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

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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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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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February 2016: Additional New Laws Affecting REALTORS® in 2016

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

Our January Courtside Newsletter covered many of the new laws that would affect real estate practitioners in the coming year. However, there were a few more that we felt deserved coverage, as outlined below.

Team Names – Senate Bill 146
With “Team Names” becoming a more complicated feature in the past few years, the California Legislature agreed revisions to the way fictitious business names (FBNs) were being used in real estate were not only appropriate but also an urgent necessity. Senate Bill 146 was backed by both CalBRE and the California Association of REALTORS® (C.A.R) and became effective immediately upon being signed into law on July 16, 2015.

Per SB 146, the California State Legislature clarified that true Team Names are not FBNs for purposes of submitting a certified copy of the fictitious business name statement along with an application to the California Bureau of Real Estate (CalBRE). Codified in Business & Professions Code § 10159.7, “Team name” means: “a professional identity or brand name used by a salesperson, and one or more other real estate licensees, for the provision of real estate licensed services… A team name does not constitute a fictitious business name…if all of the following apply:

a) The name is used by two or more real estate licensees who work together to provide licensed real estate services, or who represent themselves to the public as being a part of a team, group, or association to provide those services.

b) The name includes the surname of at least one of the licensee members of the team, group, or association in conjunction with the term ‘associates,’ ‘group,’ or ‘team.’

c) The name does not include any term or terms, such as ‘real estate broker,’ ‘real estate brokerage,’ ‘broker,’ or ‘brokerage’ or any other term that would lead a member of the public to believe that the team is offering real estate brokerage services, [or] that imply or suggest the existence of a real estate entity independent of a responsible broker.”

It is important to remember that Senate Bill 146 also addresses the advertising and solicitation materials used by the salesperson in marketing with a FBN or a Team Name. When using a FBN, all marketing materials “including business cards, print or electronic media and ‘for sale’ signage, shall include the responsible broker’s identity in a manner equally as prominent as the fictitious business name,” as well as the name and license number of the salesperson who is using the fictitious business name. Furthermore, advertising and solicitation materials cannot contain terms that imply the existence of an entity that is independent of the responsible broker. When using a Team Name, all marketing materials “including business cards, print or electronic media and ‘for sale’ signage, shall include the Team Name, the name and license number of at least one of the licensed members of the team, as well as the responsible broker’s identity.

Trust Fund Withdrawals – Assembly Bill 607
Existing law requires real estate brokers to deposit funds accepted in connection with a transaction to place those funds into a neutral escrow depository, the hands of the broker’s principal, or a trust fund account maintained by the broker. An unlicensed employee of the broker can make a withdrawal from the trust fund, if authorized in writing. More specifically, this unlicensed person must have fidelity bond coverage equal to the maximum amount of the trust funds to which the unlicensed employee has access. Codified in Business & Professions Code § 10145, this bond may have a deductible of up to 5% of the coverage amount, if the employing broker has evidence of financial responsibility. Evidence of financial responsibility includes:

a) Separate fidelity bond coverage adequate to cover the amount of the deductible;

b) A case deposit held in a separate bank account adequate to cover the amount of the deductible and held solely for that purpose; and,

c) “And other evidence of financial responsibility approved by the commissioner.”

This legislation was backed by C.A.R. when REALTORS® reported that bond companies will not sell bond coverage exceeding $100,000 unless the bond contains a deductible, usually of 1-5%. The new law is effective as of January 1, 2016.

Discrimination – Senate Bill 600
Under the Unruh Civil Rights Act, all persons are entitled to full and equal accommodations, advantages, facilities, privileges, or services in all business establishments, including both private and public entities, regardless of their sex, race, color, religion, ancestry, national origin, disability, medical condition, genetic information, marital status, or sexual orientation. Senate Bill 600, codified in Civil Code § 51, extends these protections to persons regardless of citizenship, primary language and immigration status. However, these protections do not require the provision of services or documents in a language other than English, beyond that which is required by law. This is important for real estate licensees to note, as they are considered “business establishments” under the Unruh Civil Rights Act. Per C.A.R., “the Unruh Act will generally apply to an owner of property offering commercial or residential units for rent, and to the sale of real property where the owner is in the business of selling properties.” This law became effective January 1, 2016.

As always, we encourage you to seek qualified legal counsel should you have any questions or concerns regarding these new laws.


January 2016: Several New Laws Affecting REALTORS® in 2016

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BY: JOHN V. GIARDINELLI, ATTORNEY AT LAW
CASEY MCINTOSH, PARALEGAL

California’s Legislature once again boasted of a busy year in 2015, preparing and passing numerous new laws. Many of these laws may have an effect on the practice of real estate. Brokers and agents would do well to keep abreast of them.

Continuing Education Requirements for Brokers – Assembly Bill 345
In mid-July, Governor Brown signed Assembly Bill 345 into law, thus enacting a new requirement for real estate brokers’ continuing education. Current law requires a real estate broker to renew his or her license every four years. Pursuant to Business & Professions Code § 10170.5, within that 4-year period, the broker must complete 45 clock hours of education, now including a 3-hour course in the management of offices and supervision of licensed activities.

The California Association of REALTORS® backed this bill, stating, “Since the California Bureau of Real Estate can hold a manager accountable for failure to supervise, C.A.R. believes it important that a real estate broker understand how to properly manage real estate offices, salespersons, and broker associates, in order to minimize risk for all parties involved.” The new requirement went into effect January 1, 2016. For more information on continuing education requirements, please see our September 2015 Courtside Newsletter, which can be found on our website: www.glawgroupapc.com.

Personal Information – Senate Bill 560
Business & Professions Code § 30 has been amended to include the language that no later than January 1, 2016, the Bureau of Real Estate (CalBRE) will require from licensees either an individual tax payer identification number (TIN) or social security number (SSN), if the licensee is an individual. Upon request from the Franchise Tax Board or Employment Development Department, CalBRE will provide the licensee’s information, including the TIN or SSN.

Additional Recording Fees – Assembly Bill 661
Pursuant to current law, a $10 fee is paid at the time of recording of every real estate instrument, paper, or notice required or permitted by law to be recorded within that county. The fee goes toward the Real Estate Fraud Prosecution Trust Fund, which supports local law enforcement activities to fight real estate fraud crimes. AB 661 was drafted to clarify some ambiguities in the language of exemption from the fee. Codified in Government Code § 27388, the fee does not apply to any real estate instrument, paper, or notice that is:

  1. Accompanied by a declaration stating that the transfer is subject to a documentary transfer tax;
  2. Recorded concurrently with a transfer subject to a documentary transfer tax; or,
  3. Presented for recording within the same business day as, and is related to the recording of, a transfer subject to a documentary transfer tax.

This law is effective as of January 1, 2016.

Fire Prevention Fee –Assembly Bill 301
The State Board of Forestry and Fire Protection has adopted an emergency regulation under Public Resources Code § 4212 to levy an annual fire prevention fee upon each “habitable structure” within a state responsibility area. The owner of the structure as of July 1st of the year the fee is due is responsible for payment of the fee. AB 301 allows the owner of the structure the ability to negotiate payment of the fee as part of the terms of the sale of the structure. However, in addition to this language, Public Resources Code § 4213.1(a)(2) contains the caveat that the liability for payment of the fee still rests upon the owner of the structure as of July 1st. This law went into effect January 1, 2016.

Private Transfer Fees – Assembly Bill 807
Current law defines a “transfer fee” as “any fee payment requirement imposed within a covenant, restriction, or condition contained in any deed, contract, security instrument, or other document affecting the transfer or sale of, or any interest in, real property that requires a fee be paid as a result of transfer of the real property.” It is, effectively, a private tax to be paid upon the sale of a property. Assembly Bill 807, sponsored by the California Association of REALTORS®, “expands Private Transfer Fee (PFT) recordation requirements to include PTFs whose payment does not occur upon a change in ownership or that are not based on sales price.” Furthermore, the disclosure of the PFTs must be in a single document and not incorporated by reference to other documents.

Lawn Appearance – Assembly Bill 1
Many issues and concerns have arisen regarding the appearance of lawns and the limitation for watering said lawns during California’s drought crisis. In an effort at clarity, AB 1 was passed and codified into Government Code § 8627.7, stating that during a state of emergency based on drought conditions, “a city, county, or city and county shall not impose a fine under any ordinance for a failure to water a lawn or for having a brown lawn.” This law went into effect January 1, 2016.

Recycled Water – Assembly Bill 786
As a result of the ongoing state of emergency regarding the drought, the legislature has been concerned with preserving potable water and limiting its use to water outdoor landscaping. To that effect, Civil Code § 4735 includes language stating that an association cannot impose a fine or assessment against a homeowner for reducing or eliminating watering his landscaping or lawns. However, AB 786 has amended CC§4735 to allow an assessment or fine to be imposed against “an owner of a separate interest that…receives recycled water…and fails to use that recycled water for landscaping irrigation.” Due to the emergent nature of the drought, this law went into immediate effect upon being passed by the legislature (October 11, 2015).

Water-Efficient Landscaping – Assembly Bill 349
Passed in conjunction with AB 786 in response to the drought crisis, AB 349 further amends Civil Code § 4735. Governing documents or landscaping policies or guidelines are void and unenforceable if they prohibit the use of artificial turf or synthetic grass. Furthermore, owners of a separate interest who implement water-efficient landscaping measures in response to the state of emergency shall not be required to reverse or remove the water-efficient landscaping measure when the state of emergency is declared to be over. This law was also enacted immediately (September 4, 2015.)

Drought-Tolerant Landscaping – Assembly Bill 1164.
On April 1, 2015, Gov. Brown issued Executive order directing the State Water Resources Control Board to implement mandatory water reduction across the state of California. The goal is to reduce water usage by 25%, and with landscape irrigation representing 43% of urban water use, efforts have been made to replace existing landscaping with drought-tolerant landscaping, including artificial turf or synthetic grass. Whilst laws have been implemented stating a city and/or county may not prohibit the installation of drought-tolerant landscaping, synthetic grass, or artificial turf, AB 1164 has added caveats to that prohibition. Government Code § 53087.7(b) states that a city and/or county may impose reasonable restrictions on the type of drought-tolerant landscaping that may be installed on residential property, provided the restrictions do not:

  1. Substantially increase the cost of installation;
  2. Effectively prohibit installation; and/or,
  3. Significantly impede the installation, such as with the requirement that a yard must be covered with living plant material.

As with the other water-use bills discussed herein, this law went into effect immediately (October 9, 2015).

Clotheslines or Drying Racks – Assembly Bill 1448
Codified in Civil Code §§ 1940.20 and 4750.10, landlords may no longer restrict tenants from using a clothesline or drying rack. Furthermore, any governing document, such as those issued by homeowner associations, may not prohibit or unreasonably restrict the use of clotheslines or drying racks. As defined, a “clothesline” is a cord, rope, or wire from which laundered items may be hung to dry or air. A “drying rack” is considered to be an “apparatus” from which laundered items may be hung to dry or air. A balcony, railing, awning or other part of the structure or building is not considered a drying rack or clothesline. This new law became effective January 1, 2016.


December 2015: C.A.R. to Release Revised Forms in December

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

The California Association of REALTORS® (C.A.R.) will release eight (8) new and twenty-one (21) revised forms during the week of December 14, 2015. It will also discontinue the use of one form. In our last Courtside Newsletter, we discussed the eight new forms being released; past Newsletters can be accessed on our website at www.glawgroupapc.com. In this month’s Newsletter, we are going to explore the revised forms that C.A.R. will be  issuing, with the exception of the Residential Purchase Agreement (RPA) and the Residential Listing Agreement (RLA). A special Courtside Newsflash will be issued on those forms in the coming weeks.

REVISED FORMS

1. Additional Agent Acknowledgement (AAA)

The AAA has been revised to act as an addendum to the Purchase Agreement, Residential Listing Agreement, Buyer Representation Agreement, or other “Agreement.” The form also now states that, “Listing Broker and Seller signatures are not necessary if this form is only used to modify a Buyer Representation Agreement. Selling Broker and Buyer signatures are not necessary if this form is only used to modify a Listing Agreement.” According to C.A.R., “Even though multiple agents are named, the form only needs to be signed by one.”

2. Addendum (ADM)

The addendum has been updated to include a line that indicates whether the form is being used to modify a Transfer Disclosure Statement (TDS). It also includes the caveat that, “An amendment to the TDS may give the buyer the right to rescind.”

3. Commission Agreement (CA)

The Commission Agreement contains a new segment on the benefits of using the MLS, the impact of opting out of the MLS, and the requirement for brokers to present all offers to the seller, unless seller gives written instruction to the contrary. The form addresses closed and private listing clubs or groups, also known as “pocket listings,” and how those may impact the sale of a property. It also contains an acknowledgement in which the seller indicates he understands that excluding the listing from the MLS could mean: “(a) real estate agents and brokers from other real estate offices, and their buyer clients, who have access to that MLS may not be aware that Seller’s Property is offered for sale; (b) Information about Seller’s Property will not be transmitted to various real estate Internet sites that are used by the public to search for property listings; (c) real estate agents, brokers and members of the public may be unaware of the terms and conditions under which Seller is marketing the Property.” Furthermore, the arbitration and mediation terms have also been updated on the CA.

4. Single Party Compensation Agreement (SP)

Like the Commission Agreement (CA) form, Single Party Compensation Agreement contains a new segment on the benefits of using the MLS, the impact of opting out of the MLS, and the requirement for brokers to present all offers to the seller. It is the same language used in the CA, and therefore also addresses “pocket listings” and the potential consequences of utilizing a closed- or private-listing club or group. The “Dispute Resolution” segment of the form has also been revised, adding an arbitration and mediation clause for seller and broker to acknowledge.

5. Commercial Lease Agreement (CL)
Paragraph 29, “Insurance,” of the Commercial Lease Agreement has been revised to include the tenant’s requirement to carry property insurance “in an amount sufficient to cover the replacement cost of the property if Tenant is responsible for [maintaining the roof, foundation, exterior walls, common areas, and other specified areas.]”
6. Contingency for Sale of Buyer’s Property (COP)

A “Notice to Remove Contingencies” segment has been added to the end of the COP form, which gives the buyer notice to remove the contingencies specified in Paragraph 7A entitled, “Back Up Offers and Seller Right to Have Buyer Remove Contingencies or Cancel.” As a result, the buyer and seller will no longer need to use the Notice to Buyer to Perform (NBP) to remove contingencies.

7-9. Commercial Property Purchase Agreement (CPA);

Residential Income Property Purchase Agreement and Joint Escrow Instructions (RIPA); Vacant Land Purchase Agreement and Joint Escrow Instructions (VLPA)

The “Changes During Escrow” section of the CPA, RIPA, and VLPA has been revised to add a segment stating, “Within 5 (or __) Days After receipt of such notice [of any Proposed Changes], Buyer, in writing, may give Seller notice of Buyer’s objections to the Proposed Changes in which case Seller shall not make the Proposed Changes.” This effectively prevents seller from making changes to any leases, service contracts, or property conditions during escrow.

10. Exempt Seller Disclosure (formerly SSD) (ESD)

The ESD was formerly the Supplemental and Contractual Disclosure (SSD) form. Paragraph 2 has been added, which makes sellers aware that although they may be exempt from filling out the TDS, there are other disclosures under California law that they are obligated to make to buyers. Sellers who are not legally required to complete a TDS can use this form to make other required disclosures. It is not okay to use previous versions of this form.

11. Residential Lease or Month-to-Month Rental Agreement (LR)

The LR has been revised to include updates to several sections of the form, including:

  • “Rent” (Paragraph 3E): “Rent Payments received by Landlord shall be applied to the earliest amount(s) due or past due.”
  • “Maintenance Use and Reporting” (Paragraph 11E): “Landlord and Tenant agree that State or local water use restrictions shall supersede any obligation of Landlord or Tenant to water or maintain any garden, landscaping, trees or shrubs pursuant to [previous stipulations in Paragraph 11.]”
  • “Pets” (Paragraph 13): A checkbox regarding the C.A.R. Pet Addendum has been added to indicate that pets may be allowed on or about the premises.
  • “Waterbeds/Portable Washers” (Paragraph 34) “Tenant shall not use, on the Premises, □ Portable Dishwasher □ Portable Washing Machine.”
  • “Attorney Fees” (Paragraph 40) “In any action or proceeding arising out of this Agreement, the prevailing party between Landlord and Tenant shall be entitled to reasonable attorney fees and costs collectively not to exceed $1,000 (or $____), except as provided in paragraph 39A [Mediation].”

A space for the landlord’s signature has also been provided.

12. Application to Rent/Screening Fee (LRA)

On the Application to Rent (LRA), the Social Security Number moved from the tenant information (“Application to Rent”) section to the “Screening Fee” section (Section II).

13. Notice to Perform Covenant (Cure) or Quit (PCQ)

Paragraph 1B has been added to the PQC to allow for the form to be used to pay a monetary obligation other than that of past due rent. The section includes to whom the money is owed, and when and where it should be paid.

14. Property Management Agreement (PMA)

The term “Broker” has been replaced with the term “Property Manager” throughout the agreement. Paragraph D, “Repair; Maintenance” has been updated to include the provision that, “Owner agrees that state and local water use restriction will supersede any obligation by Property Manager or any Tenant to water/maintain gardens, landscaping trees or shrubs.”

15. Seller Response and Buyer Reply to Request for Repair (RRRR)

The RRRR has been revised to include a section where the buyer can accept the seller’s response to buyer’s requests with modifications (Paragraph 1B under “Buyer Reply to Seller Response”). Another section was added that only applies if the buyer checks the box for 1B. This section (aptly titled “Only Applies If Buyer Checks 1B”), allows the seller to indicate whether he agrees or rejects the buyer’s modifications.

16. Seller’s Advisory (SA)

The Seller’s advisory now contains revisions to Paragraph D, “Government Required Repairs, Replacements and Alterations,” which includes instructions regarding smoke alarms and brace water heaters. Paragraph 4A, “Pre-Sale Inspections and Considerations,” has been revised to include advice about how to prepare the property for sale, including “making cosmetic improvements, and staging.” It also includes language regarding pre-sale inspections, in order to be made aware of, and possibly fix, faults in the home prior to the buyer’s eventual inspection.

17. Statewide Buyer and Seller Advisory (SBSA)

Paragraph 20, “Future Repairs, Replacements and Remodels,” has been updated to include language regarding the eventual discontinuation of the use of R-22 Freon and new efficiency standards for water heaters. These changes will impact the repairs and replacements of air conditioning units and heat pumps as “… replacement water heaters will generally be larger than existing units and may not fit in the existing space” and “additional venting and other modifications may be required as well.”

Paragraph 35, “PACE Loans and Liens” has also been added to provide information regarding Property Assessed Clean Energy (PACE) program loans, (also be referred to as HERO or SCEIP programs). The programs allow property owners to finance energy and water conservation improvements through an assessment on the owner’s property. If a property owner chooses to utilize this program, a lien similar to a tax lien is placed on the property, which the owner is required to disclose. The form directs the buyer to request the C.A.R. Legal Q&A “PACE Programs and Solar Leases” from the broker for further information.

Paragraph 36, “Solar Panel Leases,” has also been added to the SBSA, which provides information regarding the standard practices behind leased and owned solar panels. Although leased panels may be considered personal property, they are included in the sale of the property and must be disclosed to the buyer, along with the any documentation concerning the lease and system. The buyer can then investigate the solar panel system and may assume the lease, which is generally secured by leasing companies by a UCC-1 form giving notice of a creditor’s security interest against the property. The form again directs the buyer to request the C.A.R. Legal Q&A “PACE Programs and Solar Panels” from his broker for more information.

Lastly, Paragraph 37, “Homeowner Associations and Covenants, Conditions and Restrictions (“CC&Rs”); Charging Stations,” has been updated to include a reference to the C.A.R. Legal Q&A entitled, “Homeowners’ Associations: A Guide for REALTORS®.” The buyer can request this from the broker for review.

18. Seller Property Questionnaire (SPQ)

Paragraph V.B., “Repairs and Alterations,” now includes a segment in which the seller can indicate whether there have been “any alterations, modifications, replacements, improvements, remodeling, or material repairs to the property done for the purpose of energy or water efficiency improvement or renewable energy.” Paragraph V.J, “Title Ownership, Liens, and Legal Claims,” has also been updated to allow the seller to reference “any PACE lien (such as HERO or SCEIP) or other lien…” against the property and “the cost of any alteration, modification, replacement, improvement, remodel or material repair of the Property being paid by an assessment on the Property tax bill.”

19. Seller Multiple Counter Offer (SMCO)

The Seller Multiple Counter Offer has undergone revisions for the sake of clarity. Specifically, Paragraph 2, “Binding Effect,” has been updated to indicate the conditions under which the Multiple Counter Offer is considered binding on buyer and seller:

  • “Seller signs in paragraph 5 [“Seller Makes this Multiple Counter Offer on the Terms Above and Acknowledges Receipt of a Copy”].
  • “Buyer signs in paragraph 7 [“Acceptance”].
  • “Seller signs in paragraph 8 [“Acceptance of Seller Multiple Counter Offer”], and Buyer receives a copy of the Multiple Counter Offer with all of the signatures.

“…Prior to the completion of all of the foregoing, Buyer and Seller shall have no duties or obligations for the purchase or sale of the property.”

Paragraphs 3, “Expiration of Seller Multiple Counter Offer,” and 6, “Acceptance of Seller Multiple Counter Offer,” have been changed so the buyer’s response and seller’s selection do not have to occur in same time period. Paragraph 4, “Marketing to Other Buyers,” has also been added to indicate that the seller has the right to continue to market the property for sale and accept any other offers, prior to the seller selection of the SMCO.

* * *

As always, 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. Look out for our Courtside Newsflash regarding the Residential Purchase Agreement (RPA) and the Residential Listing Agreement (RLA).


November 2015: California Association of REALTORS® to Release New Forms in December

PDF Version

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

The California Association of REALTORS® (C.A.R.) will release eight (8) new and twenty-one (21) revised forms during the week of December 14, 2015. It will also discontinue the use of one form. In this month’s Courtside Newsletter, we are going to explore the new forms that C.A.R. will be issuing in December.

New Forms

1) Agricultural Addendum (AGAD) This form was created with the sale of agricultural property with an improved residence in mind. The form outlines disclosures that are specific to agricultural property, including whether the property:

  • is “in, or adjacent to, an area with Right to Farm rights” (Paragraph 1.A.4);
  • is landlocked (Paragraph 1.A.8);
  • has any soil problems, such as slippage sliding, flooding,drainage, grading or other problems (Paragraph 1.A.11); or,
  • is subject to any restrictions for agricultural use pursuant to the Williamson Act (Paragraph 1.A.2).

The form goes on to outline other disclosures that may interest a buyer, as well as advises the buyer to consider:

  • Size, lines, access and boundaries;
  • Zoning and land use;
  • Utilities and service;
  • Environmental hazards;
  • Geologic conditions;
  • Natural hazard zoning;
  • Property damage;
  • Neighborhood, area and other property conditions;
  • Common interest subdivisions;
  • Special taxes;
  • Rental property restrictions; and,
  • Manufactured home placement.

Both the buyer and seller sign this form.

2) Arbitration Agreement (ARB) The Arbitration Agreement is a form that the buyer, seller, and brokers may sign, agreeing “that any dispute or claim in Law or equity arising between them out of the Purchase Agreement, Listing Agreement, Buyer Representation Agreement, Other [agreement], or any resulting transaction, which is not settled through mediation, shall be decided by neutral, binding arbitration.” The form goes on to list such exclusions as:

(i) “a judicial or non-judicial foreclosure or other action or proceeding to enforce a deed of trust, mortgage or installment land sale contract as defined in Civil Code §2985;
(ii) “an unlawful detainer action; and
(iii) “any matter that is within the jurisdiction of a probate, small claims or bankruptcy court.”

Brokers who do not sign the Arbitration Agreement may participate in arbitration should they, “in writing, agree to such arbitration prior to, or within a reasonable time after, the dispute or claim is presented to the Broker.” The Agreement also explains the requirements for the arbitrator and the right to discovery pursuant to California law.

3) Condominium Conversion Subdivision Purchase Agreement and Joint Escrow Instructions (CCSPA) The CCSPA “satisfies [California Bureau of Real Estate (CalBRE)] subdivision requirements for a unit that was formerly an apartment but converted to a condominium.” According to CalBRE, “Subdivision laws enforced by the CalBRE help ensure that subdividers deliver to buyers what was agreed to at the time of sale.” Specifically, the CCSPA includes disclosures regarding Public Reports, Airport Zones, the type of subdivision to be conveyed (in this case, a condominium), and other disclosures and reports, as outlined in the CalBRE “California Homebuyers ‘Bill of Rights.’” This “Bill of Rights” can be found on CalBRE’s website: www.dre.ca.gov. The CCSPA form is for use upon firstsale following the conversion; subsequent sales will use the Residential Purchase Agreement (RPA).

4) Completed Residence Subdivision Purchase Agreement and Joint Escrow Instructions (CRSPA) The CRSPA is another form that was created to satisfy CalBRE subdivision requirements, similar to the CCSPA. This form is for the first sale of a new property with an already built home and includes disclosures regarding Public Reports, and paragraphs regarding “Builder Limited Contractual Warranties” and “Procedures for Action on Construction Defects,” amongst others that will concern purchasers of the property. Any resale of the property will use the RPA.

5) Delivery of Notices Addendum (DNA) The DNA is a new form that allows buyer(s) and seller(s) to agree upon terms of delivery of notifications, once a contract has been entered into. While it cannot be used prior to entering into a contract (“Agreement,” such as the RPA), once a contract has been signed between buyer and seller, the DNA establishes the following:

  • “Deliver,” “Delivered” or “Delivery,” regardless of the method used (i.e. mail, e-mail, other), means and shall be effective upon the earliest of (i) personal receipt by the person(s) or as specified in the Agreement, or (ii) deemed receipt as specified below:
  • Mail Delivery: Notice sent by email shall be deemed received three (or ___) Days After proof of mailing, if sent by first class mail or better to the address indicated below.
  • [If Checked] E-mail Delivery: Notice sent by email to email address #1 below, shall be deemed received (i) One (or __) Day(s) After the email was sent PROVIDED THAT (iii) A Copy of the Notice is sent, on the same date, to e-mail #2, the text number, or fax number specified below.

The form defines “notice” as “any notice, disclosure, demand, document, information or other item that Buyer or Seller may or is required to give the other pursuant to the Agreement.” The form also contains spaces for emails, fax numbers, and numbers at which text messages can be received. This form should be attached to the Agreement that buyer and seller enter into, and serves to establish delivery dates when the other side to a transaction is non-responsive.

6 & 7)  Representative Capacity Signature Disclosure (For Buyer Representatives) (RCSD-B) & Representative Capacity Signature Disclosure (For Seller Representatives) (RCSD-S) The RCSD-B and RCSD-S will be replacing the Representative Capacity Signature Disclosure form, which will be discontinued officially in December. As their titles indicate, the forms are specific to buyers and sellers. The RCSD-B differs from the RCSD-S in that it does not include Estates, since rarely is an Estate a buyer.

8) Salesperson Owned Fictitious Business Name Agreement (SOFBN) Fictitious Business Names (FBNs) can only be owned by a real estate broker, not a salesperson. As such, the SOFBN was created to notify CalBRE that the salesperson retains ownership of the FBN. The form indicates that the broker and salesperson have entered into an Independent Contractor Agreement, and that the salesperson is authorized to apply for a FBN in the county in which he or she is doing business and deliver to CalBRE an application for use of the
SOFBN associated with the broker’s license number. The form further states:

“Salesperson, while maintaining ownership of the SOFBN, agrees to use the name only as permitted by Broker. At a minimum, Salesperson understands that California Real Estate Law requires that advertising and solicitation materials including business cards, print or electronic media, and “for sale” signs containing the SOFBN shall also include:

a. Broker’s name in a manner equally as prominent as the SOFBN, and Broker’s CalBRE license number AND
b. Salesperson’s name and CalBRE license number.”

The broker further agrees that he or she shall release any rights to the SOFBN upon termination of the Independent Contractor Agreement with the salesperson, and will remove the SOFBN from the broker’s CalBRE license number.

* * *

As noted above, C.A.R. will also be releasing numerous revised forms in mid-December. A subsequent Courtside Newsletter will touch upon those. In the meantime, 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.


September 2015: California Legislature Enacts Further Clarification as to the Use of Fictitious Business & New Continuing Education Requirement for Real Estate Brokers

BY: JOHN V. GIARDINELLI, ATTORNEY AT LAW
CASEY MCINTOSH, PARALEGAL

California Legislature Enacts Further Clarification as to the Use of Fictitious Business

The California State Legislature has recently clarified that true Team Names are not fictitious business names (FBNs) for purposes of submitting a certified copy of the fictitious business name statement along with an application to the California Bureau of Real Estate (CalBRE) and revised the definition of the “responsible broker’s identity.” With “Team Names” becoming a more complicated feature in the past few years, the Legislature agreed revisions to the way FBNs were being used in real estate were not only appropriate but also an urgent necessity. The Legislation was backed by both the CalBRE and C.A.R and became effective immediately on July 16, 2015 upon being signed into law.

It is important to note that the above requirement only applies if the Team Name meets all the criteria of a Team Name as defined in SB 146 (i.e. name used by two or more real estate licensees, name incudes a surname of one of the licensees in conjunction with the words “Team,” “Group,” or “Associates,” and does not include any terms such as broker or brokerage as to lead the public to believe the team is a brokerage or offering real estate brokerage services). All other names being used will more than likely be considered a FBN and a real estate licensee must file a certified copy of the FBN statement with his/her application for a license.

If a real estate licensee wants to use a FBN, the licensee must comply with Business and Professions Code Section 10159.5, which requires the licensee to file a certified copy of his/her FBN, along with the application signed by the responsible broker, to the CalBRE. Business and Professions Code Section 10159.5 also requires the FBN statement to be filed with the county clerk in the county or counties where the FBN will be used and requires the statement be filed with the permission of a responsible broker, a.k.a. “the broker responsible for the exercise of control and supervision of salespersons…” (Business and Professions Code Section 10159.7(a)(4)). Thereafter, a certified copy of the statement will be delivered to the CalBRE with a real estate license application signed by the responsible broker, requesting CalBRE’s approval to use a county-approved FBN. The FBN will be identified with the responsible broker’s name and license number, and will be subject to the control of the responsible broker.

This law also revised the definition of “responsible broker’s identity.” Business and Professions Code Section 10159.7(a)(1) now defines the “responsible broker’s identity” to mean “a name and the associated license identification number under which the responsible broker is currently licensed by the bureau and conducts business in general or is a substantial division of the real estate firm.” This does not include a FBN or a Team Name.

It is important to remember that Senate Bill 146 addresses the advertising and solicitation materials used by the salesperson in marketing with a FBN or a Team Name. When using a FBN, all marketing materials “including business cards, print or electronic media and ‘for sale’ signage, shall include the responsible broker’s identity in a manner equally as prominent as the fictitious business name,” as well as the name and license number of the salesperson who is using the fictitious business name. Furthermore, advertising and solicitation materials cannot contain terms that imply the existence of an entity that is independent of the responsible broker. When using a Team Name, all marketing materials “including business cards, print or electronic media and ‘for sale’ signage, shall include the Team Name, the name and license number of at least one of the licensed members of the team, as well as the responsible broker’s identity.

Should you have any questions about this new law or your compliance with it, please contact your local REALTOR® association or qualified legal counsel for advice.

New Continuing Education Requirement for Real Estate Brokers

BY: JOHN V. GIARDINELLI, ATTORNEY AT LAW
CASEY MCINTOSH, PARALEGAL

In mid-July, Governor Brown signed Assembly Bill 345 into law, thus enacting a new requirement for real estate brokers’ continuing education. Current law requires a real estate broker to renew his or her license every four years. Pursuant to Section 10170.5 of the Business & Professions Code, within that 4-year period, the broker must complete 45 clock hours of education, including:

  • A 3-hour course in ethics, professional conduct, and legal aspects of real estate, which shall include, but not be limited to, relevant legislation, regulations, articles, reports, studies, court decisions, treatises, and information of current interest.
  • A 3-hour course in agency relationships and duties in a real estate brokerage practice, including instruction in the disclosures to be made and the confidences to be kept in the various agency relationships between licensees and the parties to real estate transactions.
  • A 3-hour course in trust fund accounting and handling.
  • A 3-hour course in fair housing.
  • A 3-hour course in risk management that shall include, but need not be limited to, principles, practices, and procedures calculated to avoid errors and omissions in the practice of real estate licensed activities.
  • Not less than 18 hours of courses or programs related to consumer protection, including but not limited to: forms of real estate financing…, land use regulation and control, pertinent consumer disclosures, agency relationships, capital formation for real estate development, fair practices in real estate, appraisal and valuation techniques, landlord-tenant relationships, energy conservation, environmental regulation and consideration, taxation as it relates to consumer decisions in real estate transactions, probate and similar disposition of real property, governmental programs such as revenue bond activities, redevelopment, and related programs, business opportunities, mineral, oil, and gas conveyancing, and California law that relates to managing community associations that own, operate, and maintain property within common interest developments, including, but not limited to, management, maintenance, and financial matters addressed in the Davis-Stirling Common Interest Development Act.

With the new law, effective January 1, 2016, brokers will now be required to complete a 3-hour course “in the management of real estate offices and supervision of real estate licensed activities.”

The California Association of REALTORS® backed this bill, stating, “Since the California Bureau of Real Estate can hold a manager accountable for failure to supervise, C.A.R. believes it important that a real estate broker understand how to properly manage real estate offices, salespersons, and broker associates, in order to minimize risk for all parties involved.”

Should you have any questions or concerns about this continuing education requirement, or where to find courses once the law goes into effect, contact your local REALTOR® association or qualified legal counsel for advice.

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