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

BY: JOHN V. GIARDINELLI, ATTORNEY AT LAWCASEY MCINTOSH, PARALEGAL

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

New Forms

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

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

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

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

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

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

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

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

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

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

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

Revised Forms

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

June 2017 Newsletter_New & Revised Forms

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

By: JOHN V. GIARDINELLI, ATTORNEY AT LAWASHLEY A. RICHARDSON, LAW CLERK
CASEY MCINTOSH, PARALEGAL

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

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

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

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

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

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

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

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

BY: JOHN V. GIARDINELLI, ATTORNEY AT LAWCASEY MCINTOSH, PARALEGAL

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

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

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

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

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

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

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

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

Salesperson’s first and last name

Salesperson’s CalBRE license number

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

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

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

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

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

Joining a Team: Pros

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

Joining a Team: Cons

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

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

May 2017 Newsletter_Real Estate Teams

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

Available for download in PDF.
BY: KELLY A. NEAVEL, ATTORNEY AT LAW
ASHLEY A. PLANCHON, LAW CLERK
LINDA CONAWAY, LEGAL ASSISTANT

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

Legal Affairs Forum
Copyright and Trademark Issues Affecting REALTORS®

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

Cyber Threats Involving Real Estate Transactions

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

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

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

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

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

Standard Forms Advisory Committee Forum on Forms

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

Member Legal Services

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

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

Property Management

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

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

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

Unlawful Detainer Masking

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

Criminal Screening

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

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

Marijuana law

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

Professional Standards Committee

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

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

Available for download in PDF.