July 2013: C.A.R. JULY 2013 FORM RELEASE

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

The California Association of REALTORS® (C.A.R.) released several new and revised forms on July 29th. The following is a brief summary of those forms and what their  changes mean to real estate practitioners.

New Forms
Two new forms replace the Seller Instruction to Exclude Listing (SEL). REALTORS® should take note that C.A.R. does not monitor the legal validity of any prior form version and the C.A.R. User Protection Agreement only applies to the most current version of a form.

Seller Instruction to Exclude Listing from the Multiple Listing Service (SELM)
The SELM provides a request by the seller to the broker to advise the MLS that the seller wants to completely exclude the property from the MLS. Paragraph 6, “Impact/Reduction of Exposure,” has been added to expound on the fact that any reduction in exposure may lead to a reduction in the number of offers made and may negatively impact the sales price. Paragraph 7, “Seller Opt-Out,” has been reformatted to make it easier to identify the time limitation on the exclusion.

Seller Instruction to Exclude Listing from Internet (SELI)
The SELI provides a request by the seller to the broker to advise the MLS that the seller wants to (1) opt-out of Internet display of the property or its address and/or (2) try to prevent comment features or value estimate features on MLS-related internet sites.

Revised Forms – 8 Listing Agreements
According to C.A.R., it is okay to use prior revisions for each of the following forms.

Commercial and Residential Income Listing Agreement (CLA)
The CLA now includes the following new provisions:

 

  1. A checkbox to indicate whether the listing will or will not be provided to the MLS.
  2. A blank to fill in the name of the MLS of which the broker is a participant or subscriber.
  3. A checkbox to indicate whether the MLS is or is not the primary MLS for the geographic area of the property.
  4. Boxed language (from the RLA with revisions) to be initialed by the seller and broker that explains to the seller the purpose and benefits of using the MLS, the impact of opting out of the MLS, the difference between the MLS and closed/private listing clubs or groups, and the requirement that a broker must present all offers to the seller.
  5. A section explaining the MLS rule that a listing must be submitted to the MLS within a certain amount of time, but that certain MLS data can be opted out of if the seller executes a Form SELM or the local equivalent form.
  6. A section with the dispute resolution language found in the Residential Purchase Agreement form requiring mediation and agreeing to arbitration if the seller and broker initial the provision.

Manufactured Home Listing Agreement for Real and Personal Property (MHL)

The MHL contains all the same additions as added to the CLA.

Probate Listing Agreement (PL)
The PL contains the same additions as added to the CLA regarding the MLS (1 through 5 above), but not the dispute resolution language.

Residential Listing Agreement (RLA)
The RLA boxed language regarding the MLS is revised to be the same as in the CLA (now includes “presenting all offers,” “clubs or groups,” “excluding it from the MLS”, and “reduction in exposure”). Also, “DRE” is changed to “BRE.”

Residential Listing Agreement-Agency (RLAA)
Residential Listing Agreement-“Open” (RLAN)
Trust Listing Agreement (TLA)
Vacant Land Listing Agreement (VLL)
Each of these forms contains the same additions as made to the CLA regarding the MLS (1 through 5 above). Also added to each form is a warranty by seller that seller is the owner, no other persons or entities have title to the property, and seller has authority to execute the form and sell the property.

* * *

The new forms released on July 29th emphasize the benefits the MLS offers to sellers and brokers, including the exposure that listing a property in the MLS offers. This implies that the property will sell more quickly and with less stress (and legwork) for both the seller and the broker.

As always, real estate practitioners should thoroughly understand the forms presented to their clients for signature. If a REALTOR® has any questions or concerns about which form is appropriate or how to complete a form, the broker, brokerage attorney, or other qualified legal counsel should be consulted.

Newsletter July 2013


CALIFORNIA ASSOCIATION OF REALTORS® TO ISSUE NEW AND REVISED FORMS ON NOVEMBER26,2012

Full newsletter available here.

BY: KELLY A. NEAVEL, ATTORNEY
CASEY MCINTOSH, PARALEGAL, researched and contributed to these articles.

Once again, forms were a hot topic at the California Association of REALTORS® (C.A.R.) Fall Business Meetings in Anaheim. This year there are 43 new and revised forms set to be released on November 26, 2012. While C.A.R.’s website has a list and brief overview of these forms, below is a more comprehensive review of the new and some of the revised forms that may be of importance or interest.

New Forms

In response to the ever-changing climate of real estate transaction, C.A.R. created the following 15 new forms for release in November:

The two (2) new agent broker forms:

Additional Agent Acknowledgment and Additional Broker Acknowledgement: These two forms are addendums to the California Residential Purchase Agreement (RPA). They acknowledge that both the buyer and seller understand there are two agents from the same company or two brokerages working on the transaction and when one  licensee/broker is named in a document, the other licensee/broker is also deemed to be named.

The next five (5) forms were derived from the Purchase Agreement Addendum:

Assumed Financing Addendum: This form is used if the Buyer will be taking over the Seller’s existing loan. This addendum to the RPA gives both the buyer and seller specific deadlines by which to have documents to the other person or to the lender. It also acknowledges that the assumed financing is a contingency of the RPA.

Back-Up Offer Addendum: This addendum to the RPA or Counter Offer indicates what position the potential Buyer’s back-up offer is in, as well as the terms of that back-up offer, including time periods.

Court Confirmation Addendum: In certain instances, such as bankruptcy, probate, guardianship, or receivership, the purchase of real property may require ratification by the Court. In such cases, this form has been drafted to provide deadlines and recommendations to the buyer.

Seller in Possession Addendum: This form was created to define the terms of a seller remaining in the property after it is purchased by the buyer. It is intended for short-term occupancy only (e.g. less than 30 days), otherwise, the Residential Lease After Sale form needs to be used. The SIP does not create a landlord-tenant relationship between the buyer and seller, though. The seller is responsible for the maintenance of the property and continued payment of the utilities (except those specified), in addition to paying an agreed-upon sum for his or her continued possession.

Tenant in Possession: If a property is sold to a buyer with a tenant already in the property, the buyer can agree to take the property subject to the rights of the existing tenants. This form defines the terms of that agreement.

There are three (3) new general forms:

Landlord in Default Addendum: Enacted in September 2012, Senate Bill 1191 amends California Civil Code Section 2924.85. Beginning January 1, 2013 until January 1, 2018, landlords who offer for rent a single-family or multi-family dwelling not exceeding four units who have received a notice of default on the property that has not been rescinded, must disclose the default to potential tenants prior to executing a lease agreement for the property. If the landlord violates these provisions, the tenant is entitled to void the lease. If the tenant chooses to void the lease and vacate the property, he or she is entitled to recover from the landlord either one month’s rent or twice the amount of actual damages, (whichever is greater), as well as any prepaid rent. However, the tenant may also elect to stay in the property and honor the lease, in which case he or she is entitled to deduct a total amount equal to one month’s rent from future rent obligations.

The written notice to the tenant must state as follows:

The foreclosure process has begun on this property, and this property may be sold at foreclosure. If you rent this property, and a foreclosure sale occurs, the sale may affect your right to continue to live in this property in the future. Your tenancy may continue after the sale. The new owner must honor the lease unless the new owner will occupy
the property as a primary residence, or in other limited circumstances. Also, in some
cases and in some cities with a “just cause for eviction” law, you may not have to
move at all. In order for the new owner to evict you, the new owner must provide you
with at least 90 days’ written eviction notice in most cases.

Lastly, a property manager is exempt from l ability for failing to provide the written
disclosure notice unless the landlord notified the property manager of the notice of default and directed him or her in writing to deliver the written disclosure to the tenant.

In compliance with the new regulations imposed by Senate Bill 1191 and Civil Code Section 2924.85, the California Association of REALTORS® created the Landlord in Default Addendum to be provided to potential tenant prior to signing the lease.

Parking & Storage Disclosure: For a property located in a multi-unit building, this form serves as a sort of disclaimer and acknowledgement. The form states that the governing documents for the Property must contain a description and drawing of all assigned parking and storage spaces. However, these drawings may not be accurate and there may be  differences between the drawing and physical locations of the parking spaces and storage areas. By signing the form, the Buyer acknowledges that he or she has personally inspected the parking spaces and storage areas and, if any discrepancies or issues exist, they are not material to the purchase. This form is also made in connection with the RPA.

FHA/VA Amendatory Clause: This form is to be used as an addendum to the RPA in accordance with HUD/FHA or VA requirements. Essentially, the form states that the Buyer will not incur any penalty through loss of his or her deposit nor will he or she have to  complete the purchase should the property not appraise for the amount listed on the form. This is important when the Buyer is making use of a FHA or VA loan since HUD will only insure up to the appraised amount. Pursuant to the form, it is up to the buyer to satisfy him- or herself that the price and condition of the property are acceptable.

There are two (2) new listing forms:

Trust Listing Agreement/Vacant Land Listing Agreement: The Trust Listing Agreement is similar to the standard Listing Agreement with the exception that the “seller” is the trustee of the trust that is listed. The signature line also reflects that the property is being sold by the trust. The Vacant Land Listing Agreement has been separated from the Commercial, Residential, and Vacant Land Listing Agreement and made into its own form.

There are three (3) new signature forms:

Power of Attorney Signature Addendum: This addendum to the RPA identifies a person who has the ability to sign a contract for the sale or purchase of real property as that individual’s Power of Attorney. However, it is important to note that the Power of Attorney must already have been prepared and executed prior to the use of the Addendum.

Probate Signature Addendum: Much like the Power of Attorney Signature Addendum, this form identifies who can sign a contract for the sale of real property on behalf of an estate pursuant to the Probate Code.

Trust Signature Addendum: The last signature form is the Trust Signature Addendum which is used to identify the person who can sign a real estate contract under the authority of a Trust.

Revised Forms

In addition to the 15 new forms, there are also 28 forms that C.A.R. has revised for  November release, including the Residential Listing Agreement, Transfer Disclosure Statement, and Buyer Representation Agreement. Below is a short description of three (3) forms worth noting:

Commission Agreement: This form has been revised to include a date by which the Principal must accept an offer in order to be compensated.

Contingency for Sale or Purchase of Other Property: This form mainly affects Residential Purchase Agreements or Counter Offers where the purchase of the seller’s property is contingent on the sale of the buyer’s property or the seller’s purchase of a replacement property. The form has been revised from the 2008 version to clarify a buyer’s and seller’s rights should the property at issue fall out of escrow.

Short Sale Information Advisory: In July 2012, Senate Bill 1069 was enacted, effectually
expanding California’s Anti-Deficiency Protections. In California, many mortgages are non-recourse loans, meaning if a borrower’s real property is underwater and he or she defaults, the lender cannot pursue the borrower for any deficiency that results. However, if the borrower were to refinance, the resulting loan may not be non-recourse and the lender may be able to pursue the borrower should he or she default and the lender not receive the full amount of the loan. SB 1069 amends Code of Civil Procedure Section 580b to state that no deficiency judgment shall lie on any loan, refinance, or other credit transaction which is used to refinance a purchase money loan, or subsequent refinances of a purchase money loan, except under certain, specified circumstances. These provisions would apply to credit transactions executed on or after January 1, 2013.

In compliance with the revisions to Code of Civil Procedure Section 580b, C.A.R. also
revised Section 4 on the Short Sale Information Advisory, which advises not only regarding the short sale process but also alternatives to short sales. As a real estate practitioner, it is important to remember that you cannot and should not give advice regarding short sales. If a buyer or seller you are representing has questions about the process, be sure to refer him or her to competent legal counsel for advice. As with any of the forms used in a real estate transaction, do not risk your license simply because you “think” you know the answer.

As mentioned above, C.A.R. provides a quick summary chart of all of the revised forms being released in November.

Full newsletter available here.


October 2012: NEW APPELLATE COURT DECISION: CALIFORNIA CORPORATE BROKERS NOT LIABLE TO THIRD PARTIES

Full newsletter available here.

NEW APPELLATE COURT DECISION: CALIFORNIA CORPORATE BROKERS NOT LIABLE TO THIRD PARTIES

BY: TAMAR GABRIEL,ATTORNEY AT LAW

A recent case decided by the California Court of Appeal will have an effect on how the scope of a California Corporate Broker’s liability is defined. In Sandler v. Sanchez, the appellate court’s ruling limited liability of a designated officer (sometimes referred to as “corporate brokers” or “brokers of record”) to the corporation, not to third parties.

In this case, the Sandlers, along with another party, sued 765 South Windsor, LLC, Gold Coast Financial, a real estate brokerage corporation, and Carlos Sanchez, Gold Coast’s designated officer/broker. According to the allegations in the operative third amended complaint, Keith Desser, a real estate salesman, president, and sole shareholder of Gold Coast and a principal of South Windsor, solicited the Sandlers to loan $600,000 to South Windsor to finance improvements to an eight-unit apartment building for the purpose of converting the units to condominiums. Desser, however, failed to reveal $600,000 was not enough money to do the improvements and that there was not enough equity in the property to secure their loan, which was a junior loan. When the primary lender refused to extend the first note, which was imminently due, the property was foreclosed by the holder of the first trust deed, which left the Sandler’s note unsecured. In addition, Desser used the $300,000 of the loan proceeds, which he obtained by amending the escrow instructions, for his personal expenses.

The Sandler’s third amended complaint asserted a cause of action for breach of fiduciary duty against Sanchez. Although the complaint did not allege Sanchez played any role in the transaction, or even knew of it, the Sandlers alleged that Sanchez, as Gold Coast’s designated officer, owed them a duty to supervise Gold Coast’s employees, including Desser, in accordance with California Business and Professions Code Section 10159.2. The Sandlers alleged that had Sanchez fulfilled his duty to supervise, he would have learned about Desser’s material misrepresentations and either disclosed them to the parties or cancelled the loan transaction. The Sandler’s complaint also alleged Desser was Sanchez’s agent and Sanchez, as Desser’s principal, is liable for Desser’s tortuous acts committed within the scope of that agency.

Sanchez demurred to the third amended complaint, arguing he owed no duty, as a fiduciary or otherwise, to the Sandler parties. Sanchez argued that while a claim for breach of fiduciary duty would lie against Gold Coast and Desser, there can be no liability against him as a matter of law absent allegations he authorized or personally participated in the wrongful conduct. He also argued he was not Desser’s principal and, therefore, could not be held vicariously liable for Desser’s misconduct. The trial court agreed with Sanchez and sustained his demurrer to the third amended complaint without leave to amend. The court thereafter signed an Order dismissing the action against Sanchez. On appeal from an order dismissing an action after the sustaining of the demurrer, the appellate court independently reviewed the case and ultimately agreed with the trial court’s decision.

Gold Coast Financial is a corporation. In California, a corporation can be a licensed real estate broker. In order to form such an entity, the corporation must designate a licensed individual broker as the entity’s designated officer. Sanchez was the designated officer of Gold Coast Financial. As such, pursuant to California Business and Professions Code Section 10159.2, he was “responsible for the supervision and control of the activities conducted on behalf of the corporation by its officers and employees…including the supervision of salespersons licensed to the corporation…” Therefore, Sanchez was responsible for supervising Desser (even though salesperson Desser also happened to be the sole shareholder of Gold Coast). The court reviewed the governing law. It noted that Section 10159.2 imposes a duty on the designated officer to supervise the corporate broker’s employees. However, the main issue in this case was to whom is that duty owed? Here, although Section 10159.2 imposes a duty of supervision on the designated officer of the corporate broker, it does not, on its face, expressly state to whom tat duty is owed. After reviewing other cases as well as legislative history that brought this sction into being, the court concluded that smilar to a section governing contractors, the rlevant code section was “regulatory and disciplinary in nature. It did not create a duty to tird parties and therefore could not be a basis fr the broker’s personal liability.”

On the question of whether Sanchez was vicariously liable, as a corporate employer, for te tortious acts of the agents committed within te scope of the agency or employment, the court ruled that absent special circumstances, it i the corporation, not its owner or officer, that is te principal or employer and thus subject to vicarious liability for torts committed by its employees or agents. Accordingly, the Court held that under traditional agency principles, it is Gold Coast, as Desser’s employer, not Sanchez, who may be held liable for Desser’s torts committed within the scope of his employment. The Court ruled that the right to control is insufficient by itself, under traditional agency principles, to establish a principal/agent or employer/employee relationship. For an agency relationship to exist there must be an affirmative manifestation of consent by one person to another that the other shall act on his behalf and subject to his control, and consent by the other to so act. Mere inaction or malfeasance would not create such a relationship between two employees.

The significance of this appellate decision for real estate agents and brokers is that the failure to supervise could lead to discipline from the Department of Real Estate, and could even be grounds for action by the corporation against the designated officer. However, unless the broker had participated in the bad behavior there can be no liability imposed by an injured third party.

Full newsletter available here.