2 Questions for — Ask Kathy: Regarding Agency Law in California

Q. I heard a rumor that the Agency Law was changed last year to include properties other than residential one-to-four units, mobile homes, leases for more than one year, is that true?

A. Glad you asked! Yes, it most certainly is true. SB 1171 amends California Civil Code Section 2079.13 by requiring compliance with Agency Law in all commercial real property, including leasehold. This law became effective January 1, 2015.

SB 1171 defines commercial real property as all real property in the state with the exception of single-family residential real property and mobile homes (which are already covered under the existing law); this means that compliance with Agency Law now includes industrial, commercial and vacant land, except property improved with 5+ residential units.

Are you confused yet; stay tuned!

The California Association of Realtors® recently revised the Agency Disclosure and Confirmation; and Agency Law Summary Chart. Review this important summary and all of your questions will be answered, I promise!

C.A.R. Members may log on: www.car.org; click legal; then click All Q&As. Have your user name and pass word at the ready.

Q. When should the Disclosure Regarding Real Estate Agency Relationships be given to a Buyer?

A. The law, California Civil Code Section 2079.14 states that that the selling agent shall provide the disclosure form to the Buyer as soon as practicable prior to the execution of the Buyer’s offer to purchase. That doesn’t mean you are prohibited from providing it well in advance of an offer to purchase.

Best Practice: If you take the time to engage in a discussion regarding real estate agency relationships with Buyers early in the process you will find it goes a long way toward building a strong foundation for your business relationship.

Business, like any other relationship, is built on trust. Trust is not an entitlement; it is earned! Opening up a dialogue around the subject of agency relationships at the onset is a great way to avoid misunderstandings later!

Q. If a Buyer I represent writes an offer on a listing held by a different brokerage firm, am I really obligated to provide the other Broker’s Seller with a Disclosure Regarding Real Estate Agency Relationship (AD) before my Buyer’s offer is presented?

A. Yes, that is a requirement under California law. That said, we know that Buyer’s agents rarely have the opportunity to present offers in person That reality presents a challenge when it comes to ensuring that the Seller receives your AD timely.

One tip I can offer; consider including a standard cover letter with your offer. Make sure it is the first page the listing agent receives . In the letter simply include a specific request asking the Listing agent to provide the AD to Seller PRIOR presenting the terms of your offer.

Below you will find a simple template designed for just this purpose. Feel free to modify the language as you deem appropriate:

[date]

[property address]

Dear [listing agent name here]

Thank you for presenting [Buyer name(s)] offer to [Seller(s) name]. I anticipate a positive response and a smooth transaction. Before discussing the terms of the Residential Purchase Agreement with the Seller(s), please present my brokerage firm’s Disclosure Regarding Real Estate Agency Relationships to the Seller(s) and obtain their signature(s) as acknowledgement and return it to me with the response.

I look forward to working with you!

[Buyer’s agent name here]