Code § 1954.204, and covered by the new C.A.R. Form WSM, the disclosures include:

  1. That the tenant will be billed for water service separately from the rent. (WSM Paragraph 1)
  2. An estimate of the monthly bill for water service for dwelling units at the property based on either the average monthly use at the dwelling, or the average water use of a family of four (4). (WSM Paragraph 2)
  3. The due dates and payment procedures for bills for water service. (WSM Paragraph 3)
  4. The contact information, including business hours, for a tenant to contact the landlord or billing agent with questions regarding the water service billing. (WSM Paragraph 4)
  5. Specific charges that the monthly bill for water service may only include. (WSM Paragraph 5)
  6. The tenant must notify the landlord of any problems with the water system, including leaks, drips, water fixtures that do not shut off properly. The landlord is required to investigate, and, if necessary, repair these problems within 21 days, otherwise, the water bill will be adjusted pursuant to law. (WSM Paragraph 6)
  7. The landlord’s contact information to report any of the above instances in Section (f). (WSM Paragraph 4)
  8. Upon request, the landlord must provide:
    1. The location of the submeter.
    2. The calculations used to determine a monthly bill.
    3. The date the submeter was last certified for use, and the date it is next scheduled for certification, if known. (WSM Paragraph 7)
  9. If the tenant believes that the submeter reading is inaccurate or the submeter is malfunctioning, the tenant shall notify the landlord in writing and request an investigation. If the landlord does not resolve the issue, the tenant may contact the local county sealer (contact information for the county sealer will be disclosed). (WSM Paragraph 8)
  10. A statement that this disclosure is only a general overview of the laws regarding submeters and where the laws can be found in the California Civil Code.

Tenant and landlord will acknowledge agreement with and receipt of the WSM.

Revised Forms

(* indicates that is it not permissible to use previous versions of the form. Current forms should be used however.)

Seller’s Affidavit of Non-Foreign Status (FIRPTA) (AS)
Internal Revenue Code (“IRC”) §1445 provides that a buyer of a U.S. real property interest must withhold tax if the seller is a “foreign person.” The revised AS now includes an option paragraph for seller (aka “transferor”) to indicate use of a qualified substitute to document federal withholding. The language regarding California tax withholding has also been revised to indicate that the seller will provide escrow with necessary information pursuant to California Withholding Law, Revenue and Taxation Code § 18662.

Residential Lease or Month-to-Month Rental Agreement (LR) *
Numerous aspects of Form LR have been revised/updated, including the below. Please note that it is not okay to use previous versions of this form.

  • Addition of language regarding tenant’s requirement to pay amounts due prior to taking possession of the property. Specifically, Paragraph 2 references the new C.A.R. Form PPN, giving tenant a notice to pay or the landlord has the right to terminate the agreement.
  • Additional language has also been added to Paragraph 3(D) regarding how rent will be paid and to whom it will be delivered.
  • A chart has been added to Paragraph 5, “Move-in Costs Received/Due,” clarifying the amounts due for rent, security deposit, and other purposes, the date payment has been received, the date it’s due, and who the amounts should be made payable to.
  • Disclosures regarding utilities, such has water submeters, gas, and electric meters, and a bed bug disclosure have been added to the form.
  • Paragraph 11, “Maintenance Use and Reporting,” indicates that tenant “shall not use the premises to plant, grow, cultivate or sell marijuana.” There is also a representation that if the unit is in a Common Interest Development, the landlord may not have authority or control of all parts of the building.
  • Paragraph 14, “Smoking,” has been added to indicate that the tenant is responsible for any damage caused by smoking. The landlord can also prohibit smoking on the premises, or indicate what substances maybe smoked on the premises.
  • Per Paragraph 16(B), “Condominium; Planned Unit,” tenant may be required to pay a fee to the HOA to gain access to certain areas of the development.
  • Paragraph 20, “Photographs and Internet Advertising,” has been added for the tenant to acknowledge that photos, virtual tours, and other media may be necessary for the purposes of advertising, etc., and that neither the broker nor landlord have control over who views such images once images are on the internet.
  • An option section has been added to Paragraph 36, “Insurance,” which may require the tenant to obtain insurance in a specified amount.
  • Paragraph 53, “Representative Capacity,” has been added to indicate whether a party to the agreement is signing a representative capacity, per the Representative Capacity Signature Disclosure (C.A.R. Form RCSD). The signature lines have also been updated to indicate such representation.
  • Paragraph 54 indicates whether the premises is being managed by the owner or another entity, such as a property management company or brokerage.


Commercial and Residential Income Listing Agreement (CLA) *
The optional arbitration clause was removed from the form, replaced instead with the following language in Paragraph 18(C): “If Owner and Broker desire to resolve disputes arising between them through arbitration rather than court, they can document their agreement by attaching and signing an Arbitration Agreement (C.A.R. Form ARB).” Per C.A.R., “the arbitration clause was removed from the listing agreements because some attorneys for sellers were using it to draw listing agents into contract disputes between buyers and sellers. The listing agreement arbitration was intended to cover only disputes between sellers and their agents over the listing compensation.” It is not okay to use previous versions of this form.

Lease Listing Agreement (LL)
Language was added to the LL regarding tenant payments via direct deposit, now including the indication that the landlord should discuss with a Landlord-Tenant attorney the implications of doing so in the event that the tenant defaults and an eviction is necessary. For example, will a Notice to Quit be affected by an electronic payment of a portion of the rent?

Paragraph 10, “Owner Disclosures,” has been revised to include such disclosures as lead-based paint, pool/spa drains, mold, asbestos, pest control, meth contamination, bed bug disclosures, water submeters, carbon monoxide detectors, smoke alarms, water conserving plumbing fixtures, water heater, and a Prop. 65 warning notice. Many of these categories are in response to the enacting of recent laws.

Paragraph 13, “Broker’s and Owner’s Duties,” was amended to include language indemnifying the broker: “Owner further agrees to indemnify, defend and hold Broker harmless from all claims, disputes, litigation, judgments, attorney fees and costs arising from any incorrect or incomplete information supplied by Owner, or from any material facts that Owner knows but fails to disclose including dangerous or hidden conditions on the Premises.”

In Paragraph 20, “Dispute Resolution,” the optional arbitration clause was removed for the above-described reasons.

Paragraph 21, “Time of Essence; Entire Contract; Changes,” now contains an option paragraph regarding representative capacity. This indicates whether the LL is being signed for the Owner by an “individual acting in a Representative Capacity as specified on the Representative Capacity Signature Disclosure (C.A.R. Form RCSD-LL).” It also indicates that the owner will provide documentation evidencing the authority of the entity signing to act on his or her behalf.

Property Management Agreement (PMA)
The PMA has been updated to include language regarding tenant payment by wire transfer, updated Owner Disclosures, removal of the arbitration clause, and indication of a signatory’s representative capacity. These revisions and additions are similar to those in the Form LL, described above.

Probate Purchase Agreement and Joint Escrow Instructions (PPA) *
Paragraph 12(C) of the PPA has been added regarding an “Exempt Seller Disclosure” form. It indicates that seller shall provide the buyer with a completed Form ESD, identifying the disclosure required by contract and/or law. It is not okay to use previous versions of this form.

REO Advisory (REO) *
The REO seller compliance requirements have been updated to include Paragraph 1(G) regarding water-conserving plumbing fixtures. Paragraph 2 regarding potential seller exemptions has also been updated to include language that the seller does not have to provide certain forms, but must still comply with Paragraph 1, as well as statutory and contractual obligations. It is not okay to use prior versions of this form.

Residential Listing Agreement (RLA)
The RLA has been amended to remove the arbitration clause, for the above-described reasons. There have also been minor revisions to language and formatting of the form.

Residential Listing Agreement – Agency (RLAA)
Paragraph 2, “Listing Price and Terms,” has been added to the form, as well as Paragraph 4 regarding “items to be excluded and included.” This latter section is also important because it allows the seller to list what he or she will be including and excluding in the sale (hopefully eliminating any confusion on the part of the buyer). There also a Paragraph 4(B) that indicates what items are leased or not owned by the seller, (i.e. solar power systems, alarm systems, propane tanks, water softeners), and what items have a lien for payment against them (e.g. heating/ventilation/air conditioning, solar power systems, windows/doors).

An additional section has been added to Paragraph 5, “Multiple Listing Service,” regarding MLS data on other internet sites, and the seller’s ability to opt-out of featuring the property on the internet or specific aspects of websites. Paragraph 7, “Broker’s and Seller’s Duties,” has been revised to include subparagraphs, further clarifying the duties listed. A paragraph has also been added referencing “Security, Insurance, Showings, Audio and Video,” (Paragraph 10), which indicates that the broker is not responsible should anything happen to the seller’s valuables and the seller agrees to take precautions to “safeguard and protect valuables.” Furthermore, the seller must disclose if there are surveillance cameras or security devices on the property that could constitute an invasion of privacy if persons visiting the property are not made aware of their existence.

Residential Listing Agreement – “Open” (RLAN)
The RLAN has been revised to include a section regarding items that are included and excluded from the sale, and items that are leased by the seller or have a lien for payment against them. (See the RLAA revisions above for more detail.) Paragraph 9, “Agency Relationships,” has also been reformatted regarding information about dual agency and the seller’s acknowledgement thereof. Other changes to the form include language regarding the disclosure of security devices that may record visitors to the property, the removal of the arbitration clause, and the addition of a paragraph acknowledging a signatory acting in representative capacity.

Single Party Compensation Agreement (SP)
Like many of the above-referenced forms, the SP has been revised to remove the arbitration clause. Language has also been added regarding additional mediation terms, specifically those matters excluded from mediation and arbitration, and an optional paragraph indicating a seller’s signatory acting in representative capacity.

Trust Advisory (TA) *
Seller’s compliance requirements in Paragraph 1 of the TA have been updated to include seller’s obligation to disclose “known material facts affecting the value and desirability of the property.” Subparagraph C has been added to indicate that the sale of the property is not exempt from smoke detector requirements, but it is between the buyer and seller as to who is to pay for the cost of compliance. Lastly, subparagraph G has been added regarding water conserving plumbing fixtures and seller’s obligation to disclose whether the property contains any non-complaint plumbing fixtured. (C.A.R. Form WCMD is referred to for further information.)

Exemptions to seller’s required disclosures is revised in Paragraph 2, including (amongst other language), the caveat that “even exempt Sellers have statutory or contractual obligations to make certain disclosures and may, or is required by contract, to use an Exempt Seller Disclosure (C.A.R. Form ESD) and is strongly encouraged to do so.” Please note that it is not okay to use previous versions of this form.

Vacant Land Listing Agreement (VLL) *
Paragraph 5 regarding the Multiple Listing Service has been revised to better clarify the MLS’ presence on the internet and the seller’s ability to opt-out of certain internet features. The paragraph regarding “Broker’s and Owner’s Duties” has also been revised to indicate that the owner agrees to indemnify the broker from any conflict arising out of “incorrect or incomplete information supplied by Owner, or from any material facts that Owner knows but fails to disclose including dangerous or hidden conditions of the property.” Similar to the RLAA, Paragraph 10 has been updated to include references to “Security, Insurance, Showings, Audio and Video,” broker’s responsibility (or lack thereof) for the seller’s personal belongings during showings, inspections, etc., and the owner’s responsibility to disclose the use of security devices.

As with the other listing agreements revised this time around, the VLL has had the arbitration clause removed and a section for representative capacity added. It is not okay to use prior versions of this form.

Exclusive Authorization for Vacation Rental (VRL)
The VRL, (aka “short-term occupancy listing agreement), has been updated to include the time period of the rental in Paragraph 2, “Listing Terms.” Paragraph 13, “Tax Withholding,” has also been added, which provides information regarding tax withholdings if the owner of the property is not a California resident or a corporation or LLC qualified to do business in California, or if the owner is a “nonresident alien individual, a foreign entity, or other non-U.S. person.” The dispute resolution section (Paragraph 23) has been revised to remove the arbitration clause, as with other listing agreements.

As per usual, this article only provides a brief overview of the new and revised forms release by C.A.R. this month. Should you have any questions or concerns regarding these forms, we encourage you seek qualified counsel—either through an attorney or your local REALTOR® association—for answers.

June 2017 Newsletter_New & Revised Forms

June 2017: CA Court of Appeals Rules in Favor of Real Estate Agent in Statute of Frauds Case


In February, the California Court of Appeal (“Court”) ruled on the question of whether a real estate agent can bring a lawsuit against the owners of a property for a commission if not all of the owners signed the listing agreement, but one owner allegedly signed on behalf of all owners. Long story short, the Court ultimately decided that a real estate agent should have the ability to bring a suit to prove the owner signed on behalf of others.

Bernice Jacobs (“Jacobs”) is a licensed California real estate broker who, in April 2013, entered in to a Vacant Land Listing Agreement (“Agreement”) for which she had the “exclusive and irrevocable right” to sell a parcel of real property in Marin County. Per the agreement, if Jacobs was able to obtain a buyer during the year-long listing period, she would receive a $200,000 commission. The only caveat to the Agreement was that if an entity called “Open Space Land Trust” purchased the property, Jacobs would not receive a commission.

There were six owner signatories to the Agreement, but only one owner signed, [John B. Locatelli (“Locatelli”), as trustee of the John B. Locatelli Trust]. The other signature lines were left blank. Per Jacobs, Locatelli stated that he had the authority to act on behalf of the other owners and a written agency agreement existed to that effect (though Jacobs never saw the agreement). Furthermore, after the Agreement went into effect, Jacobs claims the other owners acknowledged her employment, were impressed by her performance, and even went so far as to inquire with her about working on other projects.

By mid-April 2013, Jacobs procured The Trust for Public Land (“TPL”) as a potential buyer. After Jacobs informed Locatelli of this, Locatelli allegedly became angry and stated that he had been speaking with TPL for three years. He demanded the contact information for the person Jacobs was working with and wanted to change the Agreement exception from “Open Space Land Trust” to “TPL.” Jacobs looked into Locatelli’s allegations, but her contact at TPL confirmed that he hadn’t known the property was for sale until Jacobs contacted him, and that he had never spoken to Locatelli before. Thereafter, Locatelli informed Jacobs that TPL had been instructed not to speak with her, and that he would be dealing with them directly. Later in 2013, the owners and TPL entered into an agreement for TPL to buy the property, leaving Jacobs out of the transaction. (Somewhat unsurprisingly, the transaction was never consummated due to issues between the owners and TPL.)

In April 2014, Jacobs filed a complaint against the owners (and TPL), alleging breach of contract and specific performance (the commission promised in the Agreement), amongst other causes of action. The owners demurred to the complaint, stating that the facts in Jacob’s complaint were insufficient to establish a cause of action and therefore the complaint should be dismissed. The owners relied on the Statute of Frauds codified in Code of Civil Procedure § 1624(a)(4) which states that a real estate broker’s contract must be “in writing and subscribed by the party to be charged or by the party’s agent.” The owners alleged that they did not sign the Agreement and that Locatelli did not sign on their behalf due to the fact that the property was held as tenants in common. The trial court sustained the demurrer and Jacobs amended her complaint, alleging the owners were part of a joint venture, the purpose of which was to invest in the property. Defendants demurred to the amended complaint contending the Agreement did not refer to a joint venture and was therefore still bound by the Statute of Frauds. The demurrer was sustained without leave to amend and Jacobs appealed.

According to prior caselaw, “the ‘courts have long had little sympathy for the broker who fails to adhere to the Statute of Frauds.’” Meaning, historically the Statute of Frauds has been strictly adhered to in the case of real estate licensees, even when it results in perceived unfairness. However, “‘‘The Statute of Frauds was not enacted to afford persons a means of evading just obligations… Therefore, if after a consideration of the surrounding circumstances, the pertinent facts and all the evidence in a particular case…the purpose of the Statute will best be served by holding the note or memorandum sufficient even though it is ambiguous or incomplete.’” (Sterling v. Taylor (2007) 40 Cal.4th 757.) In the instant action, the Court believed that the case should have moved forward in order to allow Jacobs the opportunity to introduce evidence that Locatelli signed the agreement on behalf of the owners, as a partner in a joint venture. The real issue, the Court contended, was whether this alleged joint venture was enough to satisfy the Statute of Frauds. The decision of the trial court was therefore reversed and the case was remanded for further litigation.

For REALTORS®, the ultimate takeaway from this case may be to make sure all of your contracts are fully executed in order to avoid costly litigation. However, the case also demonstrates that for those who do get a jump start on marketing a property, not all may be lost (except for attorney’s fees). The Statute of Frauds is a hard and fast law, but like most laws, it is not without some room for interpretation. The best takeaway is not to put yourself in the position of having to litigate your rights to compensation. Confirm signatures, the authority to act by signatories in writing, and the status of the entity.



May 2017: Real Estate Teams: CalBRE Cracks Down; Benefits of Team Work


Real estate teams have long been held under the California Bureau of Real Estate’s (“CalBRE”) microscope, as well as both lauded and lamented by those in the industry. This month’s Courtside Newsletter will explore why real estate teams are back in the hot seat, and why joining a team has been such a heated debate.

In March, CalBRE issued a Licensee Alert entitled “Supplemental Disciplinary Advisory to Real Estate Salespersons Who Mislead Consumers into Falsely Believing that They are Brokers—and a Concurrent Caution to the ‘[Ir]responsible’ Brokers Who Permit or Support Such Practices.” This supplement is a follow up to a similarly-named September 2015 release, and Real Estate Commissioner Wayne Bell appears none too happy to be repeating himself. Both releases can be found on CalBRE’s website (www.calbre.ca.gov), and both warn against real estate salespersons acting or advertising themselves in a manner that suggests they are the broker. This applies to salespersons advertising themselves as “independent” and, more recently, to those using fictitious business names and team names that might mislead the public. In the March 2017 advisory, CalBRE uses the example of “Doe Real Estate,” whose advertisements lead the public to believe that Salesperson Doe is the broker or brokerage. Such insinuations are unlawful, on both the part of the salesperson and the broker who is responsible for supervising his or her salespersons (including their advertisements). CalBRE states that it will take “appropriate disciplinary action (including the imposition of significant fines and—where appropriate—the revocation of licensure)” against salespersons and brokers found to be participating in these activities. Ultimately, “If a salesperson wants to act and advertise as an independent or freelance real estate licensee in California, he or she must become a real estate broker. There are no exceptions.”

The Law
California Business & Professions Code § 10159.5, et seq. is the governing law for the use of fictitious business names (FBNs) by real estate professionals. A salesperson may obtain a FBN with permission from his or her broker, and the FBN is subject to the broker’s control. The broker also has a duty to supervise the salespersons using the FBN. Per B&P § 10159.5(d), all advertising and solicitation materials, including “business cards, print or electronic media and for sale signage” must include the responsible broker’s identity “in a manner equally as prominent as the fictitious business name” (emphasis added). Since such guidelines are explicitly stated in the law, one can see why Commissioner Bell would be aggrieved at having to repeat himself in the most recent CalBRE advisory.

While a FBN and team name are not the same under the law, and are often confused, they do have similar requirements. A team name does not need a license by CalBRE as a fictitious business name (but may still need to be filed with the county) if:

The name is used by two or more real estate licensees.

The words “Team,” “Group,” or “Associates” is used together with a surname of one of the licensees.

The name does not include terms that imply or suggest the existence of an entity independent of the responsible broker.

Any first point of contact materials, “For Sale” signs, websites, and ads include:

Salesperson’s first and last name

Salesperson’s CalBRE license number

Responsible broker’s identity (company name), which is as prominent as the “team name”

The Responsible broker’s identity is optional so long as the company name is provided

Again, there is express language regarding identifying oneself as under a broker’s supervision, and including the broker’s identity prominently.

CalBRE’s advisory continues to be timely as many real estate professionals try to distinguish themselves from the rest via advertising. However commendable that is, though, it is important to do so legally and ethically. It is not only a legal dilemma, but misleading the public to make them believe one is acting as or without a broker could also be seen as an ethical issue. This could lead to further problems for REALTOR® members who are bound by the National Association of REALTORS® Code of Ethics.

With what seems like a lot of rigmarole surrounding teams and team names, the question arises: are they worth it? As with most things, arguments can be made both in favor of and against joining a real estate team. According to Jill Penman, leader of the Jill Penman Group in Florida, it was “in the construct of a team where [she] found the real education [she] needed…to manage the complexities and realities of being a Realtor® today.” Conversely, Charlie Peterson with RealtyTrust Residential in Tennessee doesn’t believe that the concept of teams was “birthed by asking how [Realtors] can best serve [their] clients, nor has it flourished and produced better agents under its popularity.” Let’s jump into some of the pros and cons for agents looking to join a team.

Joining a Team: Pros

  • Jump-start a real estate career as a new agent
  • On-the-job training—learn the ins and outs of the field while getting paid to do so
  • Division and specialization of labor
    • You don’t have to do everything yourself
    • Focus on areas you excel in
  • Collaboration of efforts and ideas
  • Networking/expanding your circle of influence
  • Possibility of generating more leads, leading to more business and more money
  • Accountability to the rest of the team, keeping you focused and driven
  • Different perspectives from marketing to problem solving
  • Time off (i.e. you can go on vacation, knowing someone else will cover you)
  • Shared business expenses

Joining a Team: Cons

  • “Specialization” can be limiting,
    • You may not understand all aspects of a real estate transaction as a result
  • There may be little to no actual advancement for new agents
  • Lack of autonomy
    • You may not get the assignments or leads you want and, as a result, you may not get to choose the direction of your career
  • Inability to build a personal brand or work in a manner you would prefer
  • Teams are not often as well-run as they purport to be
  • Teams may be confusing to their clients when the point of contact is constantly shifting and changing,
    • This could lead to a poor agent-client relationship
  • Not all team members will be “good” agents, and some may even be unreliable
  • Clashing personality types
  • Commission splitting with other agents on the team
  • Minimum requirements you must meet

Ultimately, joining a team is a personal decision that revolves around how you best work and function. Furthermore, the specific team you join must suit your needs. While you may be an entrepreneurial spirit, chomping at the bit to start prospecting and selling homes, you may still need some guidance and mentorship that a team may offer, at least for the first few years. However, if you choose a team that doesn’t respect and nurture your self-starting attitude, you may find yourself stifled and hating your job. Clearly, neither joining a team nor vetting a potential team is a decision to be made lightly.

May 2017 Newsletter_Real Estate Teams

March 2017 Courtside Newsletter: C.A.R. Winter Business Meetings

Available for download in PDF.


Our office once again had the privilege of attending the California Association of REALTORS® (C.A.R.) winter business meetings. Below is an overview of some of the topics that were touched upon in those meetings.

Legal Affairs Forum
Copyright and Trademark Issues Affecting REALTORS®

Shuan Lue, a C.A.R. Staff Attorney, provided a general presentation of Intellectual Property for REALTORS®, which discussed the basics of copyright and trademark law. The main takeaway from the presentation was that almost any original material produced by an individual that has some level of creativity to it can be considered copyrighted or a trademark. In order for employers and agents to protect themselves against copyright or trademark infringement, they should make sure to seek permission prior to the use of any material that would not be considered fair use, or common to the general public. This can be done through an assignment of rights and licenses.

Cyber Threats Involving Real Estate Transactions

FBI Supervisory Special Agent, Michael Sohn presented on the topic of Cyber Threats Involving Real Estate Transactions. Per Mr. Sohn, small businesses, companies with 100 or fewer employees, are at a higher risk for being a victim of cybercrime because there is less of a risk for the cybercriminal in getting caught.

One of the most popular methods of cybercrime currently taking place is through “Business Email Compromise” (“BEC”), in which a cybercriminal is able to obtain thousands of dollars fraudulently in just five simple steps.

  1. The cybercriminal searches the internet for programs which generates email lists for a particular industry.
  2. The cybercriminal then sends a “phishing email,” or an email that is legitimate on its face but is actually fraudulent, to thousands of the email addresses he just received from the internet site. (For a real estate agent, it could be a document download under a client’s name.)
  3. When the email recipient opens the email and clicks the link, he will be directed to input his or her username and password into the account in order to download the document. The recipient has now unknowingly sent the hacker the ability to access his account.
  4. The cybercriminal will send an email to a client that will provide the client with new instructions on how and where to wire money for transactions.
  5. The client then sends the funds through the wire instructions as part of the real estate transaction. He is often unaware of the fraud until they speak with his real estate agent and it becomes known that the appropriate parties did not receive any money. Usually by then it is too late.

Mr. Sohn stated that the only way to protect yourself and your clients is to notify your clients to not respond to any email that appears to be sent by you or your company regarding wiring money or the payment of client bills. Also, it is essential that a small business have a two-step authentication security system. Such systems require dual certification through the use of a computer and a mobile device. For further information on protecting your business from cybercrime, see our September 2016 Courtside Newsletter.

Currently, firms and agents are not being held liable for BEC crimes. However, there is a potential for individuals to become liable if reasonable security measures are not taken.

Standard Forms Advisory Committee Forum on Forms

  • Water-Conserving Plumbing Fixtures and Carbon Monoxide Detector Notice (WCMD): One of the topics that caused significant discussion and debate was the law behind the new WCMD form regarding low-flow water fixtures. Many agents are concerned with the possible effect this law will have on their clients and how to advise them properly. C.A.R. has developed numerous tools available on their website to deal with this topic, such as a training PowerPoint for real estate agents as well as an informative flyer and video for clients. The Standard Forms Advisory Chair, Jeff Kahn, also stated that it was important to note that there is no enforcement mechanism for this law and that it is a condition of ownership requirement, not a point of sale.
  • Team Agreement: C.A.R. has announced that it is in the process of creating a Team Agreement form for this year that will better define the scope and responsibilities of agents participating in a Team relationship. There was no release date given for this form.

Member Legal Services

For detailed information regarding new California laws, please see our December Courtside Newsletter.

One issue of note that arose in the meeting was with regards to the Department of Housing and Urban Development’s (HUD) “Guidance on Fair Housing Protection for People with Limited English Proficiency” released in September 2016. Ultimately it was advised that agents should not be translators. Instead, agents should speak to the translator in English and rely on the translator to translate.

Property Management

C.A.R.’s Robert Bloom presented the Property Management Legal Open Forum: New Laws and Recent Developments. The presentation focused on the following:

Commercial Leasing Certified Access Specialist Program (CASp) Disclosure and Cancellation Right

Effective on September 17, 2016, new disclosure language is required when there is no CASp report. This information is included in the new form, which is titled, “Commercial Lease Construction Accessibility Addendum” (CLCA). This does not require meeting applicable standards as a condition of the lease. If there is a report, Landlord should provide this form 48 hours prior to the tenant signing the lease. Otherwise the lessee has a 72-hour cancellation right.

Unlawful Detainer Masking

Public access to Unlawful Detainer records is no longer permitted unless the plaintiff/landlord prevails within sixty (60) days of filing the unlawful detainer action. Previously, it was the defendant/tenant who had to prevail within sixty (60) days of filing to bar access. The practical effect of this is the ability of property managers to know which tenants have been sued for unlawful detainer will be compromised.

Criminal Screening

The HUD’s General Counsel restricts criminal screening and blanket refusals to rent based upon criminal records or conviction as having disparate impact on protected groups. There is no requirement that a landlord or property manager intends to discriminate. A policy or practice, even a facially neutral one, may constitute illegal discrimination unless it is necessary to serve a substantial, legitimate, nondiscriminatory interest of the landlord or property manager. Such a policy may also be allowed if the landlord or property manager adopts a practice that has less discriminatory effect. The landlord or property manager must consider when a conviction occurred, the underlying conduct and what the convicted person has done since. (This is a very difficult and subjective burden.)

It is still legal to take into consideration a criminal record. HUD provides further information and guidelines that should be followed on its website in an “Office of General Counsel Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions.”

Marijuana law

Proposition 64 legalized recreational marijuana use under certain requirements. However, marijuana remains a schedule 1 substance under the federal Controlled Substance Act (CSA) with no accepted medical use. The Department of Justice (DOJ) may prosecute under the CSA for the production, sale, and distribution of marijuana. One of the penalties landlords and property owners should be aware of is property forfeiture. Because of this, landlords may still prohibit marijuana use because marijuana does not come within the protections for “personal agriculture” in portable containers under Civil Code § 1940.10. Landlords should review their lease to ensure they prohibit or control marijuana use, tobacco and e-cigarettes. Landlords may wish to add a provision to their lease to prohibit plants and cultivation. Landlords who do not currently want to prohibit smoking may want to at least prohibit marijuana use.

Professional Standards Committee

Some of the highlights from the Professional Standards Committee meeting included:

  • Beginning January 1, 2017 through January 31, 2018 and for successive two (2) year periods thereafter, REALTORS® are required to complete biennial ethics training of not less than two hours and thirty minutes of instructional time. The new Code of Ethics classes will be available in the spring and will fulfill quadrennial requirements.
  • The National Association of REALTORS® (NAR) Code of Excellence has been approved. The goals of the Code of Excellence will be to work with REALTORS® to improve from the standard of “good enough” and link participation to consumer view of superior performance, thus increasing overall competence.
  • Some changes to the NAR Manual include:
    • If a member resigns/terminates membership with a pending disciplinary complaint, the complaint will still be heard but any disciplinary sanction imposed will be stayed until the member rejoins.
    • A complainant may withdraw his/her complaint up to the time a decision is made, even during the hearing.
    • Disputes between two listing brokers where no contract exists between the parties and the dispute is not specified in Article 17, Standard of Practice 17-4 are non-arbitrable.
    • Before an arbitration hearing is closed, the parties should be given an opportunity to discuss settlement amongst themselves.

Available for download in PDF.