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

Available for download in PDF.

BY: KELLY A. NEAVEL, ATTORNEY AT LAW
ASHLEY A. PLANCHON, LAW CLERK
LINDA CONAWAY, LEGAL ASSISTANT

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.


December 2016 Courtside Newsletter: New Laws Affecting REALTORS®

Available for download in PDF.

BY: JOHN V. GIARDINELLI, ATTORNEY AT LAW
ASHLEY A. PLANCHON, LAW CLERK
CASEY MCINOTSH, PARALEGAL

The California Legislature has enacted several new laws that may affect REALTORS® and their practices over the next two years. This month’s Courtside Newsletter provides an overview of those laws and their potential impact.

Uniform Advertising – Assembly Bill 1650 [Effective January 1, 2018]

Under current real estate law, any solicitation materials published, circulated, or distributed by a real estate licensee performing an activity for which a real estate license is required must contain a disclosure to the effect that a real estate license is required for the activity. Furthermore, a licensee is also required to include his or her license number (and unique identifier for mortgage loan originators) on such materials that are intended to be a “first point of contact with consumers” and on real property purchase transactions in which he or she is acting as an agent.

In an attempt to create uniform standards across a variety of advertising mediums, Assembly Bill 1650 will amend Business & Professions Code § 10140.6. Effective January 1, 2018, a real estate licensee will also be required to disclose the responsible broker’s identity in addition to the licensee’s name and license number. (Again, if the licensee is a mortgage loan originator, the unique identifier must also be listed.) As defined in B&P § 10159.7, “responsible broker’s identity” means the name under which the broker is licensed by the California Bureau of Real Estate (CalBRE). The inclusion of the responsible broker’s identification number is optional.

“Solicitation materials” are materials intended to be the first point of contact with the consumer. The definition of such materials will also be redefined to include:

  • business cards;
  • stationary;
  • advertising flyers;
  • advertisements on television, in print, or electronic media;
  • “for sale,” rent, lease, “open house,” and directional signs; and
  • “other materials designed to solicit the creation of a professional relationship with a consumer.”

An exception to this rule is if the “for sale,” rent, lease, “open house,” and directional signs do either of the following:

  1. Display the responsible broker’s identity without reference to an associate broker or license; or,
  2. Display no licensee information (i.e. a generic sign).

A “refence” to an agent would be anything that names an agent in any way. It is important to note that a sign displaying no licensee information would likely be a violation of the National Association of REALTORS® (NAR) Code of Ethics Standard of Practice 12-5. (SOP 12-5 states that any advertising materials must disclose the name of the REALTOR®’s firm in a “reasonable and readily apparent manner.”)

This piece of legislation is considered to be the most important law affecting agents this session, and provides a year for all agents to become compliant.

Team Names – Senate Bill 710 [Effective August 28, 2016]

SB 710 amended Business & Professions Code § 10159.7 immediately to redefine the meaning of “responsible broker’s identity.” Previously, it had been defined as “a name and the associated license identification number under which the responsible broker is currently licensed and conducts business in general or is a substantial division of the real estate firm” (emphasis added). The Code will be amended to define it as the name or both the name and associated license identification number.

Per the California Association of REALTORS® (C.A.R.), this amendment now allows for only the responsible broker’s name to be displayed in all team name and agent-owned DBA advertising. Displaying the broker’s license number is optional. The team name and broker name must still remain equally prominent on all advertisements and first point of contact materials.

CalBRE Website Licensee Information – Assembly Bill 2330 [Effective January 1, 2018]

Currently, the CalBRE lists information regarding the status of every license issued by the Bureau pertaining to “brokers” and “salespersons.” Brokers are also required to immediately notify the Bureau when a salesperson enters into or is terminated from employment with the broker. AB 2330 will amend Business & Professions Code § 10083.2 to require CalBRE to include whether the licensee is an associate licensee. Per Civil Code § 2079.13, and associate licensee is a real estate broker or salesperson who is “either licensed under a broker or has entered into a written contract with a broker to act as the broker’s agent…and to function under the broker’s supervision…” The new statute will also require CalBRE to include whether the associate licensee is also a broker (i.e. a broker-associate), and to include information regarding the responsible broker under whom the associate licensee is acting. Responsible brokers will also be required to inform CalBRE if a broker-associate is engaged in or terminated from employment, as requirement that was missing from the previous law. This law will go into effect on January 1, 2018.

Disciplinary Action Records on CalBRE Profile – Assembly Bill 1807 [Effective January 1, 2018]

Any disciplinary action reported on a licensee’s profile on the CalBRE’s website is currently slated to remain there indefinitely. However, AB 1807 will amend Business & Professions Code § 10083.2 to allow licensees to petition CalBRE to remove the disciplinary action from the public profile. Per AB 1807, the petition will be accompanied by a fine, which will go into the Real Estate Fund, and could only be submitted at least 10 years after the violation was initially posted to CalBRE’s website. In the petition, the licensee must provide both justification for the removal and evidence of rehabilitation, which will indicate that the posting is no longer required to prevent a risk to someone utilizing the licensee in his or her capacity as a real estate agent. Review and granting of a petition is at CalBRE’s discretion, and CalBRE will also take into consideration other violations that could present a risk to the public that have arisen since the posting of the violation. There is no guarantee that the violation will be removed from the website following the submission of a petition. Licensees may begin submitting petitions January 1, 2018.

Death of Occupant Disclosure – Assembly Bill 73 [Effective September 25, 2016]

Prior to enacting AB 73, existing law merely stated that no cause of action would arise against a real property owner or agent or agent of a transferee for failure to disclose to the transferee that a death occurred upon the property or that an occupant had or died from Human T-Lymphotropic Virus Type III/Lymphadenopathy-Associated Virus. Under AB 73, Civil Code § 1710.2 was amended to clarify that the owner of a real property, his or her agent, or the agent of a transferee of a property is not required to disclose an occupant’s death on the real property if that death occurred more than three (3) years prior to the date of the offer to purchase, lease or rent the real property. Furthermore, the owner, his or her agent, or the agent of the transferee is not required to disclose that an occupant of the property was living with HIV or died from AIDS-related complications.

It should be noted that the three-years rule is not hard and fast. If a real property is particularly stigmatized and the value of the property is affected by a death that took place more than three years prior to the transaction, such a fact should be disclosed. For example, in the 1983 case of Reed v. King (145 Cal. App. 3d 261) the fact that the house was the site of a gruesome murder involving a woman and her four children ten years prior was a fact that affected the value of the home and should have been disclosed to the buyer. (It was not, hence the litigation.)

Additionally, if an occupant died from AIDS-related complications within the three years prior to the transaction, the law does not preclude the disclosure of the death. However, the owner and/or agent would not specify the manner of death, simply that it occurred on the property. An owner and/or agent is also not precluded from intentional misrepresentation. If a potential transferee asks if an occupant died on the property and the owner and/or agent has knowledge that a death occurred, he or she must answer truthfully. The C.A.R. Seller Property Questionnaire (SPQ) and the Exempt Seller Disclosure (ESD) forms cover disclosures.

This law took effect immediately on September 25, 2016, “in order to protect HIV and AIDS patients and the HIV/AIDS community from discrimination in real property transactions that may otherwise impose severe emotional distress…” Under federal law, people with HIV/AIDS are considered handicapped and protected from discrimination under the Fair Housing Act. The California Association of REALTORS® offers a Legal Q&A entitled “Disclosure of Death and AIDS” for further information regarding this topic and how it affects REALTORS®.

* * *

In an effort at brevity, not all new laws are covered here. As always, we encourage you to seek qualified legal counsel should you have any questions or concerns regarding the law and how it affects your real estate practice.

 

Available for download in PDF.


C.A.R. Fall Business Meetings in Long Beach

BY: JOHN V. GIARDINELLI, ATTORNEY AT LAW
ASHLEY A. PLANCHON, LAW CLERK

In September, our firm had the privilege of attending the 2016 California Association of REALTORS® (C.A.R.) Business Meetings in Long Beach. The following discusses some of the highlights from those meetings.

PROFESSIONAL STANDARDS COMMITTEE

Regional Reports

A representative from each of the 32 Regions answered four questions presented by the Committee:

(1) Do your hearing panels consider whether or not a violation will be published on the C.A.R. website when determining what forms of discipline to impose in an ethics case?
(2) Do hearing panels sometimes impose less harsh forms of discipline because they do not want members of their association to be published on C.A.R. website?
(3) Are there any other ways C.A.R. Ethics publishing has an impact on the decision at the association?
(4) Do your associations have any unique professional standards programs or ethics training within your region?

The majority of the Regions answered “no” to all four questions presented. A few Regions answered “no” to the first three questions but stated that their associations did have some sort of training or professional standards program in place. These training programs included the ombudsman program, citation policy training, or basic ethics training. Some associations stated they are reluctant to impose a violation that would result in publication because they do not want to harm the reputation of their agents or face their members outside of the association.

Crafting Ethics Discipline

There was a presentation on crafting discipline with the goals in mind to build education, establish a deterrent, and provide vindication of unethical behavior. It was stated that associations need to strictly adhere to their policies and provide consistency over caution. Discipline can include Letters of Warning or Reprimand, training requirements, reasonable fines, Cease and Refrain orders, suspension of membership, remedial suspensions or expulsion from membership. Information on C.A.R.’s website should not be considered, and the violator’s membership file should not be reviewed until the hearing Panel finds a violation. Factors that should be considered when determining the sanction include, but are not limited to:

  • the nature of the violation;
  • the harm caused;
  • whether the violation was intentional or inadvertent;
  • any economic gain or loss;
  • the experience of the person committing the violation;
  • the violator’s previous history; and,
  • any mitigating or extenuating circumstances.

MEMBER LEGAL SERVICES

New Laws—Brokerages

In advertising, two new laws will come into effect regarding brokerages. Assembly Bill 1650 addresses uniform advertising standards and amends California Business & Professions (B&P) Code § 10140.6. AB 1650 “requires a real estate licensee to additionally disclose his or her name, license identification number, and responsible broker’s identity on all solicitation materials intended to be the first point of contact with consumers and on real property purchase agreements when acting as an agent in those transactions.” The Bill also expands the definition of “solicitation material” to include: “business cards, stationery, advertising fliers, advertisements on television, in print, or electronic media, “for sale,” rent, lease, “open house,” directional signs, and other materials designed to solicit the creation of a professional relationship between the licensee and a consumer.” This law will come into effect on January 1, 2018.

Senate Bill 710 addresses real estate licensees, fictitious business names, and team names and amended B&P § 10159.7. Current law requires “advertising and solicitation materials using a fictitious business name or that contain a team name to display the responsible broker’s identity.” SB 710 defines “responsible broker’s identity” to include the name or both the name and associated license identification number. However, it is important for REALTORS® to note that the Code of Ethics requires that the broker’s name be provided.

Under Assembly Bill 2330, which amends B&P §§ 10083.2 and 10161.8 and becomes effective January 1, 2017, the BRE will divide brokers, broker’s associates, and salespersons into separate categories for identification purposes.

Lastly, current law allows for any record of disciplinary action to be placed on a broker’s permanent record. AB 1807 will allow brokers to petition the BRE to have any disciplinary action removed after ten years and “for which the licensee provides evidence of rehabilitation indicating that the notice is no longer required to prevent a credible risk to members of the public utilizing licensed activity of the licensee.” This amends B&P § 10083.20 and becomes effective January 1, 2018.

New Laws—General

Senate Bill 1173 will amend the Civil Code to require that any non-complaint indoor water fixtures and faucets must be replaced with water-conserving plumbing fixtures as defined by the Code. Commercial property is required to replace any noncompliant plumbing fixtures on or after January 1, 2017. The deadline for commercial real property replacement will be January 1, 2021. This change is a condition of ownership, not a point of sale. There will also be an update to the Seller’s Questionnaire form that asks whether the seller is aware of any low-flow fixtures.

Finally, the Federal Aviation Administration (FAA) now requires drone users to have a Remote Airman’s Pilot Certification, which can be obtained through an approved FAA facility. All drone activity must remain below four hundred (400) feet.

Recent Cases

  • Horiike v. Coldwell Banker may be the most anticipated case for the real estate industry. The California Supreme Court heard oral arguments on September 7, 2016 to determine whether a listing agent working under the same brokerage as the buyer’s agent would owe a fiduciary duty to the buyer through the concept of dual agency. The Court seemed to have trouble understanding the concept of dual agency during in oral arguments. A decision from the Court is expected by December 1, 2016.
  • Gragg v. United States: The Court held that real estate professional may deduct rental losses from their taxable income only if they materially participate in rental activities. Without some record or evidence establishing the real estate professional as having material participated in the management of the rental property, the income is considered passive for tax purposes.
  • Morlin Asset Management LP v. Murachanian: The Court held that a tenant cannot be held liable to a landlord for injuries sustained by a worker in common areas. The landlord still has the duty to inspect and make safe all common areas on the property.
  • Weeping Hollow Trust v. Spencer: The Court found that a lender may be held liable for misrepresentation by its loan servicer. The Court found that this liability can be found under the theory of respondeat superior.
  • Vasilenko v. Grace Family Church: The Court held that a land owner may be liable for injury sustained on a third party’s property. In the instant action, Plaintiff sued the Church after he was struck by a car attempting to cross a street from the church’s overflow parking lot to get to the church itself. The overflow lot was owned by a third party, but the court found that the church may be held liable for Plaintiff’s injuries. In reviewing this case, it appears that the Court is expanding the concept of duty and liability of a landowner.

LEGAL AFFAIRS—NEW FORMS

Below are the most recent forms created and provided by C.A.R. for real estate professionals. They will be released in December 2016.

  • Early Occupancy Addendum
    C.A.R. is creating a Buyer Early Occupancy Addendum to provide regulation to the practice of early occupancy in which the Buyer takes possession of the property prior to the close of escrow. There is a large amount of debate regarding this issue, and while the concept is faulty, the forum may go a long way in attempting to provide some guidelines for those who do practice early occupancy.
  • Shared Agency Commission Agreement
    The Shared Agency Commissions Agreement was created for agents who, while not a member of a team, agree to share their commissions with one another on a particular purchase or sale of property. This form will allow agents an express agreement for a common practice.
  • Seller Property Questionnaire
    The Seller Property Questionnaire has been updated to include the knowledge of low-flow water fixtures and faucets inside the home pursuant to law concerning Water Conserving Plumbing Fixtures, as discussed above. The Questionnaire will now ask whether the seller was aware of any noncompliant plumbing fixtures on the property and whether such fixtures are water-conserving. This change will also be made to the Exempt Seller Disclosure form.
  • Wire Fraud Advisory
    The Wire Fraud Advisory is intended to make buyers and sellers aware of the need to exercise extreme caution when using wire transfers of funds and also some practical suggestions for safeguarding their transaction and private information. It is highly encouraged for agents to have their client receive it, read and understand it, sign it, and return a copy to their agent.
  • Residential Purchase Agreement
    Finally, an update was made to the Residential Purchase Agreement (RPA) in which the arbitration clause was removed. Agents encouraging their clients to sign that segment of the form could be considered the unauthorized practice of law. However, the mediation clause is still provided for in the Agreement.

July 2016 Courtside Newsletter: Uber Class Action Lawsuits: How Proposed Settlement Affects the Independent Contractor v. Employee Debate

PDF: July 2016 Newsletter_Uber Settlements

BY: SYLVIA J. SIMMONS, ATTORNEY AT LAW
CASEY MCINTOSH, PARALEGAL

This month’s Courtside Newsletter will discuss the recent settlement of the California and Massachusetts class action lawsuits against Uber Technologies, Inc. and how it potentially impacts the classification of workers as either employees or independent contractors.

As an article in the San Francisco Magazine states, “the crux of [the lawsuit] was whether the sharing economy habit of using contractors rather than fully vested employees violates basic labor laws.” The Uber cases have been closely watched as potentially setting a precedent that could affect this “sharing economy” or “gig economy.” In this rapidly growing business model, companies do not hire employees to perform certain key tasks. Instead, the company facilitates interactions between independent contractors and customers through electronic communications (e.g. smart phone applications). On one hand, the independent contractors enjoy flexibility and unlimited income potential by setting their own hours and working for more than one company. However, on the other hand, they are not due any benefits such as overtime or health insurance, guaranteed hours or a minimum wage, and are often faced with the question of who to turn to when their rights are potentially violated.

Terms of the Uber Settlement
The uncertainties of the appeal, as well as the impending trial before a jury in San Francisco where Uber is very popular, encouraged the plaintiff’s attorney to negotiate a settlement and the defendant’s attorney to accept some terms favorable to the drivers. The current question will be whether the Uber company policy changes will satisfy Judge Chen, who in denying Uber’s motion for summary judgment last year, took apart Uber’s claim that it is a technology company simply facilitating smart phone app interactions between riders and independent contractor drivers.

Under the terms of the settlement:

  • Drivers are not reclassified to be employees.
  • The main case in California and a smaller case in Massachusetts were conditionally settled for $100 million (which includes a contingent $16 million based on Uber’s initial public offering).
    • Drivers who drove at least 25,000 miles and opted out of the arbitration agreement will receive $8,000 or more.
    • Drivers who worked part-time will receive about $200.
    • No settlement figure has been identified for drivers who drove less than 25,000 miles.
  • The parties’ lawyers will get $21 million.
  • Uber will not provide drivers with benefits under state and federal labor laws.
  • Drivers will not be reimbursed for gas.
  • Uber will clearly inform riders that tips are not included in Uber’s fares.
  • Uber will provide drivers with small signs to post in their vehicles to encourage tips.
  • Uber will make significant policy changes, including:
    • Uber will not be allowed to delist a driver without longer notice, sufficient cause, and transparency, including an appeals process.
    • Uber will institute an “appeals panel” comprised of drivers who believe they were unjustly dismissed.
    • Uber will help create and then recognize a Drivers Association to communicate concerns to management, and Uber will meet with the drivers’ councils quarterly.

Approval of Settlement is Required
The Uber settlement (154 pages) is not final until it is accepted by U.S. District Judge Edward M. Chen in San Francisco, and the judge is not required to approve the settlement just because the lawyers are satisfied with it. A hearing on preliminary approval was scheduled for June 2nd, but is currently pending. Judge Chen has ruled favorably for the plaintiffs throughout the litigation. He certified a 15,000-driver class in August and another 160,000-driver class in December by invalidating Uber’s employee arbitration agreements. The ruling on the arbitration agreement was appealed and is set for hearing in June.

Government Agencies and Organizations Not Bound by Settlement
Government agencies and organizations are not bound by the pending Uber lawsuit settlement.

IRS: The Internal Revenue Service could audit Uber and decide the drivers are employees. In the case, Uber would be responsible for all employment taxes that were not withheld from wages, with penalties and interests.

NLRB: The National Labor Relations Board is reported to already be investigating Uber. One commentator wrote that the Uber settlement may help support the classification of the drivers as employees, because Uber alone controls the listing and delisting of drivers, how they are evaluated, and how they are compensated, and the right to set their own hours is compatible with employee status.

Teamsters: The Teamsters are reported to be interested in organizing Uber drivers and may file charges claiming that Uber’s assistance to the new drivers’ councils violated federal labor law, giving the NLRB an opportunity to decide whether the drivers are employees. Employees have a legal right to form unions and negotiate wages, but an association of independent contractors does not enjoy those protections and might even be violating antitrust law.

Settlement Incentive: Administrative proceedings typically lack the incentive to settle, which is present in court proceedings because millions in legal fees must be paid when expensive law firms are involved.

Legal Issues Not Resolved by Uber Settlement
An increasing number of people work in the new flexible labor markets or “gig economy” and have issues similar to the Uber drivers. Those issues include, for example:

  • Benefits (usually provided by employers)
  • Tracking compensation (usually documented on paycheck stubs)
  • Sharing in success of company (usually hard work results in raises, bonuses, promotions, and stock options)
  • Communicating with the company (usually company policies and labor laws apply)

Regulating New Working Models
This case and others provide support to the argument that the law is not keeping up with the changes in the economy created by technology. Enforcing current law is like trying to put a square peg into either the round employee hole or the round independent contractor hole – it just doesn’t fit!

The underlying motivation for enforcing these labor laws is allegedly to protect the worker from being unfairly treated and to ensure that workers receive benefits (overtime pay and medical coverage, paid time off, protected leave, etc.). The trend is to impose this responsibility on the employer even when the employer does not exercise control over the worker’s actual work. However, in reality the enforcement of labor laws is also driven by the desire of the government (local, state and federal) to have control and protect its entitlement to funding – when workers are employees on payroll, taxes are withheld and paid to the government.

Impact on the Real Estate Broker-Agent Relationship
According to the National Association of REALTORS® (“NAR”), “the hallmark characteristic of an independent contractor relationship is one where the worker is generally free of control.” However, there seems to be a trend away from the old classification tests (employee or independent contractor) and toward expanding responsibility beyond the employer that controls the work.

No court has yet decided whether Uber drivers are employees or independent contractors – that question will continue to be debated and litigated, or possibly be the subject of rulings by the National Labor Relations Board or the California Labor Commissioner, or state or federal legislation. The Courts in the Uber cases have suggested that the legislature intervene to “enact rules particular to the new so-called ‘sharing economy’” and to create “a new category of worker altogether, requiring a different set of protections.”

Under the “follow the money” model, it seems likely that we will continue to see a chipping away of the protections from liability provided to real estate brokers based on the classification of licensed agents as independent contractors. Many issues remain to be resolved!

PDF: July 2016 Newsletter_Uber Settlements


California Association of REALTORS® to Release New Forms in June

Click here to download the PDF version of the newsletter.

BY: KELLY A. NEAVEL, ATTORNEY AT LAW
CASEY MCINTOSH, PARALEGAL

The California Association of REALTORS® (C.A.R.) will release two (2) new and nine (9) revised forms during the week of June 27, 2016. In this month’s Courtside Newsletter, we will explore the new forms, their significance, and the revisions to existing forms.

NEW FORMS

1. Seller Agricultural Land Supplementary Questionnaire (SALSQ) This new form serves to supplement the Seller Property Questionnaire with a focus on agricultural land. Section II explains in no uncertain terms that the contents of the form consist of representations made by the Broker: “Unless otherwise specified in writing, Broker and any real estate licensee or other person working with or through Broker have not verified information provided by Seller. A real estate broker is qualified to advise on real estate transactions. If Seller or Buyer desire legal advice, they should consult an attorney.”

The form also allows for “Seller Awareness” (Section V), allotting “Explanation” spaces after each section. The seller is also encouraged to attach any documentation regarding the disclosures, “regardless of when such documentation was originated” (Section VI). The form includes disclosures regarding the following and has a space for buyer acknowledgment at the end:

  • “Geological Condition and Environmental Hazards;”
  • “Governmental” disclosures,
  • “Water-Related Issues;”
  • “Utilities and Services;”
  • “Landscaping, Agriculture, Structures or Other Improvements;”
  • “Title, Ownership, and Other Legal Claims;” and
  • “Disaster Relief, Insurance or Civil Settlement.”

2. Wire Fraud Advisory (WFA) After seeing an increase in wire transfer fraud targeting the real estate industry, C.A.R. has included a Wire Fraud Advisory form in its repertoire of forms to provide buyers and sellers. Per C.A.R., the WFA is “an advisory…regarding the need to exercise extreme caution when using wire transfers of funds and also some practical suggestions for safeguarding their transactions and private information.” Among the precautions suggested is the advice to:

  • Obtain the phone numbers of the escrow company and bank officers early on in the transaction;
  • Always call the escrow company or bank to confirm escrow instructions; and,
  • Never rely on a telephone number provided in the wiring instructions.

C.A.R. recommends making the WFA a part of the listing package provided to buyers and sellers. This sort of fraud can allow criminals access to buyer’s and seller’s email accounts, personal information, and bank routing numbers, enabling them to redirect funds into the criminals’ accounts. It should not be taken lightly.

REVISED FORMS

3. Agricultural Addendum (AGAD) Paragraph 1E of the Agricultural Addendum has been updated to reference the Seller Agricultural Land Supplementary Questionnaire (SALSQ). The form now indicates that the seller will complete and provide the buyer with Form SALSQ “in addition to any Seller property questionnaire that may be required by the [Purchase] Agreement.” This revised language removes any reference to the Vacant Land Questionnaire to avoid duplication. Paragraph 2 of the form has also been updated to encourage the buyer to “investigate” matters that may affect the buyer’s decision to purchase property, such as zoning and land use (Paragraph 2B), environmental hazards (Paragraph 2D), neighborhood, area and property conditions (Paragraph 2H), or owner associations in Common Interest Subdivisions (Paragraph 2I).

4. Contingency for Sale of Buyer’s Property (COP) Paragraphs 7A and 7B of the COP have been added regarding Time Periods and Buyers Deposits, respectively. Specifically, Paragraph 7A “Time Periods” states:

Time periods in the Agreement for inspections, contingencies, covenants, and other obligations shall begin as specified in the Agreement, or □ on the Day After Buyer Delivers to Seller any of the following: (i) Escrow Evidence for Buyer’s Property, or (ii) Buyer’s election in writing, signed by Buyer, to begin time periods, or (iii) Buyer’s removal of this contingency for the sale of Buyer’s Property.

Paragraph 7B “Buyer’s Deposit” includes similar language, stating:

Buyer’s deposit shall be delivered to escrow within the lime specified in the Agreement or □ within 3 business Days After Buyer Delivers to Seller any of the following: (i) Escrow Evidence for Buyer’s Property, or (ii) Buyer’s election in writing, signed by Buyer, to begin time periods, or (iii) Buyer’s removal of this contingency for the sale of Buyer’s Property.

Language has also been added regarding the seller’s right to cancel (Paragraph 5) after giving the buyer a Notice to Buyer to Perform. Lastly, below the signatures, a section entitled “Notice to Remove Contingencies” has been added, allowing the seller to give the buyer notice that contingencies are being removed and the actions specified in Paragraph 8A (“Immediate Right to Notify Buyer to Remove Sale of Properly Contingency”) are being taken.

5. Lease/Rental Mold and Ventilation Addendum (LRM) The signature lines have been changed to include two for tenants and two for landlords.

6. Representative Capacity Signature Disclosure (For Buyer Representatives (RCSD-B)

7. Representative Capacity Signature Disclosure (For Seller Representatives (RCSD-S)
Per C.A.R., the Representative Capacity Signature Disclosures for both buyer and seller have been reformatted to “make the form easier to understand where the entity names should be inserted, where signatures should occur, and who or what should be identified for each.” Language has been added to indicate that the purpose of the form is “to identify who the principal is in the transaction and who has authority to sign documents on behalf of the principal.” If the buyer is a trust, the trustee and co-trustees will be identified as the buyer, and the full name of the trust will be included on the form. If the signatory is a power of attorney, the principal will be listed as the buyer. It is important to remind clients that this form does not create a Power of Attorney. A Power of Attorney must have been created prior to signing the form.

8. Seller’s Purchase of Replacement Property (SPRP) This form has been updated so that the default time for buyer’s performance of covenants, contingencies and other obligations is delayed until after the seller removes the contingencies. Paragraph 2B has also been added regarding “Buyer’s Deposit,” indicating that “Buyer’s deposit shall be delivered to escrow within 3 business Days After Seller delivers to Buyer a written notice removing the Finding replacement Property Contingency as specified in paragraph 1 A or □ as specified in the [Purchase] Agreement.” The form also reflects the potential for two contingencies: “One for seller entering into contract to acquire another property and another for seller closing escrow on another property.”

9. Contingency Removal (CR) Section II of the Contingency Removal has been updated to reflect the above-referenced changes in the Seller’s Purchase of Replacement Property (SPRP), specifically the two potential contingencies.

10. Notice to Seller to Perform (NSP) The format of this form has been changed to identify the two potential contingencies of finding a replacement property and closing escrow on a replacement property. Doing so allows the form to stay consistent with the changes in the Seller’s Purchase of Replacement Property (SPRP).

11. Text Overflow Addendum (TOA) The TOA has been updated to clarify the property and the form that it is referring to. For example, it now says, “The foregoing terms and conditions are hereby incorporated in and made a part of the paragraph(s) referred to in the document to which this TOA is attached.”

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2017 SRCAR Board of Director Election Results

Election-Results

 

Thank you to everyone that participated in this year’s election for the 2017 SRCAR® Board of Directors. We are pleased to announce this year’s election winners are:

curtis-doss

Curtis Doss

Jenna-Garza

Jenna Garza

janicelovendahl

Janice Lovendahl

TerryRyan

Terry Ryan

Denyse Wilson

Denyse Wilson

 


May 2016, TGLG Reports: The C.A.R. Spring Business Meetings

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Several weeks ago, our Team attended the California Association of REALTORS® (C.A.R.) Spring Business Meetings in Sacramento. This month’s Courtside Newsletter will discuss some of the news and information picked up in the Member Legal Services portion of those meetings.

Legal Q&As

C.A.R. has revised several Legal Q&As, available for review on their website, including:

  • “Team Names” (revised 2/16/2016) – Discusses the definition and use of team names as per the California Bureau of Real Estate (CalBRE) and Business & Professions Code requirements.
  • “Advertising Your Services: Required Name and License Information” (revised 2/29/2016) – Regarding the California laws and regulations, and the C.A.R. Code of Ethics sections that govern how a REALTOR® may advertise his professional services.
  • “Revocable Transfer on Death Deed & Reprint of the Statutory FAQs” (revised 1/22/2016) – Enacted on January 1st, Assembly Bill 139 allows for the creation of a revocable transfer on death (TOD) deed to allow a homeowner to pass property to a beneficiary without a probate, trust, or joint tenancy. C.A.R.’s Q&A explains the purpose and requirements of the TOD deed.
  • “Liquidated Damages and Deposit Disputes” (revised 4/7/2016) – Discusses the liquidated damages clause standard in C.A.R. purchase agreements and the effects of the clause when a buyer breaches the purchase agreement.
  • “Use of An ‘As Is’ Clause” (revised 3/18/2016) – Clarifies the “as is” clause in C.A.R. purchase agreements and outlines its limitations and significance.
  • “Counter Offer Forms (C.A.R. Forms SCO, BCO and SMCO)” (revised 3/15/2016) – Outlines the more important aspects of the C.A.R. counter offer forms, also known as the Seller Counter Offer (SCO), Buyer Counter Offer (BCO) and the Seller Multiple Counter Offer (SMCO). Specifically, it clarifies what must be done in a situation with multiple counter offers and/or back-and-forth between buyer and seller, and when a binding agreement is created.
  • “Contingencies and Contingency Removal” (revised 3/14/2016) – Discusses the more common contingencies found in real estate sales transactions, their appearance in the C.A.R. form Residential Purchase Contract (RPA-CA), and how to remove contingencies under the C.A.R. contracts.

New Legal Developments

  • Impact of TRID on Disclosure of Commissions: The buyer should know how much their real estate agent is going to receive in commissions 7-10 days before the transaction closes. Further, there is now a mandatory field to disclose the commissions of both sides.
  • Fast-Tracked Real Estate License Application for Military Veterans: As a result of Senate Bill 122, effective July 1, 2016, the California Bureau of Real Estate (CalBRE) will expedite licensure process for an applicant who has served as an active duty member of the Armed Forces of the United States and was honorably discharged.
  • Rights of Pregnant Employees: Effective April 1, 2016, California employers must provide employees with a new poster describing the rights and obligations of pregnant employees. Pregnant employees must be provided with pregnancy disability leave (PDL) of up to four months and employers must return them to the same job, or a comparable job in certain circumstances, when they are no longer disabled by pregnancy. The poster also offers further clarification of PDL, including the fact that it is not for an automatic period of time and that it is ultimately determined by a health care provider.
    • A copy of the poster must be provided to the employee when the employer finds out the employee is pregnant.
      o Additional rights and requirements are applicable under the California Family Rights Act and/or the federal Family and Medical Leave Act.
    • If more than 10% of the employees speak a different language, the employer must have policy translated into every language that is spoken by at least 10% of the workforce.

Property Management Hot Issues – Presented by Sanjay Wagle, Legislative Advocate

  • Support Animals: Current law requires landlords to allow service animals on their property, so that handicapped individuals may be afforded the equal opportunity to use and enjoy a dwelling. A “service animal” is defined in the Americans with Disabilities Act as “a dog that has been individually trained to do work or perform tasks for an individual with a disability.” Recently, controversy has arisen regarding a landlord’s allowance of support animals on a property. Support animals are any animal that provides emotional support, therapy, comfort, or companionship. Since they have not been trained to perform a specific job or task, they are not considered service animals.

    As a result of the ongoing argument over the necessity of support animals, Assembly Bill 2760 has been introduced to “provide that a tenant or prospective tenant shall not be prohibited from possessing a support animal on the rented premises or associated common areas if the tenant or prospective tenant satisfies specified conditions.” Amongst those conditions would be:

    • notification to the landlord;
    • the animal must be housebroken;
    • the animal does not disturb the quiet enjoyment of other tenants, or pose a threat to them;
    • the animal does not jeopardize the availability or price of insurance.
  • Furthermore, the Bill would finally define “support animal” as “a support dog, companion animal, emotional support animal, or assistive animal that is prescribed by a California licensed physician or licensed mental health professional in order to treat a mental or emotional illness or mental or emotional disability. A support animal does not include a service animal.”
  • Bed Bugs: Under the recently introduced Assembly Bill 551, California legislature attempts to evoke cooperation amongst landlords, tenants, and pest control operators to address the unique challenge of controlling bed bug infestations. Specifically,
    • Beginning July 1, 2016, landlords will be required to provide written notice to prospective tenants regarding “Information about Bed Bugs.”
      • The notice, outlined in Civil Code Section 1954.12, will also be provided to existing tenants by January 1, 2017.
    • Landlords cannot rent or lease, or offer to rent or lease, any dwelling they know or should know has bed bugs.
      • Such a dwelling is considered untenantable.
    • Tenants cannot bring furnishing onto the property that they know, or reasonably should know, has bed bugs.
    • Tenants must inform the landlord within seven (7) calendar days of finding or suspecting bed bugs.
      • Within five (5) days of being informed, the landlord must retain the services of a pest control operator.
      • If there are bed bugs, the landlord must inform other tenants of units identified for treatment, in writing, within two (2) business days. If common areas are infested, all other tenants will be notified.
    • If an infestation is confirm, the landlord must prepare and implement a bed bug treatment program within 10 calendar days after the infestation confirmation.
      • Tenants will be provided with a cover sheet from the landlord disclosing the date/time of the treatment, length of time of the treatment, and what the tenant must do to prepare, as outlined on a checklist.
      • Entry into units must comply with Civil Code § 1954.
    • Within 30 calendar days after an infestation, landlords will create a written bed bug management plan for the property, which will be made available for tenants.
  • Fair Housing Act – Criminal Records and Tenant Selection: On April 4th, the Department of Housing and Urban Development (HUD) issued the “Guidance on Application of Fair Housing Act Standards to the Use of Criminal Records.” This paper brings to light how a landlord may be violation the Fair Housing Act (FHA) by implementing a blanket ban on potential renters with arrest records. The FHA prohibits discrimination in the sale, rental, or financing of dwellings and in other housing-related activities on the basis of race, color, religion, sex, disability, familial status or national origin. While having a criminal record is not a protected characteristic under the FHA, a blanket ban on potential renters with arrest records could have a disparate impact on racial groups. Per the Guidance, “African Americans and Hispanics are arrested, convicted and incarcerated at rates disproportionate to their share of the general population…” and “criminal records-based barriers to housing are likely to have a disproportionate impact on minority home seekers.” According to HUD Secretary Julián Castro, “Many people who are coming back to neighborhoods are only looking for a fair chance to be productive members, but blanket policies like this unfairly deny them that chance.”

    HUD’s guidance comes after last year’s Supreme Court decision in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc., et al., in which it was determined that disparate impact is cognizable under the FHA. The guidance urges landlords and property managers to reevaluate their rental practices to ensure that they are acting within the law. Blanket bans and requirements that cause disparate impact are illegal. When screening applicants with arrest records, housing providers must take into consideration “the nature, severity, and recency of criminal conduct” and ultimately prove that any policy is “necessary to serve a ‘substantial, legitimate, nondiscriminatory interest.’” In other words, not all past criminal conduct is a risk to resident safety, and landlords need to distinguish what and who could be a risk on an applicant-by-applicant basis.

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