Form-of-the-Week: Work Authorization and Authorization to Provide Services – Forms 108 and 133

Authorizing repairs

Real estate owners frequently make repairs to add value to their property listed for sale or lease, or when acting as a property manager. The owner deducts these fixer-upper expenses from income or profits.

Property management includes routine maintenance, whether the owner is operating a residential or commercial property.

Routine maintenance prevents obsolescence from decreasing a property’s desirability as a rental, and thus, its value and the total rents it commands.

Agents commonly coordinate repairs on behalf of clients who are listing their property for sale or lease. The agent uses a Work Authorization form to receive the client’s consent for the agent to contract for repairs on the property on the client’s behalf. [See RPI Form 108]

When listing a property for sale, an agent may suggest the owner make specific repairs needed prior to marketing the property at the listed price so the agent may market the property as “turnkey.” The agent explains that turnkey properties command a higher price and usually sell quicker, versus those with known obsolescence or depreciation.

When an agent suggests to their client that repairs be made to a property, owners will frequently entrust their agent to handle contracting the recommended repairs with third-party service providers. The agent uses an Authorization to Provide Services form to allow service providers to perform maintenance or repairs on the client’s property. [See RPI Form 133]

Licensed contractors

For repairs totaling less than $500, the agent may contract with either:

• licensed contractors; or
• unlicensed individuals such as handymen.

However, when the proposed repairs cost $500 or more, an agent who does not have a contractors license is limited in involvement to recommending a competent licensed contractor. All the negotiations, contracting and oversight are the responsibility of the owner directly. [Calif. Business and Professions Code §7048]

The same rules apply to a property manager or landlord overseeing the ongoing repairs and maintenance of property they are managing. A broker, retained as a property manager, is allowed to order out maintenance, repairs and replacements to be performed by third parties when the total cost is less than $500 per project.

An agent who is also a licensed contractor may order out work as authorized by the owner of the property regardless of the cost.

Although unlicensed individuals may be used for conducting repairs totaling less than $500, it’s best business practice to obtain a licensed contractor who specializes in the type of repair requested, such as plumping, roofing, electrical, carpentry or painting. Brokers can determine the specialization of the contractor by interviewing the contractor, reviewing their marketing materials and getting a copy of their business card.

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Analyzing the work authorization

An agent uses the Work Authorization published by Realty Publications, Inc. (RPI) when a seller, buyer or landlord authorizes the agent to contract for repairs, maintenance or improvements to the property on their behalf. [See RPI Form 108]

The Work Authorization contains:

• Facts, which identify the date, the broker, the client and the real estate’s address and whether the form is an addendum to a:
  • Seller’s Listing Agreement [See RPI Form 102];
  • Exclusive Authorization to Lease Property [See RPI Form 110];
  • Buyer’s Listing Agreement [See RPI Form 103]; or
  • Property Management Agreement [See RPI Form 590; See RPI Form 108 §1];
• Client Authorization, which states the client authorizes the broker to act as their agent and contract for repairs, improvements or maintenance to their property, and includes a blank space for the broker to list the specific repairs, replacements or maintenance needed on the real estate, as well as the estimated cost [See RPI Form 108 §2.1];
• Client Agreement, which contains a checklist for the broker to select one of three options:
  • all bills for repair work will be sent directly to the client;
  • the client will pay an advance fee to the broker to be deposited into their trust account to cover the costs of repairs, with a blank space for the broker to enter the agreed-to amount; or
  • the client will reimburse the broker at close of escrow or cancellation of the agreement they entered into for all sums, including broker fees, spent on the client’s behalf [See RPI Form 108 §2.2];
• Additional Authorizations informing the client the estimated cost for repairs is not guaranteed, and a space for the broker to enter a dollar amount which the client considers an excessive cost and which the client needs to approve before contracting additional repairs [See RPI Form 108 §§2.3 through 2.4]; and
• Signatures of the broker and their agent to agree to render services on the above mentioned terms and for the client to agree to the terms. [See RPI Form 108]

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Analyzing the authorization to provide services

A seller’s or buyer’s agent uses the Authorization to Provide Services published by RPI when preparing a listing/marketing package or performing a due diligence investigation on a property. The form allows the agent to authorize a service provider to perform maintenance, repairs, or other services on the property. [See RPI Form 133]

The Authorization to Provide Services contains:

• Property Address information and the type of property, including:
  • single family residence (SFR);
  • condo unit;
  • two-to-four residential unit; or
  • other [See RPI Form 133 §1];
• Owner’s Information, including their:
  • name;
  • address;
  • home phone;
  • work phone;
  • cell phone; and
  • extension number [See RPI Form 133 §2];
• Services Requested: The broker lists the services the client has authorized to be completed on their property [See RPI Form 133 §3];
• Contract Participants involved when the service provider needs to execute a contract before rendering services, including the:
  • owner;
  • buyer; or
  • agent/broker, and their name, address and phone number [See RPI Form 133 §4];
• Contact for Access: The agent or broker checks whether the person to be contacted for the service provider to access the property will be the:
  • agent/broker; or
  • owner [See RPI Form 133 §5];
• Fee for Services: The agent or broker checks the person responsible for paying the service provider, including the:
  • owner;
  • buyer; or
  • agent/broker;
• where the service provider will submit the billing, including to:
  • the agent/broker; or
  • escrow, including the escrow company name, office, number, address and phone number; and
• the agent or broker enters the anticipated fee due the service provider for services rendered [See RPI Form 133 §6]; and
• Signature of the submitting agent. [See RPI Form 133]

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